Matthew Prince's 10-year plan

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.

• In the future, Prince believes the biggest winners in cybersecurity will be those who can deliver security combined with an assortment of other cloud-based services that businesses need to operate in the modern world.
• Ten years from now, "our customers will think of it less as cybersecurity and think of it more just as the network that they need to get their jobs done."
• Cloudflare is one of the few companies that can deliver a network like that, according to Prince and a number of analysts I spoke with.

To be sure, deeply entrenched enterprise vendors can be harder to displace by upstarts than it might seem.

• But for the last several years, Cloudflare has aggressively sought to expand beyond its roots in application security and into zero-trust services, an increasingly pivotal focus for enterprises.
• In that push, analysts say that Cloudflare brings unique advantages — particularly its global network — that could be setting it up for serious growth in the enterprise security market.
• "There's no reason to think that [Cloudflare] won't have success on the zero-trust side like they've had on the application security side," said Adam Borg, director of equity research at Stifel.

Still, Cloudflare will need to take on some of the most-established vendors in the industry to achieve its vision.

• But if Prince is right, the way customers think about cybersecurity will look very different a decade from now — and Cloudflare will be one of the biggest players left standing.
• In the future, "I think the companies that are able to take cybersecurity and do it well — and build out a true cloud platform themselves — will dwarf anything that we're seeing in the cybersecurity space today."

Read the full story here.

— Kyle Alspach (email | twitter)

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All that, and a bag of chips

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.

— Max A. Cherney (email | twitter)

‘I call b.s. on that’

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.

— Kyle Alspach (email | twitter)

Around the enterprise

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.

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