tldr: No. No less than not but ….
Sumo Logic is submitting for its IPO this week. Sure, the world could also be affected 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 fireplace in our face, however on our method to our extinction, we sorely must test our log information, our shares, and IRR development.
So right here we go.
By now, we have now accepted that we’re all information 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 functional. Each Sumo Logic and Splunk do an identical factor — collect all of your information and allow you to analyze it, roughly.
However Sumo Logic is all SaaS, whereas Splunk remains to be shifting to SaaS. So can the brand new IPO child on the town, Sumo Logic, be a robust competitor to Splunk? Contemplating that each are taking part in in a $50 billion whole addressable market, in line with Sumo Logic’s S1 filings, I’m fairly positive there’s room for a couple of participant.
Splunk bought off to an early head begin however was an “on-prem” product. “It was nearly eight years in the past once I first noticed Splunk’s product – I used to be blown away” says a VP of Engineering at a $four billion firm. “It was a effectively designed product and we beloved it.”
These of you who’re sufficiently old could recall that Splunk began as an information ingesting dinosaur, which then changed into a nimble fowl, flying in these hybrid clouds. I bought fun once I dug out its S1 offering from January 2012, the place Splunk recognized SaaS as a danger, saying if prospects demand software program that gives operational intelligence by way of a “Software program-as-a-Service” enterprise mannequin, the corporate’s enterprise could possibly be adversely affected. I’m positive the founders of Sumo noticed that chance and jumped on it at time. However Splunk has changed into a cloud-first firm, with out compromising its development charge. 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 whole bookings at the moment are by way of subscriptions. This improve is a non-trivial feat. To make this shift whereas sustaining development is like swapping out an airplane engine whereas flying at 30,00zero toes.
Splunk now pulls in $1 billion ARR from cybersecurity
Virtually 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 (wherein 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 help carry out superior detections and investigations and streamline safety operations processes within the cloud. But loads stays to be accomplished, because of the ever-growing complexity of safety information sources. Dhiraj Sharan, Founding father of Question.ai (wherein I’m an investor), stated “Splunk has clearly demonstrated its chops within the safety market, however safety information continues to stay fragmented throughout merchandise 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 reviews, but 89% of those organizations have considerations in regards to the lack of visibility and perception into trusted information. Grunt work contains extracting, transferring, cleansing, and merging information, in addition to making, formatting, and presenting calculations. Safety leaders are involved that their crew productiveness is adversely impacted due to time spent on reporting, in line with the survey.
COVID tailwinds and worth wars
COVID has accelerated most cloud and expertise firms’ 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 latest 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 information quantity pricing triggered a lot heartburn for its prospects, and it’s now shifting to instance-based pricing. As a method, the corporate performed its hand very effectively by skimming the cream as a primary transfer. Now, with others moving into the sector, and prospects fatigued with price runoffs, Splunk is transferring in the direction of instance-based pricing. This can assist it retain prospects within the brief run. Splunk additionally has a big benefit over Sumo with integrations and effectively over a thousand apps, entrenching it within the ecosystem in a stable method. Speedy manufacturing innovation (it might supply machine studying throughout its complete platform) and embracing open supply choices give it an edge in the long term.
However within the meantime, the expansion of knowledge volumes, the complexity of knowledge sorts and sources, and disparate safety instruments will generate loads of alternatives available in the market. 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 firms like Query.aiCyberGRX, and Accurics He’s the creator of two books The Business of Venture Capital and Startup Boards (co-authored with Brad Feld).