tldr: No. A minimum of not but ….
Sumo Logic is submitting for its IPO this week. Sure, the world could also be stricken by a pandemic, forest fires, chaotic climate patterns with 100-degree temperatures and snowfalls (on the identical day, sure), however allow us to take a pause to contemplate the upcoming market battle between Sumo Logic and Splunk. Mount Vesuvius could also be exploding and spewing hearth in our face, however on our strategy to our extinction, we sorely must examine our log knowledge, our shares, and IRR development.
So right here we go.
By now, now we have accepted that we’re all knowledge hogs, accumulating and saving each bit and byte, logs, trickles, and streams. (Here is my recent post on Snowflake and its meteoric growth). We’re addicts and hoarders multi function. Each Sumo Logic and Splunk do an analogous factor — collect all of your knowledge and allow you to analyze it, kind of.
However Sumo Logic is all SaaS, whereas Splunk continues to be shifting to SaaS. So can the brand new IPO child on the town, Sumo Logic, be a powerful competitor to Splunk? Contemplating that each are taking part in in a $50 billion complete addressable market, in accordance with Sumo Logic’s S1 filings, I’m fairly positive there may be room for a couple of participant.
Splunk acquired off to an early head begin however was an “on-prem” product. “It was almost eight years ago when I first saw Splunk’s product – I was blown away” says a VP of Engineering at a $4 billion firm. “It was a well designed product and we loved it.”
These of you who’re sufficiently old might recall that Splunk began as a knowledge ingesting dinosaur, which then became a nimble chook, flying in these hybrid clouds. I acquired amusing once I dug out its S1 offering from January 2012, the place Splunk recognized SaaS as a danger, saying if clients demand software program that gives operational intelligence by way of a “Software-as-a-Service” enterprise mannequin, the corporate’s enterprise might be adversely affected. I’m positive the founders of Sumo noticed that chance and jumped on it at a great time. However Splunk has became a cloud-first firm, with out compromising its development fee. It’s now pulling in $1.93 billion ARR (Q2 2021). In its most recent earnings call in Sep 2020, CEO Doug Merritt shared that the annual recurring income (ARR) from SaaS subscriptions is rising at a wholesome ~50%, and 53% of its complete bookings at the moment are by way of subscriptions. This enhance is a non-trivial feat. To make this shift whereas sustaining development is like swapping out an airplane engine whereas flying at 30,000 ft.
Splunk now pulls in $1 billion ARR from cybersecurity
Nearly 50% of Splunk’s income comes from its cybersecurity choices. (The remainder comes from its different enterprise areas of IT Ops and utility observability). Sumo Logic’s safety enterprise has potential, nevertheless it’s too early to inform the way it will play its playing cards. For one, the corporate acquired JASK (through which I used to be an investor), and with it, it acquired a modern-day autonomous SOC platform and a few established safety leaders who got here from Arcsight, Anomali, and Netflix.
In the meantime, Splunk is gearing up, and its latest providing is Mission Management — a unified SaaS platform that was launched in Q2 2020. Mission Management may also help carry out superior detections and investigations and streamline safety operations processes within the cloud. But so much stays to be carried out, because of the ever-growing complexity of safety knowledge sources. Dhiraj Sharan, Founding father of Question.ai (through which I’m an investor), stated “Splunk has clearly demonstrated its chops in the security marketplace, but security data continues to remain fragmented across products and platforms.”
A survey of more than 200 security leaders by Panaseer reveals that enterprise safety groups spend a mean of 36% of their time manually producing studies, but 89% of those organizations have considerations concerning the lack of visibility and perception into trusted knowledge. Grunt work consists of extracting, shifting, cleansing, and merging knowledge, in addition to making, formatting, and presenting calculations. Safety leaders are involved that their workforce productiveness is adversely impacted due to time spent on reporting, in accordance with the survey.
COVID tailwinds and worth wars
COVID has accelerated most cloud and know-how corporations’ development, and I’m no genius in saying that Splunk and Sumo will profit over the midterm. As a SaaS providing, Sumo has a built-in benefit, and Splunk is quickly catching up. Splunk’s Merritt remarked on the current earnings name that the corporate will attain its cloud combine income goal of 60% two years forward of schedule.
Anticipating worth wars, Splunk has shifted into a brand new pricing mannequin. It’s knowledge quantity pricing precipitated a lot heartburn for its clients, and it’s now shifting to instance-based pricing. As a technique, the corporate performed its hand very nicely by skimming the cream as a primary transfer. Now, with others entering into the world, and clients fatigued with price runoffs, Splunk is shifting in the direction of instance-based pricing. This may assist it retain clients within the brief run. Splunk additionally has a major benefit over Sumo with integrations and nicely over a thousand apps, entrenching it within the ecosystem in a stable method. Speedy manufacturing innovation (it will probably supply machine studying throughout its total platform) and embracing open supply choices give it an edge in the long term.
However within the meantime, the expansion of information volumes, the complexity of information varieties and sources, and disparate safety instruments will generate loads of alternatives out there. That’s good for all of the gamers on this sector.
Mahendra Ramsinghani is founding father of Secure Octane, with investments in cybersecurity and cloud infrastructure corporations like Query.aiCyberGRX, and Accurics He’s the writer of two books The Business of Venture Capital and Startup Boards (co-authored with Brad Feld).