With all of the buzz created in the past few weeks from the investment community around the IPO of Splunk and the pricing this week there is a renewed interest in these tools. Finishing the week up 108% and with a market cap of $3.35b compared to the initial pricing of $8-10 revised to $11-13 and moved to $17, this bidding war caused it to open at $31 to the general public. The reason this IPO is very hot is not only due to the fact that they do solve some complex problems, but the technology is salable and very easy to use. There are multiple use cases for them, some of which warrant the high license prices. The main buyers use case is for IT troubleshooting, which often is difficult to justify given the expense of the solution at scale. There are higher value business use cases which do warrant the high prices paid for the software. While splunk creates a very open platform for building views, analysis, and overall usability of unstructured IT data they do not help you locate and extra that high value data. There are other solutions on the market, but none have the stickiness or usability that Splunk has for the IT Operations market.
With competitors that have something unique and innovative that Splunk doesn’t they are all built and only run as Software as a Service (SaaS) in the cloud these include both Loggly and Sumo Logic. Loggly has a direct use case for development and the target is being embedded into Platform as a Service(PaaS) deployed applications. Sumo Logic on the other hand does target Splunk directly, but with some unique capabilities which Splunk cannot do being data center bound and restricted to a single company. These differentiated features include the tuning of parsing and analytics based on customer usage both across the entire data set they host as well as between users in a single company data set. This allows them to provide a constantly tuned product based on analysis of the usage of the product itself. This opens the door for some innovative technology, which I look forward to seeing evolve. Splunk has been working on a cloud version, with the beta being launched in August. There have been incremental improvements over the past several months, but it offers a subset of Splunk functionality without any real innovations beyond what the enterprise product can currently do. I expect more focus on this product from Splunk, and hopefully we have better competition in the cloud than what we have seen the market produce for on premise or enterprise solutions.
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