 Live from the MGM Grand Convention Center in Las Vegas, Nevada, it's theCUBE at Splunk.conf 2014. Brought to you by headline sponsor, Splunk. Here are your hosts, John Furrier and Jeff Kelly. Okay, welcome back everyone. We're here live in Las Vegas for Splunk's conference, customer conference, annual conference. This is theCUBE, our flagship program. We go out to the events and expect to see the noise. I'm John Furrier here with Jeff Kelly, Big Data Analyst at Wikibon. Our next guest is Steve Selmer, the SVP and Chief Marketing Officer of Splunk. Welcome to theCUBE. Thank you. Again, thanks for having you guys are really busy. I know you're super busy. Thanks for coming on and speaking with us. So first, give us the rundown on the event by the numbers, what's going on? Attendees, what's going on? What's the big theme? Just some highlights. Happy to share that. We've got about 3,500 attendees here, which is about a 70 or 80% increase over last year. Phenomenal crowd, glad we came to this hotel so they had room to accommodate the last-minute crowd. We've got several hundred partners. We've got a partner pavilion that was sold out. We actually had a waiting list for people to exhibit. And the theme is all about leveraging machine data for business advantage, IT op security, business analytics, whatever. So Jeff and I were talking on the intro basically about a couple of things. Obviously going outside of the IT core value preposition where you guys have done very well and continue to do well, but as big data is everywhere, as you guys said, leather keynotes on the floor, it's on the walls, it's on the ceilings. It's in trains and planes and automobiles. It's all the above, right? A lot of stuff's happening around your market position. The business model evolution of this modern era with cloud is a lot of tooling, platform. You guys are a tool and a platform. So speak about that business model. How do you market a value preposition that is so diverse, yet the platform, the platform you're enabling, but you also have some really awesome tooling that you're also expanding. So it's, you know, we kind of get it, but some people might not understand how complicated that is to articulate as the marketing chief marketing officer. How do you do that? What's your strategy? How do you get your arms around that? I mean, it must be a challenge, but you're doing great. Customers love you, the guys, and we get testimonials. So how do you manage this in this new modern era? Usually we tell people, talk to our customers, the customers tell the story better than we do. The overall theme this year is your data adventure and the idea that your data will take you on a journey. Most of our customers start with one of our core use cases, figuring out how to better manage their applications, their services, their IT infrastructure, security, but fairly quickly they understand that Splunk is not a point solution or tool, it's a platform. And with Splunk, they can have many different departments leverage the data in Splunk and get advantages for all the departments I mentioned, engineering, industrial data use cases, marketing, web analytics, and many other areas. So for us, a lot of the conference here is to tell them how the Splunk platform has evolved and educate them on the many different ways they can take advantage of it. So the classic competitive strategy thing that you guys have done, first of all you're quite public, so it's beyond, you guys are more than successful in my mind, but you go in, you win a segment that you've done, and then you expand to a broader industry scope. And those scopes are hot right now, internet of things, application development, all the above. So you've got a lot of exploding theaters if you will, expanding around the Splunk's territory. So as you guys expand your TAM and your opportunity, what's on your to-do list? I mean like, do you run it? Do you more acquisition of customers? Is that the messaging? Is it do more? What's your high level thesis for your marketing teams? You've hit on the reason that we all love working at Splunk. It's not a single product, it's not a single market, it's an almost unlimited potential. Each one of the markets we're in is undergoing fascinating disruption, and that creates new opportunities for new solutions like Splunk. And we literally can go from one customer meeting to another, and it's from security, to IT ops, to internet of things, customers freeing out how to better manage electric car fleets. It's fascinating to see what you're doing. It's not your grandfather's venture where you go, oh, we need a sales and marketing guy to do this, to specialize, and you got to need, you almost need like a generalist, almost, like, or someone who can be diverse. Because if you're going to be walking into customer case studies like that, I mean, there's so many use cases. So how do you hire people? I mean, it's literally. Well, we balance it. In marketing, in product management, sales engineering, we have people who are generalists, but also some very deep experts. So you need that deep domain expertise to help customers solve specific problems, regardless whether it's managing applications or security, whatever. But then we make sure we have people who understand the broad use case, the value proposition of a cross silo platform, and can help customers understand how to leverage that short term and long term. Yeah, I think that's one of the challenges of having a really broad, general, a broad set of use cases across the platform is just that you don't necessarily have the domain expertise, but it sounds like you're bringing people into Splunk who have some of that domain expertise, and I'm guessing you're leveraging your customers who have the domain expertise to help build out new applications and you're learning from them, I'm guessing as much as they're learning from you. We leverage our customers all