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Splunk Idea Proposal (SPLK)

Splunk Idea Proposal (SPLK)
 

Is Splunk’s broadening platform and shift to the cloud increasing its appeal to existing and potential customers?

Report Available: October 29, 2020

 

Blueshift’s ongoing research found SPLK making quick progress in shifting customers to its cloud products, though the transition is slowing its revenue growth.  The company, a market leader in areas like IT operations management and analytics, is investing heavily to expand its toolset, especially into the promising area of “observability.” As the company is juggling these major initiatives, it is trying to better position itself in extremely competitive markets with new pricing models.

 

Observations

  1. SPLK – a developer of enterprise software for monitoring and analyzing data – is in the midst of multiple major transitions. One is a push to move customers from on-premise deployments to SPLK’s cloud infrastructure. In Q2, cloud-based products drove more than half of total software bookings for the first time in SPLK’s history, and the company now projects to reach its 60% cloud mix target two years ahead of schedule. The shift does have a short-term downside as the company moves from perpetual licenses that involve upfront payments to a cloud model with subscription fees. SPLK’s total revenues declined 5% in Q2 compared to a year earlier, and executives forecast total revenues for Q3 that are likely to be flat or down compared to the same quarter last year. Still, several sell-side analysts have recently boosted their outlook for SPLK because of its high level of annual recurring revenue. SPLK’s ARR was up 50% to $1.93 billion in Q2. That provides a stable base but also means SPLK is reliant mostly on growing with existing customers rather than attracting new ones.
  2. SPLK’s other major initiative revolves around expanding from its roots as a developer of Security Information and Event Management (SIEM) software into related IT sectors. In 2018, it acquired Phantom Cyber Corp. for $350 million to get a toehold in the security orchestration, automation and response (SOAR) space, which aims to automate tasks associated with monitoring and responding to security threats. Last year, SPLK shelled out more than $1 billion to buy SignalFX, its biggest acquisition ever – and followed that up weeks later by acquiring Omnition – to push its way into the nascent “observability” market. Platforms in that sector – led by companies like DDOG, DT, and NEWR – aim to combine tools for application performance monitoring, infrastructure monitoring, data logging, and SIEM. Blueshift’s September 10 observability market report said such comprehensive platforms were experiencing high and growing demand, especially as enterprises shift operations to the cloud. Sources gave SPLK high marks for its logging solutions and said its SignalFX acquisition had expanded its overall capabilities.
  3. SPLK is one of several companies, along with DDOG, SNOW, and others, that are benefiting from an increasing focus on the middle layer of IT operations, such as security and visibility into cloud-based networking operations, according to Blueshift’s October 2 Tech Trends report. But one recurring criticism of SPLK is that its solutions are expensive. Multiple sources in Blueshift’s February 6 report on competitor ESTC said SPLK had some compelling attributes, but its high cost limited its appeal. To address that issue, the company is trying to shift from a pricing model based on data ingestion volumes to workload-based pricing for cloud customers and ELAs (enterprise level agreements) for those with on-premise deployments. Executives said they are seeing “very, very high acceptance rates” among customers who have been offered the more predictable instance-based pricing.
  4. SPLK was the top-ranked vendor by market share in the most recent Worldwide IT Operations Analytics Software Market report from IDC. According to the report, Splunk had 41.8% of the ITOA market in 2019 and $1.5 billion in revenue, ahead of vendors such as VMW, NOW, IBM, and SUMO. Earlier in the year, IDC identified SPLK as the share leader in the IT Operations Management Software market as well, with its 13% share outpacing MSFT, IBM, CSCO, AVGO, and NEWR.

 

In what ways does SPLK stand out in the world of data aggregation and analysis? Can SPLK be a major player in the observability market? Can SPLK’s pricing changes help overcome its reputation for being too expensive? Does SPLK have a cohesive strategy for putting all of its solutions together? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: SPLK users, SPLK partners, and Industry specialists.  

 

Companies: Splunk Inc. (SPLK), Broadcom Inc. (AVGO), Cisco Systems Inc. (CSCO), DataDog Inc. (DDOG), Dynatrace Inc. (DT), Elastic N.V. (ESTC), IBM Corp. (IBM), Microsoft Corp. (MSFT), New Relic Inc. (NEWR), ServiceNow Inc. (NOW), Snowflake Inc. (SNOW), Sumo Logic Inc. (SUMO), VMWare Inc. (VMW)

 

Research Begins: October 12, 2020

 

To see other ideas Blueshift Research is currently working on, please click here.

 

Blueshift Research’s sister company, Intro-act, has launched the Intro-act Scorecard, the C-suite’s standard, ongoing measure of corporate investor engagement.

 

The Scorecard optimizes the ROI on corporate access by measuring: Concentration, Directionality, Breadth, Impact, Depth, and Duration

 

See the sample Scorecard. Watch the Scorecard video.