Quick Take: Splunk, the fast-growing provider of the Data-to-Everything Platform, announced earlier this week that it has completed the acquisition of SignalFx, a SaaS leader in real-time monitoring and metrics for cloud infrastructure, microservices and applications. The aggregate purchase price for the transaction was approximately $1.05 billion, excluding adjustments, paid approximately 60% in cash and 40% in Splunk common stock. Splunk shares today closed up $3.34 or 2.89%.
For those less familiar, Splunk develops software for searching, monitoring, and analyzing big data through capture, indexing, and correlation of real-time data in a searchable repository,which enables users to generate graphs, reports, alerts, dashboards, and visualizations. The company is already a leader in IT ops management as well as an AIOps market leader – with the addition of SignalFx, Splunk can now be considered one of the leaders in Application Performance Management for organizations at every stage of their cloud journey, from cloud-native apps to homegrown on-premises applications.
I feel that Splunk CEO Doug Merritt’s comments on the acquisition reflect the true state of the enterprise challenge with cloud-native and hybrid cloud migrations:
“We live in a cloud-first world, where developers must have the ability to monitor and observe cloud-native infrastructure and applications in real-time, whether via logs, metrics or tracing. The power of Splunk and SignalFx allows our customers to monitor any relevant data at massive scale”.
Verdict on the Acquisition
Clients are increasingly demanding software as a service rather than up front perpetual license-based models and Splunk making this transition will serve them well in months and years ahead. As I mentioned in a recent edition of the Six Five podcast, Splunk is making a pivot from a primarily on-premises player to a SaaS (or subscription based) provider. This transition will be good for clients who can better manage costs and for Splunk which can build a more linear revenue profile.
I believe that the SignalFx acquisition is a clear statement of intent by Splunk as it looks to pivot its business model and increase its value proposition to current and future customers. This will be paramount as clients continue to invest in agile data architectures in the cloud, which will lead to a need for greater pricing transparency; This will also act as an enabling factor for executives that need a more predictable understanding of how data growth and proliferation will impact their bottom line.
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Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.