tldr: No. At least not however ….
Sumo Logic is submitting for its IPO this week. Yes, the world is also affected by a pandemic, forest fires, chaotic local weather patterns with 100-degree temperatures and snowfalls (on the an identical day, positive), nevertheless enable us to take a pause to consider the upcoming market battle between Sumo Logic and Splunk. Mount Vesuvius is also exploding and spewing fireside in our face, nevertheless on our technique to our extinction, we sorely have to check our log data, our shares, and IRR progress.
So proper right here we go.
By now, we have got accepted that we’re all data hogs, gathering and saving every bit and byte, logs, trickles, and streams. (Here is my recent post on Snowflake and its meteoric growth). We are addicts and hoarders multi purposeful. Both Sumo Logic and Splunk do an identical issue — acquire all your data and will let you analyze it, roughly.
But Sumo Logic is all SaaS, whereas Splunk continues to be shifting to SaaS. So can the model new IPO baby in town, Sumo Logic, be a robust competitor to Splunk? Considering that every are participating in in a $50 billion full addressable market, based mostly on Sumo Logic’s S1 filings, I’m pretty constructive there could also be room for a few participant.
Splunk acquired off to an early head start nevertheless 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 agency. “It was a well designed product and we loved it.”
Those of you who’re old enough might recall that Splunk started as a data ingesting dinosaur, which then became a nimble chook, flying in these hybrid clouds. I acquired amusing as soon as I dug out its S1 offering from January 2012, the place Splunk acknowledged SaaS as a hazard, saying if purchasers demand software program program that offers operational intelligence by means of a “Software-as-a-Service” enterprise model, the company’s enterprise is perhaps adversely affected. I’m constructive the founders of Sumo seen that probability and jumped on it at time. But Splunk has became a cloud-first agency, with out compromising its progress cost. It is 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 revenue (ARR) from SaaS subscriptions is rising at a healthful ~50%, and 53% of its full bookings in the meanwhile are by means of subscriptions. This enhance is a non-trivial feat. To make this shift whereas sustaining progress is like swapping out an airplane engine whereas flying at 30,000 ft.
Splunk now pulls in $1 billion ARR from cybersecurity
Almost 50% of Splunk’s revenue comes from its cybersecurity selections. (The rest comes from its completely different enterprise areas of IT Ops and software program observability). Sumo Logic’s security enterprise has potential, however it absolutely’s too early to tell the best way it will play its enjoying playing cards. For one, the company acquired JASK (throughout which I was an investor), and with it, it acquired a modern-day autonomous SOC platform and some established security leaders who obtained right here from Arcsight, Anomali, and Netflix.
Meanwhile, Splunk is gearing up, and its newest offering is Mission Control — a unified SaaS platform that was launched in Q2 2020. Mission Control would possibly assist perform superior detections and investigations and streamline security operations processes inside the cloud. Yet hundreds stays to be carried out, as a result of ever-growing complexity of security data sources. Dhiraj Sharan, Founder of Query.ai (throughout which I’m an investor), talked about “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 displays that enterprise security teams spend a median of 36% of their time manually producing tales, however 89% of these organizations have points regarding the lack of visibility and notion into trusted data. Grunt work comprises extracting, shifting, cleaning, and merging data, along with making, formatting, and presenting calculations. Security leaders are concerned that their employees productiveness is adversely impacted resulting from time spent on reporting, based mostly on the survey.
COVID tailwinds and value wars
COVID has accelerated most cloud and know-how firms’ progress, and I’m no genius in saying that Splunk and Sumo will revenue over the midterm. As a SaaS offering, Sumo has a built-in profit, and Splunk is rapidly catching up. Splunk’s Merritt remarked on the present earnings identify that the company will attain its cloud mix revenue aim of 60% two years ahead of schedule.
Anticipating price wars, Splunk has shifted right into a model new pricing model. It’s data amount pricing induced loads heartburn for its purchasers, and it’s now shifting to instance-based pricing. As a technique, the company carried out its hand very correctly by skimming the cream as a major switch. Now, with others coming into into the sector, and purchasers fatigued with value runoffs, Splunk is shifting in path of instance-based pricing. This will help it retain purchasers inside the fast run. Splunk moreover has a serious profit over Sumo with integrations and correctly over a thousand apps, entrenching it inside the ecosystem in a powerful means. Rapid manufacturing innovation (it will presumably present machine finding out all through its full platform) and embracing open provide selections give it an edge in the long run.
But inside the meantime, the growth of information volumes, the complexity of information types and sources, and disparate security devices will generate a great deal of options accessible available in the market. That is good for all the avid 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 is the author of two books The Business of Venture Capital and Startup Boards (co-authored with Brad Feld).