Dipak Golechha: Yes. No, I think Nikesh mentioned it well. The only comment that I would say is we’re probably more focused on the economics of the actual deferred payments versus the upfront. I understand the argument that if you’re more of a SaaS business, then you don’t have to make as much like discounts to pull the deal through. We haven’t really built that in, right? At this stage, we’ll see how that goes. We’re still going through the transformation.
Nikesh Arora: And don’t forget, there’s still a reasonable part of our business that still has to be paid upfront, which is the hardware business.
Walter Pritchard: Thanks Rob. We’re going to take our last question in this segment from Brad Zelnick at Deutsche Bank. The IR team is available to take questions offline, and we will return at the end of this program to take more questions from you all. Go ahead, Brad.
Brad Zelnick: Thank you so much Walter. So many questions to ask, but I’m going to keep it high level. Nikesh, heading next week into sales kickoff, you’re going to once again rally the troops to perform even better next year, topping a fantastic fiscal ’23. What are the highest level messages that you’re going to focus on to ensure that they really step up their game and can overachieve and do even better next year?
Nikesh Arora: Brad, sort of how I worked in sales and interacted with salespeople, majority of my life, salespeople like to win. And I think what has become apparent in fiscal ’23 for our teams that can — that we can win in each of these categories. They were used to winning in firewalls. I will tell you, our win rates have gone up tremendously in SASE. I mean we did $1 billion in SASE this past year. Winning in XSIAM has been a phenomenal surprise and a delight to all of us. And literally, I’m telling you what’s going to happen on Sunday, every salesperson is going say, I want to be able to sell that product. This product is selling with an average ACV of $1 million hasn’t happened in security before. So I think the just generating enthusiasm towards all these capabilities and solutions is kind of a key message for our team.
There are some structural changes. Like last year, we took the SASE team and merged that with the core team, and you saw the outcomes. We managed to do that seamlessly without an impact to our business, in fact grew faster. We’re doing that next year with Cortex. We’re taking our Cortex team, and making them part of core. That’s why Dipak talks about these constant ability to improve operating margins is we’ve hit sort of scale economics in our business. We’ve hit scale. Everybody has to do these deals. It’s no longer a firewall business. So our teams want to do cross-product deals. So the message really is, we’re winning in major categories, go out and win those deals. The message is cross-platform is working for us. The message is you are now empowered and trained to sell everything.
And every year, we use the opportunity to tweak certain things, which have worked better than the others. So I mean, honestly, like sorry to drag you out on a Friday day afternoon, but I think it’s important for a few thousand people next week that we shared all these results with them, and we just got caught in the trap. We’re trying to get a Board meeting done and do that on Sunday, so here we are on Friday. But all I — if it gives you any comfort, Dipak and me and the team are going to be working all Saturday and Sunday as well.
Brad Zelnick: Awesome. Thank you.
Nikesh Arora: Thank you.
Walter Pritchard: Thanks, Brad. Thanks, everybody, for your questions. We will come back at the end to do more. We’re now going to move to the forward-looking portion of our program and talk about our medium-term update. And with that, I’ll pass it back over to Nikesh.
Nikesh Arora: Well, that’s a wrap on our Q4 results. The reason we wanted to make sure you had the opportunity to enjoy our Friday evening celebrations in the context of a long-term or midterm outlook from us was we wanted to make sure that you see our FY ’24 guidance in the context of where we believe we are in the next three to five year journey. I think what’s important to understand is that over the last five years, the cybersecurity TAM has continued to rise. It has grown at approximately 14%, and it has grown twice the pace at which the IT market has grown. Now the reasons for that are, as we get down these transformations that are going on in the world, we get more and more reliant on e-commerce, as we get more and more reliant on digital transformation movement is about and possibly now with the sort of arrival of AI as a mainstream opportunity, every one of us is trying to make sure we grab that with both hands.
So we will continue to see the pace of technology spend go sort of up or forward. Similarly, we’re going to see that cybersecurity is going to get more than its fair share of growth. So from an opportunity perspective from what’s going on in the market, we believe the cybersecurity market is robust and will continue to be so in the next three to five years. Having said that, if you look deeper, there are actually three things going on in that market: one, there are new markets being created. If you look at the last five years, we saw a sort of a surge in this concept called SASE. We saw SASE come on mainstream. Everybody is out there trying to build a SASE business. That’s kind of been a big thing. As we had anticipated and talked about five years ago, cloud continues to become bigger and bigger.
As companies go sign up with cloud service providers, they are beginning to go move their applications from on-prem or their hybrid cloud to the public cloud. Now it’s important to understand is that approximately 80% of the applications in the world are actually homegrown applications, which are working on on-prem data centers. As we go forward, we’re seeing enterprises take those applications, reimagine them, rewrite them, rearchitect them and move them to the public cloud. Now that work has to be done by 33 million developers around the world, which work for these companies. As they write new code, as they put together a code by looking at open source and having stuff from here and there, there is this real opportunity to make sure that, that code that is written is written in such a way that is secure, is secured by design.
So you will continue to see that cloud security part of that market grow, but that’s a market that’s effectively been created in the last five years. Couple that with the arrival of IoT and OT as mainstream opportunities, we’ve seen even that market has been sort of a new market. Approximately it’s a $30 billion market between those categories, which has been built over the last five years, driving some of the cybersecurity opportunity. Outside of that, in the underlying cybersecurity market, we’ve also noticed that some markets have undergone to transformation. We’re seeing a large transformation in network security as people try and figure out how much to go in the public cloud, how much to leave in the data center, how much hardware to deploy, how much software to deploy.
