Cloudflare expanded from protecting websites (a reverse proxy) to protecting corporate employees (a forward proxy). They realized the same global network used to inspect incoming traffic could inspect outgoing traffic, allowing them to enter the massive Zero Trust security market with existing hardware.

Incumbents are disincentivized from creating cheaper, superior products that would cannibalize existing high-margin revenue streams. Organizational silos also hinder the creation of blended solutions that cross traditional product lines, creating opportunities for startups to innovate in the gaps.

Large incumbents struggle to serve newly-formed startups because these customers offer low initial revenue but require significant sales and support. This P&L constraint creates a protected 'greenfield' market for new vendors to capture customers early and grow with them.

Unlike typical asset-light software companies, Cloudflare's capital-intensive model of owning physical infrastructure is a core strategic advantage. This CapEx builds a global network that is extremely difficult for competitors to replicate, creating a durable competitive moat through owned infrastructure.

Inspired by Google, Cloudflare made an early decision to build its global network using inexpensive, commodity hardware instead of specialized equipment. This software-centric approach allows them to scale their infrastructure rapidly and cost-effectively, a key structural advantage over competitors.

By offering generous free services, Cloudflare aggregates immense web traffic. This scale gives them leverage to negotiate peering agreements with ISPs, drastically lowering their bandwidth costs. This cost advantage, reinvested into the network, creates a powerful, hard-to-replicate competitive moat.

Arista successfully challenged the dominant Cisco not by direct confrontation, but by serving specific, high-demand use cases like high-frequency trading and massively scaled cloud data centers. These were 'white spaces' that the incumbent either didn't understand or didn't prioritize, allowing Arista to establish a strong foothold.

Being the de facto industry standard removes the external pressure to innovate. Dominant companies often resist internal change agents who want to 'rock the boat,' fostering complacency. This creates an opening for more agile competitors to gain a foothold and disrupt the market.

Instead of a direct assault, Arista's initial strategy was to serve unique, demanding use cases that Cisco was not focused on. By solving for the low-latency needs of high-frequency trading and early cloud data centers, Arista built a strong, defensible market foothold before expanding.