 Live from Orlando, Florida, it's theCUBE, covering .conf18, brought to you by Splunk. We're back in Orlando, Splunk.conf 2018. I'm Dave Vellante, Stu Miniman. This is theCUBE, the leader in live tech coverage. Doug Merritt is here, the CEO of Splunk, longtime CUBE guest, great to see you again. Thank you Dave, great to be here. So I loved the keynote yesterday and today. You guys have a lot of fun. I was laughing my you know what off at the auditions. They basically said, Doug wasn't a shoe in for the keynote, so they had these outtake auditions. They were really hilarious. You guys are a lot of fun. You got the great t-shirts. How do you feel? It's been a blast. My favorite time of year is .conf, both because there's usually so much that we're funneling to our customers at this time, but being here is just infectious. It's, and one of the things that always amazes me is it's almost impossible to tell who are the customers and who are the employees. So I think Devani this morning said it's a family affair and it's not just a family affair, it's that there's a shared passion, a shared almost culture and value set and it's just a very inspiring and naturally flowing type of event and I know I'm biased because I'm a CEO of Splunk but I just don't know of events that feel like .conf does. There's a lot of great shows out there but this has got a very unique feel to it. Well we do a lot of shows as you know and I've always said .conf I think service now does a great job obviously reinvent the tableau shows. That energy is there and the other thing is we do, when we go to these shows a lot of times you'll look at the keynotes and say are there any products being announced? You guys, that wasn't a problem here. You guys announced this bevy of products. I mean it's clear the R&D is translating it to stuff that people can consume and obviously that you can sell so that's huge. I'm really excited about the product roadmap right now. It's, that was when I got the job almost three years ago that one of the key areas I lean forward and the board was excited about it was where are, how are we going to take this product beyond the amazing index and search technology that we have and this show it takes a while to progress the roadmap to the point that you can get the type of volume that we have here but this show was the first time that I felt that we had laid enough of the tracks so you could see a much, much broader landscape of capabilities and now it's a challenge of packaging and making sure our customers are successful with the product that we just have announced. The products that we've announced. Cloud caught a lot of companies and a lot of end user companies flat footed. You guys have embraced the Cloud not only with the AWS partnership which we're going to talk about but also the business model. You're successfully transitioning from a company with perpetual license model to a ratable model which is never easy. Wall Street is, you know, is killing companies who try to do that. Why have you been successful doing that and you know, give us an update? Yeah, so five years ago less than 20% of our contracts were had any type of subscription orientation to it whether it's a multi-year term or a cloud. We had just launched our cloud four years ago and we moved from there to, we had told the street that would be 65% term and subscription by the end of this year and updated guidance at the end of the second quarter which was just a month and change ago that we've already hit the 75% mark that we were setting for next year. So it's been a pretty rapid progression and I think there are two elements that have helped us with that. One, Cloud continues to catch fire and so the people's orientation on do I do something in the cloud? Four years ago they were much more nervous or less nervous today but data is growing at such a huge rate and people are still wrapping their heads around how do I take advantage of this data? How do I even begin to collect this data and then how do I take advantage of it? And the elasticity that comes in the cloud and that comes with term contracts we can flex out and flex back in. I think it's just a much more natural contracting motion than you bought this big perpetual thing and pay maintenance on it especially when something's growing as fast as data is growing. Well it requires you to communicate differently to the financial analysts. It does. Obviously Billings was an important metric. You've come up with some new metrics to help people understand the real health of the business and one of the other metrics that strikes me and you see this with some of the successful companies I actually think Anil Boucheray was the modern version of this is the number of seven figure deals. You're starting to hit that and it's not, the way you phrase it is pretty good. It's not something you're trying to engineer. It's the outcome of having great loyal customers. It's not something you're trying to micromanage. Right. And that's, again, just recently we dropped six figure deals which when I joined you've got this wonderful dynamic forecasting system that sits on top of Salesforce and so as I had a sales where I started you're really paying attention to deals and I'd go down to $100,000 deals that were tracked throughout the quarter and now it's hard to get down to the six figures because we've got a big enough envelope of seven figure deals so that the business has changed pretty dramatically from where it was but it is an outgrowth of our number one customer priority which is our number one corporate priority which is customer success because that investment by companies when you get to a million dollars plus and in most cases that's a million annually you better believe