Interview Synopsis

Splunk – cloud transition, competitive environment & notable challenges

  • Public Equity
  • TMT
  • North America

Splunk’s cloud transition has been “bumpy” and the company continues to face several headwinds, a former director at the data software company told Third Bridge Forum. The Interview explored Splunk’s competitive positioning in a rapidly evolving market.

Still time to “recover and reach new heights”

With its roots in ITOps, Splunk is now a dominant player in security, representing approximately 60% of company revenue. Competition is heating up across the board but particularly in ITOps, which makes up about 30% of revenue, and observability, accounting for about 10%. Although on-premise solutions have been the company’s bread and butter, and remain a considerable driver of revenue, it has been ramping up its focus on cloud. 

As we heard in the Interview, cloud is a “different animal” when it comes to subscription-based revenue. “If you look at some of the competition, they do offer a pay-as-you-go-type service which is completely elastic, like AWS and others, where you can pay just for the data you use,” the specialist said. However, this is not something Splunk is able to do yet. 

Certainly, the company has been transitioning, but not as fast at it had anticipated. This is compounded by the fact that some of its cloud-native peers, such as Datadog, are able to be more dynamic in terms of adding new features and adapting pricing structures. Conversely, Datadog “cannot do an on-prem offering, whereas Splunk can”.

The expert said Splunk has made some missteps by going “all-in on cloud” and consequently abandoning on-prem customers. This hyper-focus on cloud has also dampened innovation and M&A efforts, we heard. Over time, however, the company has “realised to some extent that on-prem is also to their advantage”.  

On pricing trends, we heard that customers are increasingly aware that their data needs are growing, but they are unwilling to be subject to spiralling premiums. This is an area where Splunk may “feel the pinch”, according to the Interview, with many customers instead diversifying across vendors, and many reducing their business with Splunk.

Overall, the expert is optimistic that “Splunk has a huge opportunity ahead”, buoyed by its brand, ARR and growing TAM. In fact, the company is undervalued, they said, noting however that cloud execution “is the key”. If done well and in a timely manner, Splunk will be able to “recover and reach new heights”.  

To access all the human insights in Third Bridge Forum’s Splunk – cloud transition, competitive environment & notable challenges Interview, click here to access the full transcript. 

The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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