Updated: Feb 22
A perfect storm featuring millions of new remote workers, unprecedented levels of data vulnerability, and several shape-shifting security breaches (most notably, SolarWinds*) made 2020 an extremely active year in the monitoring space. In response to market demand, we have observed many suppliers introduce new, “unified” monitoring platforms to expand into other areas of monitoring and observability. This trend was led by suppliers known for their Application Performance Monitoring (APM) offerings, but these vendors are now being chased by several newcomers.
Here’s a snapshot of recent revenue growth in this segment:
DataDog quarterly sales climbed at a staggering 60-80% pace YoY since the company’s IPO, propelling it to become a new leader in monitoring. Many others in this space also experienced hyper growth, except for Splunk.
What Does This Mean for Customers?
ClearEdge customers are experiencing high levels of frustration due to their inability to buy the correct amount of these security solutions because the vendors use metrics that are impossible to compare to one another. Subsequently, clients consistently over- or under-purchase this software because vendor A’s offer is based on number of Gigabytes needed, vendor B’s is based on your number of users, and vendor C’s is based on an entirely different proprietary metric (i.e., Compute Units) to measure consumption. Because there is never an apples-to-apples comparison available, clients are unable to distinguish the merits and cost-of-ownership of one deal over another, nor can they apply these arcane metrics to their actual demand, which typically results in choosing the proposal with the lowest price.
RFPs are difficult (and seldom done) due to the amount work involved in putting together accurate growth estimates for multiple suppliers that all use different metrics. It should be noted that those clients who do go through this process have achieved positive results, but it requires a significant commitment of resources.
Further, the consumption-based models used by DataDog and New Relic require customers to commit to an annual level of spending, which customers cannot later reduce. We know that some clients have overspent on their projections by millions of dollars. The contract language that deals with purchases that go over the commitment is typically not customer-friendly and stipulates that any discounts revert to list pricing for any spends beyond the commit limit.
ClearEdge clients have reported numerous internal challenges when using these spend models. Often, a client will have multiple business users consuming on this model, but lack strong internal reporting or communication procedures, which causes clients to lose track of their usage/spending. We have also heard that the new “unified” monitoring platforms make it easy for customers to monitor everything, which some users are doing, instead of identifying which logs/systems need to be monitored and which can be ignored.
Clients are advised take the following steps to improve their results with these monitoring suppliers:
Project demand effectively and understand these complicated pricing models early, before signing on with a supplier.
Ensure that commercial terms are as customer-friendly as possible and request contractual price protection if your demand exceeds your purchase.
Effectively introduce competition into these deals. Monitoring vendors are in a feeding-frenzy for market share at present, and we have seen the mere mention of competition cause them to improve pricing significantly.
For more information about achieving better outcomes with suppliers, download our blog titled “Leverage: The Key to Every Deal”, or contact your ClearEdge representative. Click here to read more about the recent SolarWinds hack.
Kevin Cammarn is a ClearEdge Analyst.