in and trust that vendor because that's no longer an easy small departmental sale. You're usually at the CIO CFO type level so it's something that we're very honored by that people trust us enough to get that footprint of Splunk to be that size and to feel that they're getting the value from Splunk to justify that purchase. All right, we'll get off the income statements too and you can read about all that stuff and we're going to get into, we have a lot of ground to cover with you, Doug. Jump in here too. So Doug, I've really enjoyed talking to some of your customers that most of them started on-premises with you and now many of them, they're using Splunk Cloud, it's really kind of a hybrid model and it's been really interesting to watch the maturation of your partnership with Amazon, being the leader in the cloud space. Can you give us a little bit of color as to what you're hearing from your customers? You said three, four years ago, they were obviously a little bit more cautious around it and bring us inside a little bit that partnership. Sure. So the first piece that has part of Splunk that I think is a little bit different than other vendors is because we are both a lower level infrastructural technology, right? Data is, the way I frame what we do is there's these raw materials which are all these different renditions of data around and companies increasingly have to figure out how to gather together these different raw materials, put them together in different ways for the output that is driving their business and we are the manufacturing parts provider that makes it easy for them to go and pick up any of these different compounds and then actually do what they want to do which is make things happen with data and that middle layer is really important and we have never taken a super strong stance either we started on prem, but as we moved to the cloud, we never took a strong stance saying we, everything should be in the cloud or everything should be on prem because data has gravity and there's physics to data and it doesn't always make sense to move data around and it doesn't always make sense to keep data stagnant so having that flexibility, being able to deploy your collection capability whether it's ours or third party, your storage capability and then your processing, your search, what are you going to do with the data, anywhere that makes sense for a customer I think is important and that's part of that hybrid story is as people increasingly trust in AWS and other cloud vendors to build core apps and then house a lot of their data, we absolutely need to be there and I think that momentum of the cloud is certainly as secure and in many cases more secure than my on prem footprint and the velocity of invention that's something like AWS is driving allows me to be much more agile and effectively drive application development and leading edge capability I think just has people continuing to trust the cloud service providers a little bit more. Yeah, what we're here in the pavilion and seeing your ecosystem grow, we've been at re-invent for about five years, that ecosystem is just so massive and sprawling, gives a little bit about the relationship with Amazon and how you look at that, how Amazon looks at a company like yours. Yeah, it's been, so one, whenever you're playing with a highly inventive and hugely successful company like Amazon, my orientation and what I convey back to the company is our job is to be more inventive, more agile and continue to find value with our maniacal focus every day being the data landscape, data as a service and outcomes as a service. So our job is run faster than Amazon and I think that this show and our announcements help illustrate that our invention cycle is in high tilt gear and for what we do, we are leaning in in a really aggressive way to add that value. With that backdrop, Andy and I formed this partnership four years ago, he felt there's enough value in Splunk and we were a good enough partner in the way that we consume their services that he would commission and quote their sales reps whenever a Splunk sale was done in the AWS landscape which I think has been really helpful for us but we obviously are a huge customer of AWS's and they become an increasingly large customer of ours and finally gave us approval with their three year renewal a quarter ago to publicly reference them as a sizable customer for us. Congratulations on that and something I've really, it's really crystallized for me. So many administrators out there, you look at their jobs, you know, what are they? It's like, okay, I'm the security expert, I'm the network certified person. You're really, your users here, you know, they are the beacons of knowledge. They are the center of data is really what they are. You know, Splunk's a tool, they're super excited about the product but it's data at the center of what Splunk does and therefore you're helping them in just such a critical aspect of what is happening in the industry today. Yeah, yeah, the key aspects of the keynote, of my keynote were we are moving to a world where data is the product that people care about. So the whole object is how do you make things happen with data and the people that can get that done increasingly become the most valuable players in the field. So what infrastructure, what tooling, what capability exists that allows people from all departments, you know, we are very heavy within IT and security but increasingly HR departments, finance departments, marketing departments, sales departments, manufacturing departments will not be successful without a really competent group of folks that understand how to make things happen with data and our job is to lower that bar so you don't have to