Research | Technology

How Cloudflare Stays Competitive in Challenging Times

Cloudflare has a bold strategy for building resilience. At RBC Capital Markets Global Technology, Internet, Media and Telecommunications (TIMT) Conference, our software analyst Matt Hedberg sat down with Co-Founder, President and COO Michelle Zatlyn, to discuss lessons for businesses seeking to navigate the economic challenges ahead.

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By Matt Hedberg, Featuring Michelle Zatlyn
Published February 15, 2023 | 3 min read
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Key Points

  • Cloudflare’s strong position and scalable services place it in good stead to weather macroeconomic headwinds.
  • Through streamlined on-ramps to scale up service offerings, it helps companies reduce reliance on multiple vendors.
  • By supporting its employees to do their best work, Cloudflare helps encourage performance and staff retention.
  • The company is also helping build a greener web by improving search engine efficiency.
  • Cloudflare Workers help companies leverage data localization to comply with new internet laws.

In little over a decade, Cloudflare has gone on a remarkable growth journey, evolving from a spam detection service to become a major player in the cybersecurity space. Today, it is one of the biggest networks on the internet, helping increase web security and performance for around 20% of the web.

Cloudflare is fortunate that its services are in the “must have” category, explains Co-Founder, President and COO Michelle Zatlyn, “because you can't be exposed and there are real threats online.” She revealed to the conference that Cloudflare had stopped a staggering 126 billion cyber-attacks in a single day.

However, she has observed deal cycles slowing down, as all companies reevaluate their spending.  Dealing with a more hesitant consideration process is key to ensuring resilience in a testing macroeconomic environment, said Zatlyn. In such a scenario, derisking becomes important and is often a question of building diverse services that can be rolled out over time, she noted.

“For a service like Cloudflare, you don't have to adopt the whole platform on day one. It becomes a real superpower, where you can adopt a service, start to get used to it, and then over time, you can adopt more. That's very appealing for organizations.”

Despite the real challenges of the last decade, Zatlyn is keen to put current economic woes into  context. She noted the proliferation of unicorns over the last ten years—a strong sign the internet continues to fuel growth.

“It went from 10 to 380 unicorns in a decade,” she observed. “That speaks to the rate of innovation and tech, and the groundswell on the internet,” she added.

Cloudflare also plays a role in fostering the business success stories of the future. Zatlyn cited the success of Cloudflare Workers, a serverless execution environment that helps companies create and augment applications without having to maintain infrastructure. She shared the story of a founder who built two successful companies entirely using Cloudflare.

“I've met many entrepreneurs who've done the same thing. A lot of the large organizations are using Workers to solve problems that their teams used to bang their heads against the wall to try and figure out.”

Own and expand

So how is Cloudflare moving forward in an uncertain economic environment? Part of the answer lies in its technological architecture, said Zatlyn. Cloudflare owns its servers, from which it runs all its services. This provides the flexibility to expand its offerings to customers. Zatlyn highlighted the importance of this strategy as companies seek to reduce their reliance on multiple vendors.

“The best investments are the ones that offer greater opportunities over time, and don't narrow the possibilities,” says Zatlyn.

This ability to acquire customers with an initial offering, and then smoothly onramp new services, helps Cloudflare maintain resilience amid increased buyer hesitancy.

“That integrated platform where we can add additional services and expand our portfolio is really powerful. We have really good muscle around innovation and shipping new things,” explained Zatlyn. “That's different than most technology or software companies,” she added.

Retaining talent in a competitive market

In a tightening labor market, Cloudflare stands out by fostering a culture of worker engagement and retention. This people-focused approach helped it evolve from an ambitious startup to a category leader. Employees are still attracted by the scale of its mission and ambition, explained Zatlyn.

“Enabling everyone to do their best work is so important. When you truly feel like your work matters, and that you're part of something that's winning and you get paid well to do it, that's a very powerful combination.”

Building a more efficient web

In increasingly climate-conscious times, Cloudflare’s innovative web technology aims to support UN sustainability goals. One piece of this is making the web more efficient, in response to its rapid growth over the last 30 years.

“If we can help decrease the amount of waste requests on the internet, you save a lot of computing resources,” explained Zatlyn.

“Because about 20% of the web is a Cloudflare customer, we can just push to Google what's changed.” This ability to support search on such a large scale cuts down on Google’s need to continuously trawl the web for updated content.

Supporting compliance

Cloudflare also plays a key role in helping companies operate in an evolving legal landscape, as many countries implement internet policies.

“The internet's only 30 years old. It's enabled so many different things. But all of a sudden, it's changing economies and societies. And so all these countries are waking up being like, ‘how are we going to put policy in place for the internet?’”

Overcoming the challenges of maintaining compliance across a range of legislative contexts is no easy task, especially given the hefty fines that non-compliance can bring.

“We see a lot of organizations adopting Cloudflare Workers to meet local data localization needs, which means continued innovation in those countries.”

This content is based on commentary and analysis from RBC Capital Markets' Global Technology Internet Media and Telecommunications Conference hosted in New York, NY on November 15-16, 2022. For more information about the conference, please contact your RBC representative.

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