July 27, 2022
Photo: Martina Albertazzi/Bloomberg via Getty Images
Hello and welcome to Protocol Enterprise! Today: how Cloudflare plans to compete for larger and larger pieces of the cybersecurity market, the Chips Act finally passes the U.S. Senate and you can’t spell cybersecurity without b.s.
Even just within the realm of cybersecurity, Cloudflare does a lot of things. But if you ask CEO Matthew Prince to break down the strategy on security — as I did recently — the answer sounds something like this.
First, become a dominant player in providing network security for the zero-trust era. Second: Make you forget that cybersecurity even exists.
To be sure, deeply entrenched enterprise vendors can be harder to displace by upstarts than it might seem.
Still, Cloudflare will need to take on some of the most-established vendors in the industry to achieve its vision.
How global ecommerce benefits American workers and the U.S. economy: Alibaba — a leading global ecommerce company — is a particularly powerful engine in helping American businesses of every size sell goods to more than 1 billion consumers on its digital marketplaces in China. In 2020, U.S. companies completed more than $54 billion of sales to consumers in China through Alibaba’s online platforms.
The U.S. Senate voted 64-33 Wednesday to approve a $280 billion piece of legislation that will dole out a batch of chip manufacturing subsidies and research funding that’s designed to return chip production to the U.S. in some meaningful fashion.
The vote likely marks the end of more than two years of debate, which stalled in recent weeks amid disagreements between the two houses of Congress and within parties. The Senate bill is now set to travel to the House and is expected to pass there, according to several D.C. insiders Protocol spoke with this past week. If or when the House passes the bill, it will head to President Biden, who has signaled he supports this effort to boost U.S. chip manufacturing and plans to sign the bill.
The semiconductor manufacturing-related legislation the Senate passed is a reworked version of the House's bill that strips out some of the components that bogged down passage in favor of ensuring the chip-related funding passes.
Broadly, the Senate version includes roughly $52 billion in subsidies to bolster chip manufacturing in the U.S., spread over five years, and a $24 billion tax credit to support the industry. Beyond the manufacturing subsidies, the bill also adds $200 billion marked for research.
The legislative package is a meaningful sum of money, but for the chip industry, which measures the cost of its future plans in the tens or hundreds of billions of dollars, $52 billion over five years is “a rounding error given the scale of investments required in this space,” according to Bernstein analyst Stacy Rasgon. The funding and tax breaks will directly benefit chip manufacturers such as Intel, GlobalFoundries, Samsung and TSMC.
As a former CISO, Jay Leek brings a different perspective to venture investing than a lot of his fellow VCs. I spoke with Leek, the former CISO of The Blackstone Group and now managing partner at SYN Ventures, about some of the top areas for security innovation that he's focusing on.
Attack prevention. "A lot of analysts out there right now are talking about detect and respond [technologies] — they're throwing their arms up and saying, 'You can't prevent it.' I call b.s. on that. You actually can stop a lot of things. We have a really strong emphasis on prevention, and then failing back to detect and respond."
Security for hybrid IT. Most security vendors excel at either cloud security or on-prem security, not both, Leek told me. "Very few are built with hybrid in mind — [which means being] purpose-built to be on-prem and in the cloud. One security stack in both locations. Unless you were born-in-the-cloud in the last decade, you are going to be on-prem in perpetuity in some form or fashion, as well as in the cloud. Amazon Outposts would not exist if Amazon didn't believe you need an on-prem solution."
Truly ML-driven security. Leek says that 100% of the security startups his team has met in the past five years have touted having machine learning-powered analytics. But probably a "mid-single-digit percentage" of those companies actually use ML in a way that really matters.
"I'm not saying they don't have it — it's just not their secret sauce,” Leek told me. However, "we believe that over the last year or two, the technology has started to catch up with the marketing," he said. "We see that it's now maybe low double digits — and we see a path where it could be 20%" in the coming years.
Microsoft reportedly asked Google Cloud and Oracle to help it argue that federal government contracts should pursue a multicloud approach; for some mysterious, unknown reason, it appears AWS was not invited to this club.
SK Hynix believes that demand for server-chip technology could wane in the second half of the year if consumer demand continues to fall off a cliff.
How global ecommerce benefits American workers and the U.S. economy: Using economic multipliers published by the U.S. Bureau of Economic Analysis, NDP estimates that the ripple effect of this Alibaba-fueled consumption in 2020 supported more than 256,000 U.S. jobs and $21 billion in wages. These American sales to Chinese consumers also added $39 billion to U.S. GDP.
Thanks for reading — see you tomorrow!