Even before 5G proliferates, the global economy has already been on its way to digital transformation. More and more applications and services are moving away from the traditional corporate data centers to the cloud, which in turn disrupts the networking and security architecture. 5G only accelerates the trend, especially on the edge. As Gartner said, 

• "The digital inversion of usage patterns will expand further with the growing enterprise need for edge computing capabilities that are distributed and closer to the systems and devices that require low latency access to local storage and compute, with 5G acting as a catalyst to accelerate edge computing adoption."

• New security frameworks, such as Secure Access Service Edge (SASE) and Zero Trust Network Access (ZTNA), pave the way for vendors to transform security architectures to meet the new demand.

• Zscaler, offering cloud-based security solutions that provide secure access for users and devices to their applications and services regardless of location, is the best example of this new breed.

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On December 03, 2019, Zscaler reported the earnings for the first quarter of FY 2020. The company's growth seems to stabilize after several quarters of deceleration, with billings up 37% YoY vs. 23% last quarter. What still bothers investors is threefold: a) can they sustain this (high) level of growth? b) increasing competition from bigger players such as Palo Alto Networks; and c) the elephant in the room, sky-high valuation (16.9x EV/Sales).

We remain confident in the company's technological leadership in the cloud-based security markets. "Sitting in the middle of the traffic" empowers Zscaler to tap into other adjacent opportunities in the new technology stacks. Take ZDX for example.

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Another interesting observation over the quarter is players in other software stacks are trying to tap into next-gen security markets too. The line is blurred.

• VMware has been building security capabilities into its infrastructure solutions. The Carbon Black acquisition added security offering at the end-point level. The company is leveraging Carbon Black's security capabilities and announced a new Security Business Unit that includes Carbon Black and the AppDefense offerings. VMware also announced a partnership with Dell that makes Carbon Black Cloud the preferred endpoint security solution for Dell's commercial customers. The management believes that the fragmented nature of the security market is prime for disruption and aims to position itself to be a winner.

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• Elastic N.V. also completed the acquisition of Endgame, a leader in endpoint security, and introduced Elastic Endpoint Security, an endpoint protection solution (based on Endgame) that integrates with Elastic SIEM in the Elastic Stack.

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