SentinelOne Pushes Upmarket to Minimize Effects of SlowdownCEO Tomer Weingarten Says SentinelOne Will Focus on Top Accounts in Its Pipeline
SentinelOne plans to go after more Fortune 500 and Global 2000 organizations as the economic downturn prompts customers to shrink the size of their purchases.
Over the past year, the Silicon Valley-based endpoint security stalwart doubled the number of clients spending at least $100,000 and $1 million with SentinelOne annually. Two-thirds of its revenues now come from large enterprises. CEO Tomer Weingarten says SentinelOne has revamped its sales organization to more effectively capture pipeline opportunities associated with large global enterprises (see: SentinelOne's Tomer Weingarten on Cloud, XDR and Analytics).
"We're placing a higher emphasis on the largest account opportunities in our pipeline," Weingarten tells investors during an earnings conference call Tuesday. "We've made significant progress in the past few years winning Fortune 500 and Global 2000 accounts."
The push upmarket comes as existing customers and prospects either push back dates for signing contracts or scale down the size of their purchases. The desire to "right-size" deals means customers are increasingly opting not to add modules such as remote script execution, endpoint firewall controls or endpoint management on top of their Singularity Complete EPP and EDR purchases, Weingarten says (see: How XDR Is Fulfilling the Promise That SIEM Never Did).
Outside of endpoint security, the demand for runtime protection, managed services and data retention remains strong since clients are increasingly using the cloud as their production environment and can save money by retaining data in SentinelOne's Singularity platform rather than in a separate data lake, Weingarten says. Similarly, clients can reduce labor costs by offloading services work onto SentinelOne or an MSSP.
"We will see a continued trend to right-size deals, and I think that SentinelOne is very well positioned to deal with that," Weingarten says. "We've always been a more cost-effective solution in the market, so it bodes incredibly well for our business model."
Gaining a Foothold in the Cloud
Customers also have opted to control costs by pursuing multiphase deployment where they buy only what they need for now and kick node or portfolio expansion down the road, according to the CEO. This is most pronounced for large deals that now require additional layers of evaluation and approval.
"We're seeing higher cost consciousness and prudence around IT budgets that are leading to elongated sales cycles and limited budget availability," Weingarten says. "Customers are more focused on the most critical and immediate security needs while taking a 'spend later' approach for other areas."
One opportunity SentinelOne has captured for large enterprises is providing cloud workload protection alongside a competitor's endpoint security technology. He says the strength of SentinelOne's cloud offering allows the company to gain a foothold even in organizations using a rival endpoint tool. Many of these businesses actually have a larger footprint that needs securing in the cloud more than on the endpoint (see: SentinelOne's $100M Venture Capital Fund Seeks Data Startups).
"At the end of the day, it allows us to come in with a truly unique offering right now for cloud workload protection that is far superior to what any other endpoint vendor can provide on the cloud side," Weingarten says. "The more cloud deals we can do, it's incredibly beneficial to our go-to-market motion."
From a competitive standpoint, Weingarten says cost consciousness in the market hasn't led to a meaningful shift in business to Microsoft. While Defender for Endpoint is included in a Microsoft software license, potential buyers are encountering higher costs for integration, management and affiliated services such as MDR, and they don't save much when all is said and done, he says.
"We've seen more and more Microsoft displacements, with some citing it in eventual cost terms as the most expensive solution they had to manage over the years," Weingarten says. "We feel that best-of-breed security, even in an environment where people focus on cost, will still prevail in a lot of cases."
Microsoft didn't immediately respond to an Information Security Media Group request for comment.
Sales Soar, Losses Mount
|Quarter Ended Oct. 31 2022
|Quarter Ended Oct. 31 2021
|Loss Per Share
|Non-GAAP Net Loss
|Non-GAAP Loss Per Share
SentinelOne's revenue of $115.3 million in the quarter ended Oct. 31 beat Seeking Alpha's sales estimate of $111 million. And the company's non-GAAP loss of $0.16 per share crushed Seeking Alpha's net loss estimate of $0.22 per share.
The company's stock is down $0.05 - 0.35% - to $14.05 per share in after-hours trading. Earnings were announced after the market closed Tuesday. For the quarter ending Jan. 31, SentinelOne expects revenue of $125 million. Analysts had been expecting sales of $124.5 million, according to Seeking Alpha.