the time. We do Splunk live events where people come, not to hear us, but to hear our customers. And customers present on not just how they're using the platform, but on what apps they built on top of the platform. I was at Splunk Live Boston, and one of our partners, ConduCiv, built a HIPAA healthcare compliance app with Middlesex Hospital. We don't know HIPAA, but ConduCiv knows it, and Middlesex Hospital knows it, and now we're helping them market the app to other healthcare organizations around the country. So you mentioned kind of, and John alluded, that land and expand strategy that kind of has been kind of core to Splunk's growth. And I know, you know, reading kind of, reading the earnings transfer from the recent results, I think it was about two thirds of your upsells come from horizontal expansion. So you're delivering on that land and expand strategy. How do you actually go about from practical point of view, and from a marketing point of view, actually making that happen? What does that look like inside a customer organization? Is it simply word of mouth or is Splunk actually evangelizing and trying to help with that land and expand approach? Yes, the Splunk software has really fundamentally turned on its head, the traditional enterprise software model. Traditionally, you'd find it an opportunity, you'd sell as big a license as possible, and then you walk away because you've already sold the customer. With Splunk, it's completely critical that the customer have a great experience with the software. Most of the customers start with a free download or a free online sandbox. They love what they see, they buy a small license, and then they upgrade over time. And over time, they may buy 10, 20, 30X what the initial purchase was. And the way it works is we get customers who get a very fast value, very fast ROI, and not 10%, but 10X, 15X, 25X, which is phenomenal. Word spreads, before they know it, users are being told by other peers, hey, can we put our data in Splunk? We want to see what you see. And we often get all these deployments and eventually it turns into an enterprise adoption agreement. And so more and more customers are saying, give me these huge licenses, because we don't even want to think about all these different silos. We wanted to have one central Splunk center of expertise where we have these center of expertise staff help the rest of the bank or the rest of the telco leverage what Splunk can do for us. So I got to ask you a question because I'm pushing 50, so remember the old software days. Main time. No, I was before punch cards. So that was like paper tape. My older brother, maybe he's a punch card. But let's talk about, because you've seen the industry, you've seen the business models evolve, compare and contrast the software business enterprise software from the old days to today, because then I want you to talk about to the folks on Wall Street or who might not understand the Splunk mojo when it comes to the business model, how you sell, acquire customers. Your whole business proposition is working. Some people may be scratching their heads saying, I don't get this new cloud thing and this data exhaust and I know data is everywhere, but how are they going to make money? So I agree, you have unlimited opportunities with the new markets exposed. So compare and contrast the old software way and how customers consume the products and bought the products to now. How you're actually getting against that because you're adding customers every quarter, significant amounts. So, you know, check the box on that. That's a really good business performance. So compare and contrast. So what's different? Stocks should be like 2,000 right now. I mean, so explain that and use that to compare and contrast the old way to the new way. There are several aspects to the business model. One is something that Jeff just mentioned a few minutes ago, the idea that a lot of our licensed revenues are coming from existing customers and normally customers pay a lot of maintenance as the old model and if most of your revenue is coming from existing customers, that's a bad sign. In our case, it's because customers start small and they do massive upgrades once they see the value. So that turns a lot of the traditional business model on its head. We're also very big proponents of letting customers buy and consume the way they want. If you want to run a software on-prem, you can have a perpetual license out of your CapEx budget or you can do a term license out of your OpEx budget. If you want us to run your software, that's fine. We have Splunk as a cloud service. If you want to buy a software and run it in the cloud yourself, you're welcome to do that, you know, BYOL, bring your own license. So we just trying to give customers a flexibility to buy and use the software and use it wherever they need to, whatever fits their business model. I can summarize that. So you get great operating leverage on the flexibility of customer consumption. You can deliver at a low cost, high value. In some cases, a lower price purchase point. Someone can get into Splunk easily. We had one customer on here, 10 gig license, saving his customers a billion dollars of value. I mean, that's the break company there. Amazing. We underpriced the software. I mean, people are happy. So, but the net contract value is increasing. So too, good, great leverage gives you ability to get into the market and acquire customers. And then you got the net contract value increase on upselling. So now the third thing that Jeff and I were talking with in the intro is how do you get new customers? So is this the new territory? So that's good, that explains that. I don't think that's a problem. I love that business model. Killed me with that problem. So what's the new strategy for new customers? The way we get new customers, I'd say, is not a new strategy. In the early days, there was a lot of