Observability
Enterprise

1

Splunk
Power Score: 62.0 Momentum Score: 46.0 (4) HQ: San Francisco, CA CEO: Douglas Merrit

Economics

Valuation: $23.59 billion (+25% YoY)

Amt. Raised: $40.2 million

Politics

Lobbying Spend: $70,000

Industry Orgs: BSA

People

Headcount: 7,946 (+20% YoY)

Engineering Headcount: 1,971 (+13% YoY)

Big Tech Experience: 8%

Open Roles: 3,292

Innovation

R&D Spending: $791 million (+28% YoY)

Patents Applied For: 160

Patents Owned: 738

Acquisitions: TruSTAR (May 2021); Flowmill (November 2020); Plumbr (October 2020)

Leadership

Exec Team Exits: Tim Tully (CTO)

Diversity Data: Yes

ESG/CSR Data: Yes

On Power

An IT search engine, a security information and event management company and an observability company walk into a restaurant. The waiter says, "Table for one, Splunk?" The company, founded in 2003, has tried all those markets in the past, mirroring the big enterprise industry trends of big data, monitoring and now observability along the way. Obviously, Splunk's market power is not the result of overnight success. Rather, the company built a loyal client base over time by helping reduce enterprise IT complexity, first for cloud migrations and later for hybrid and multicloud architectures. Splunk only launched its observability platform in October 2020, on the heels of two major acquisitions: SignalFx and Omnition, the former being its largest acquisition to date at $1.05 billion. Though Splunk's observability platform launch is recent, the company is in a leadership position in the sector due to its deep relationships with cloud vendors and Fortune 500 companies, as well Splunk Cloud's existing FedRAMP authorization (the government's mechanism for vendor approval) which can further grow its public sector penetration. And Splunk's revenue growth relative to its valuation is illustrative of a big player aiming to get much bigger.

On Disruption

Observability is still so new that, despite Splunk's age, it can simultaneously exist high on both the power and the disruption sides of the index. From a growth standpoint, Splunk's continued investment in R&D and headcount are indicative of the market opportunity the company sees in the space. And while the company suffered a down quarter in revenue at the tail end of 2020 — due in part to delayed transaction closings within the context of the pandemic — its significant revenue bump in the following quarter shows that the company is finding its footing in a crystalizing market for more holistic observability functionality. Moreover, the company's recent acquisitions of Flowmill (network performance monitoring), Plumbr (real user Monitoring/application performance monitoring) and Rigor (digital experience monitoring) further flesh out the strategy that began with the SignalFx acquisition a year and a half ago.

Tea Leaves

Splunk lost its CTO in April 2021, when Tim Tully joined Menlo Ventures. Tully is credited as one of the key architects in the deals that propelled the company into the observability space via acquisitions, and Splunk's stock price took a significant hit after his departure. But the company also announced in April that it was bringing on Teresa Carlson, former AWS vice president of worldwide public sector and industries, as the new president and chief growth officer, signaling what could be a deeper push into government procurement processes. And despite Tully's impact, CEO Douglas Merritt has been at the helm since 2015, overseeing significant growth along the way.

They Said It

"We've done super well in IT and security — we're early in market for observability, so that's a must win market for us as well." — CEO Douglas Merrit in an October 2020 interview

https://roar-assets-auto.rbl.ms/documents/11794/PowerIndex_PowerSheets_Observability-Splunk_2021-0907.pdf
Observability
power-index/enterprise/observability/