go to Carnegie Mellon for four years and get a master's in computer science and data science to be able to be that most valuable person on the field. I want to take a moment, I want to explain why I'm so bullish on Splunk, we had a conversation with Susan St. Ledger yesterday, digital transformation is all about data and you guys are all about data. There's a cliche which data is the new oil and we've observed, well not really. I can put oil in my car, I can put it on my house, I can't put it in both places but data, I can use that same data in a lot of different use cases and that's exactly what you guys are doing now as you expand into line of business. That's Splunk next. So you've announced that, you showed some cool demos today. I'd like you to talk about how you're going from your core peeps, the IT ops guys and the SEC ops guys and what your plan is to go to lines of business. More than just putting the data out there, you've come up with some new products that make it simpler like business workflows but what else are you doing from a go to market standpoint and a partnership standpoint? How do you see that playing out? I think the innovation on product, there are three key pillars that we're focusing on, access data, any type of data anywhere it lives, make sure that we're driving actionable outcomes with that data and acquisitions like Phantom and Victrops have been a key pillar of that but there's other things we're doing and then expand the capability of finding those outcomes to a much broader audience by lowering the bar. So the three key themes across the portfolio but all of those are in service of the developers at a customer site, the developers in the ecosystem to make it easier for them to actually craft a set of solutions that help a retailer, help a discreet manufacturer, help a hospital actually make things happen with data because you can certainly start with a platform and build something specific for yourself but it's much easier if you start with a solution and the lot of the emphasis we've been putting over the past two to three years is how do we up that platform game and the many, many of 20 different product announcements that we've rolled out at this conf and one of them that I'm also very excited about is our developer cloud where we've really enhanced the API layer that interacts with the different services that the entire Splunk portfolio represents not just the search and index pieces that people are familiar with but everything from orchestration to role-based access to different types of visualizations so a very broad API layer that's a well-mannered restful set of APIs that allows third parties to much more crisply develop it should be applications to compliment the 1800 apps that are already part of Splunkbase and right behind me is a developer pavilion where we've got the first handful of early adopter OEM partners that are building their first sets of apps on top of that API framework. Dozens of them. It's actually worth walking around and seeing. Now, so that developer cloud is a lever. Those developers are a lever for you to get into lines of business and build those relationships through the software really and through the apps. Same thing for IoT, industrial IoT. Now we've observed that a lot of the IT companies that we see are trying to take a top-down approach into IoT and we don't think it's going to work. It's, we're talking about process engineers. It's operations technology people. They speak a different language. It's not going to be a top-down here at IT. It's going to be a bottoms-up set of standards coming from the OT world. The brilliance of what you guys have is your, it's the data, you know, it's data coming off machines, data, you don't care. And so you're in a good position to do a bottoms-up in IoT. And we heard some of that today. Now there are some challenges. A lot of that data is still analog. Okay, you can't really control that. A lot of the devices aren't instrumented. They're not connected. You can't control that. But once they become instrumented and connected and that analog data gets digitized, you're in a really good position, but then you got to build out the ecosystem as well. So talk about how you're addressing some of those challenges in industrial IoT. Yeah, man, it's a great set of tips. I think the, trying to rely on standards is the wrong approach. That the velocity across this digital landscape is so high. And my view over the past 30 years, and I think it's only accelerated now, is there's going to be more and more varieties of data with different formats than there's ever been. And we've seen that over the past five years. Just look at the variety of services on top of AWS, which didn't even exist 10 years ago. But, and they now have hundreds of services and there is no organizing principle across those services as far as data definition. So it's a very chaotic data landscape. And I don't think there's any way to manage it other than to embrace the chaos and work a little bit more bottoms up. Grab this data, don't worry about cleansing it, don't worry about structuring it, just make sure you have access to it, and then make sure that you've got tools like Splunk that allow you to play with the data and try and find the patterns and the value inside of that data, which is where I think we're very uniquely suited as a technology set. Helping the ecosystem come to that realization is a key aspect of what we're doing. We're trying to attack it the same way we attacked the IT and security piece, which is pick a handful of verticals and really focus on the players, both the marquee anchor tenants, the BMWs, the Siemens, the Deutsche Bahn Railroad to the world as customers. And through that, get