evangelism, a lot of basic marketing. We're seeing a lot of new customers like 500 a quarter and they're coming because existing Splunk customers change jobs and go to a new company that doesn't use Splunk. We're seeing a lot of channel partners signing on because they see Splunk is killing it and security and other use cases. And they see it's a great way to add value to their clients. So we have new partners bringing us into accounts. We've got geographic expansion. We have sales people in something like 14 or 15 countries right now and we see opportunities to go global. So nothing new in this is working, you get five years of customers a quarter, it's outrageous. It's just new territories expanding because of the market's developing. Is that what you categorize that way? Yeah, new markets, new partners, new ecosystem. Yeah. I wonder if we could switch gears a little bit and talk about some trends we're seeing in the data management, data analytics space. So in this keynote, Godfrey Sullivan kind of put up a slide where he kind of showed the old traditional BI, EVW stack, and then kind of the new modern stack which includes Splunk and other tools, not on the screen, but imagine things like Hadoop and other more modern architecture, modern big data platforms. How do you view kind of that before and after picture? How do you see this evolving? Are your customers moving away from, are they moving to Splunk at the expense to some extent of the traditional EVW and BI players? What's the relationship there? They're very different markets. Nobody is throwing out their relational databases or the BI solutions. They serve a very mature set of use cases, standard structured reporting, predictable reports end of month, any type of sales reporting is all based on structured ERP, CRM type of data. So that's going to continue to be used. It may only be growing 4% a year or whatever, but it's not going away. What Godfrey did a great job on was saying there's a whole different set of data which you should never even try and put into relational databases. And if you do, you're going to kill yourself trying it because you have to do the extraction, the transformation, the loading. You create a brittle schema and as soon as your machine data changes or you want to add more sources, your complete year of investment just completely explodes. So people still use relational databases, they'll still have to do ETL and MDM and all this other stuff, but there's a whole new world of time series, unstructured data, GPS location data. And for that, if you really want to take advantage of it intelligently, you need a completely different approach based on search, based on schema at read time, not at write time. And that's what the Splunk founders created years ago before I got there. But at the same time, if you really want to get a full view of your organization, you want to bring in data from those relational systems. You want to bring in data from your more traditional system. So what does Splunk do to make that possible? I mean, it seems Splunk can play that role of a higher up the stack and kind of uniting all the disparate data sources underneath. And so how do you help customers do that? Bring in some of the old legacy data but also bring in some of the new sources of data. So any organization, company, whatever, has all sorts of business systems based on relational databases, whether it's Oracle or IBM DB2, whatever. And those systems will keep running. They'll keep doing transactions. They'll keep storing the relational data. Splunk is fantastic as a data fabric for the unstructured machine data. And when you have the machine data in Splunk, you want to complement it. So you don't move the data from the RDBMS, but you do lookups. So if you have a machine address or a user ID, you can now pull in from the business systems the name of the customer, if it's a tier one high net worth customer for banking. We do that all the time. We can look at our call detail logs for our inside sales reps, the calling customers, and then we do lookups and sales force. So instead of getting a report with random phone numbers, we can see phone number, company name, individual called. So it's not physically moving data. It's more of a virtual fabric. Yeah, it's enhancing, it's correlating. Getting the best of both worlds, basically. Okay, Steve, we really appreciate you spending the time in your busy schedule and a big event for you guys. Still a lot of probably customer meetings, smoozing and details, take care. Really appreciate you taking the time. I'll give you the final word for the event. We love your business model. Your customers are awesome to talk to. Thanks so much for having the cube here. We really appreciate it. Share it to folks in your mind. Bumper sticker, the Splunk value proposition right now around this event, the theme, obviously adventure, the journey, I get that. Bumper sticker, the modes of the vibe, the conversations, the hallway. What's happening here? We've got almost 500 Splunkers here, Splunk employees, and it is incredibly motivating for us because the customers here are complete evangelists. They understand the value of the data. They understand how they are becoming superheroes and their companies. And they understand that the area, the path that they're on with us, it is a multi-year journey. And they're closer to the front lines. We've heard from new developers in the hallways here. They love being close to the front lines. They love to develop with data first and it brings out creativity and just people just get jazzed. So you guys are really great success to her. I'm really proud to cover the show here. Okay, the Splunk is CMO, breaking it down for us. He's probably super tired. I know how hard it is for these guys to do these events. Thanks for coming on. This is the cube. We're here live. We'll be right back after this short break. Thank you.