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November 2, 2011

Updated: Splunk chief says machine data is ‘next frontier’

Former Hyperion CEO Godfrey Sullivan says log analytics is the next generation of BI, but is he right?

By Jason Stamper

Godfrey Sullivan, Splunk

Godfrey Sullivan, Splunk CEO

In an IT infrastructure which is increasingly dynamic and virtualised, it seems humble log management and analytics is suddenly something that enterprises need. So says Godfrey Sullivan, former CEO of Hyperion and CEO of just such a log analytics firm, Splunk, since late 2008.

Sullivan, who says Splunk has around 3,000 customers worldwide of which 500 are in Europe, says Splunk, "Does for machine data what business intelligence did for structured data. This is the next generation."

After successfully piloting his former company, Hyperion, from $500m to $1bn revenue in six years before selling it to Oracle, Sullivan says he shortly after received several offers to become CEO of public companies, as you would expect. However after due diligence which he says included talking not just to managers but to customers, and finding that Splunk had doubled in size three years in a row, he decided to take the reins.

"This is the most fun I have had in 20 years," he says. "We’re going to grow Splunk by at least another 70 to 80 percent this year despite the economy."

But is machine data management really such a hot area to be in? Wouldn’t the management of unstructured data, such as emails, social networking feeds and multimedia have been a better bet? "The trouble there is that there are already two gorillas in that space," Sullivan says. "Google and Autonomy. And they are doing a pretty good job managing unstructured data."

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"I’ve spent a lifetime in Silicon Valley and I have learned that the most fun you can have is finding a new category and helping to create that," Sullivan says. "And remember that machine data is also unstructured – it comes in multiple formats that we need to be able to make sense of."

Surely if not unstructured data then anyone in their right mind would have been looking for a hot young cloud or SaaS vendor to run? "I also assumed I would be working for a cloud company," Sullivan muses, "but what I found was a lot of companies trying to be cloud companies because they think it is hip. Four years on and it has matured quite a bit but when you scratched under the surface in 2008 you found a lot of very average technology."

Splunk in the cloud

Sullivan notes also that the company recently launched Splunk Storm, for analysing and troubleshooting applications in the cloud.

"There are two further points I’d make about Splunk," he continues. "The first is that customers have downloaded it from the web and used it with almost no assistance from us. The second is the diversity of use cases. I called people all over the world using Splunk in geographies where we have no sales force, using it in different ways: to help with security, infrastructure management, application monitoring, compliance. Six of the seven biggest banks are using Splunk for compliance. It’s a very horizontal product. And download to success is measured in days."

So what does machine data management actually do? Essentially Splunk tracks every machine event — the clinking on a URL, the movement of a virtual machine, the trade in a stock, the list is almost endless – and stores them all in proprietary flat files. There’s no relational database underneath, no schema, just a high speed indexing engine, Sullivan claims.

Customers can then use natural language queries or Splunk’s analytics to query those machine events, perhaps to find error codes, failed transactions or just degradation in transaction handling times.

Users can download the software and monitor or analyse up to 500MB of machine data before they need to get their cheque books out. Sullivan says the typical sale is $20- to $30,000.

As well as security and compliance the web analytics potential is gaining ground, Sullivan says. Splunk can be used to find, for instance, all those cases where a web surfer got to the checkout but didn’t go through with the purchase. It’s also being used in telcos for call detail record (CDR) analysis.

Sullivan says Splunk made around $66m in revenue in 2010. His goals for 2011 are to have added 1,000 new (paying) customers and break the $100m mark.

Is it too early to be thinking about an IPO or trade sale? "No, I am preparing the company to be a public company," Sullivan says. "We have to be ready to manage it that way. SarbOx, compliance etc. But an IPO is just a financing event. The question is, can you run the marathon? I estimate this is a $7 to $10bn market, and there’s no direct competitor. It’s only a matter of time before we have some more competition. There are so many use cases for Splunk my biggest challenge is deciding which areas not to pursue yet."

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UPDATE: Splunk has just announced that in its latest quarter it added 350 new licensed customers and grew sales 95% year on year. It now claims 3,200 customers in over 75 countries. "At the core of every business is data that can provide a powerful competitive advantage. Every company is a data company. Splunk is delivering software that enables companies to derive game changing insights from their machine data," added Godfrey Sullivan, president and CEO.

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