access to the key influencers and consultants and advisors to those industries and start to get that virtuous circle of, I actually have more data than I think I have, even though there's some analog machines, there's so many different ways to attach to the signal that those machines are emitting, and it may not be bidirectionally addressable, but at least you can see what's happening within those machines without a full manufacturing floor rip and replace. And everyone is excited about doing that. The advisors to the industry are excited, the industry themselves are excited, we have BMW on stage who walked through how they're using Splunk to help on everything from product design all the way through to predictive maintenance and feedback on the quality of the cars that they're rolling out. We've all heard stories that there's more lines of code in the Ford F-150 and these other vehicles than there is within Facebook right now. So we all are dealing with rolling and sitting in buildings and houses, data centers. How do you make sure that you're able to pay attention when it's happening within that data center? And so I think that that is as bigger, bigger than of an opportunity than what we've done with IT and security. It just has its own pace of understanding and adoption. Carnival Cruise Line and other ones too. We have those guys on today and they basically look, they have a lot of industrial equipment on those ships so they're excited. Yeah, absolutely. All right, so Doug, we started at the beginning talking about the last couple of years how we measure Splunk has changed. Going to more subscription models, talk about how many customers you have. I look at developers, I look at IoT, whole different set of metrics. So if you look at Splunk Next, how do we measure you going forward? What is success for your team and your customers going forward? Yeah, and the whole orientation around Splunk Next, as I'm sure Susan covered, it's not a product. It's a messaging framework. People are so used to Splunk being all about the collection of data within the index and search against that index and we're increasingly moving it. We're complimenting the index. The index is an incredibly unique piece of IP for us but there's a lot of other modalities that can compliment what that index does and Splunk Next represents all of our investments and next generation technologies that are helping with everything from stream processing to distributed compute capability, next generation visualizations, et cetera. The metric that I care about over time is customer adoption and customer success. How many use cases are being deployed at different customers? How many companies, both customers and partners, are incorporating Splunk in what they do every day? Begetting an OEM Splunk, making Splunk a backbone of their overall health and success and ultimately that needs to translate into revenue so revenue and bookings will always be a metric to be care about but I think the leading indicators within these different markets of rate of adoption of technology and more importantly the outcomes that they're driving as they adopt this technology are going to be increasingly important. Yeah, I just have to tell you when you talk about your customers not only excited but it's a deeper partnership where you talk to an insurance company out of Toronto that they're talking to the people that they insure about should they be using Splunk and how do they do that? It's just a much deeper and, you know, deeper than a partnership model for your customers. It's one of the things I love about this conference is as we were talking about earlier it's hard to tell the customers to employees. Like there's this whole belief and purpose that everybody shares which I adore about being here but when you look at the sea of data we've thought traditionally looked at the data we manufacture typically data that's historic and at rest from our ERP systems. This next wave is certainly all the data that's happening within our organizations but increasingly it's all the data that's available in the world at large and whether it's insurance or automotive or oil and gas the services that I'm going to have to deliver to customers require me to farm data outside my walls, data inside my walls, combine those two to come up with unique value added services for my customers. So it's great to hear that our different, our customers are on that journey because that's where we all need to go to be successful. There's definitely alignment there Doug. I know you're super busy. We got to go. Thanks so much for coming on theCUBE. Give me the last word. Conf 18 takeaways. Unbelievable excitement and enthusiasm. A huge array of products that I think broaden the aperture of what Splunk does so dramatically that people are really trying to digest what should, how should I be thinking about Splunk moving forward? And we started a whole series of transformations three years ago and I'm really excited that they're all starting to land and I can't wait for this slow realization of the impact that our customers are counting on us to provide and that will increasingly be known for across the data landscape. Well then and the landscape is messy and as you said the messiest part of that landscape is the data landscape. You guys are helping organize that, curate it and hopefully we're helping curate some of the from some of the noise and extracting to the signal to you on theCUBE. Doug, thanks so much for coming on theCUBE. Great to see you again. Thank you Dave, thank you Stu. You guys do a great job. Thanks for being here with us. I appreciate that. All right, keep it right there buddy. We'll be back with our next guest from .conf 18 from Orlando. Right back.