Splunk SPLK is the $18 billion data mining and modeling engine for 92 companies in the Fortune 100, and numerous other top brands including Adobe, Blackrock, Cerner, Micron, and Zillow.
As I described earlier this month in Big Data Chaos: How Alteryx Creates Raving Fans, "There's a new gold rush going on inside of companies as they either mine their data, or get permanently disrupted."
The data flood from multiple sources across enterprise systems, devices, and customer interactions creates multiple challenges for companies since much of it is unstructured machine data recorded in the log files of servers-- what can they use, where do they find it, and how should they organize it?
Yesterday I found a study sponsored by Splunk which labeled this new deluge of bits and bytes as "dark data." CEO Doug Merritt and his team put together an extensive survey late last year and sent it to thousands of business and IT leaders in seven countries.
Titled “THE STATE OF DARK DATA: Industry Leaders Reveal the Gap Between AI’s Potential and Today’s Data Reality,” the research was conducted by TRUE Global Intelligence and they received back over 1350 responses with over500 from the US and 100-150 each from Germany, China, Japan, Australia, France and the UK.
Among the stand out findings was that 55% of an organization’s data is "dark" -- unquantified, untapped and in many cases, unknown. Here was part of their introduction to the study...
We live in a data-saturated world. Billions of interconnected devices communicate with countless cloud services. We accumulate data from server log files, GPS networks, security tools, call records, web traffic and more. Every digital transaction, from backend handoffs to the customer’s fingertips, is catalogued. Everything from the contents of a warehouse’s shelves to the temperature of our server rooms to the time and location of every login to our secure networks is recorded and stored … somewhere. Most of it, today, is unstructured, untagged, untapped. In a word, useless.
In the video that accompanies this article, I share some slides from the Splunk presentation deck. The study is organized around three major themes...
THE FUTURE OF DATA
AI: THE NEXT FRONTIER
THE FUTURE OF JOBS
What I found especially interesting as an investor in both Splunk and Alteryx was their explanation of the vital necessity of AI and machine learning models to handle the workload of the data deluge. After building the right data models, automation of the data mining processes can then run 24/7 and create more usable information and insights, faster.
Also, the worker training aspect is equally vital for companies and universities to discuss. While Splunk and Alteryx provide data platforms and tools that allow "citizen data scientists" (how Gartner describes designers and users of data models without formal engineering, programming or statistical training) to engage with their "dark data," the bar is still being raised across industries for knowledge workers to have more analytical skills.
Some of the study findings showed high awareness and value placed on the new data battlefield...
76% of respondents agree that data experts in their organizations are becomingthe new business strategists.
85% believe that data skills will continue to become more important for workers in all roles, not just IT.
83% agree that workers who continue to rely on others to explain what data means will fall behind in their careers.
81% agree that becoming a senior leader in their organization requires being data literate.
84% think that being a decision maker in their organization will require strong data skills.
One survey respondent is quoted thus...
“Simply having data isn’t enough. Workers need to have the business analytics skills to use the data in such a way that it leads to profitable action. Business analytics training needs to be mandatory for all personnel in decision-making positions.”
But there were also levels of complacency (or fear) among workers that shouldn't surprise us...
More than half of U.S. and Chinese respondents said employees with both technical data skills and business acumen will be most in demand over the next decade, but they predict these same employees will also be the most difficult to hire.
69% are content to keep doing what they’re doing, even if it means they don’t get promoted again.
73% say that data skills are harder for them than business skills.
53% of respondents say they feel too old tolearn new data skills.
Data Engines for Mining & Modeling: Powertools for the Gold Rush
After I bought shares of Alteryx AYX in May, two very interesting M&A deals in the data space occurred. Here's what I wrote on June 12...
Last Thursday I chose Alteryx, the $6 billion "self-service" data analytics platform, as my target for a Zacks Bull of the Day feature to be published the next day. And I wasn't even aware that the $2.6 billion acquisition of Looker by Google Cloud that morning was the spark about to ignite my AYX shares 20% in a matter of days.
The next day, Friday June 7, Goldman Sachs initiated coverage of AYX with a Buy rating and $110 price target.
By the weekend, as I caught up with the implications of the Looker story, here were the notes I gave my TAZR Trader members on how M&A fever could heat up for other analytics "picks and shovels"...
After Google bought a private business intelligence (BI)/data analytics platform called Looker for $2.6 billion, or ~15X sales, the analyst team at D.A. Davidson put together a good summary of the deal and highlighted AYX as a clear potential target.
The D.A. Davidson team, led by analyst Rishi N. Jaluria, has followed the Looker story closely for the past few years and has been impressed with the business, with a $100M run-rate and 70% year-over-year growth. Strategically the acquisition makes sense, especially given the integration between Google BigQuery, the company's cloud data warehouse, and Looker, and they have long expected Google Cloud Platform (GCP) to turn acquisitive under new CEO Thomas Kurian.
While GCP has impressive technology, it has seen limited enterprise traction, especially relative to AWS and Azure, and Jaluria viewed M&A as an important part of GCP's strategy going forward. They also believe the acquisition may signal increased M&A appetite by the hyperscale cloud vendors (AWS, Azure, GCP) to buy more software companies.
The D.A. Davidson analysts also expect targets for cloud vendors to be more at the infrastructure, data, API, and analytics layers, as opposed to pure application vendors. Within their coverage universe, they view AYX and New Relic as the most likely M&A candidates, with MongoDB and OKTA representing a "wish list" that may be less likely because of their high valuations. In addition, they continue to see an outside chance that AWS or Microsoft attempt to buy WDAY again.
Salesforce.com Throws Down vs. Google and Microsoft
Then on Monday June 10, Salesforce.com CRM announced their deal to buy Tableau DATA for $15.3 billion. And over those three trading sessions from Thursday June 6 through Monday, AYX shares vaulted from $87 to $106.
Tableau is a BI and visualization platform for that can harness structured data from spreadsheets. It can’t do the deep mining of unstructured log files in the abyss of a company’s dark data.
Something else exciting in the data world happened that Monday: Alteryx started their annual user conference in Music City. One of the more exciting presentations was delivered by their SVP of Product Ashley Kramer, who came from Tableau.
In the 49-slide deck the team used, hers were the most interesting and thought-provokingas she explained the challenges of finding, prepping, cleaning, and blending unstructured data. I was especially rocked by this stat: 50% of data science models never get deployedas knowledge workers across company departments don’t have a common platform to collaborate and share ideas, insights, and use cases.My Big Data Chaos video shows some of her slides.
Splunk and Alteryx are the premier data engines that modern corporations have found they can't exist without to harness their "dark chaos."
I'm just waiting to see who will buy one of them first. My bet is that Microsoft MSFT is either already building their own platform internally, or they will pay up to acquire SPLK or AYX.
Disclosure: I own shares of SPLK and AYX for the Zacks TAZR Trader portfolio.
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