Here are the insights you need to know from the Q&A session with David Obstler, CFO, and Olivier Pomel CEO.
Datadog’s efficient sales model, focused on low friction trials, purchases and land & expand sales motion, enables the company to make outsized investments in R&D. According to Pomel, “We are hiring as many engineers, as quickly as we can.”
Slowdown in spending
Datadog is not worried (yet) about a slowdown in customer spending. According to Obstler, “We have lived within our means, not boom or bust.”
Gross retention is a metric closely watched by Datadog, and customers need to have a monitoring platform in place. Either Datadog, or something like it. Of course Datadog is more than infrastructure monitoring, but you get the idea. Datadog provides must have capabilities so that an organization can develop, test and run applications.
Pomel and Obstler both talked about the efficiencies of Datadog, to consolidate spend and provide Automation. By a sustained focus on Developer productivity, Datadog helps company IT budgets reduce spend in their largest area: engineers.
Target Addressable Market
Datadog’s Target Addressable Market is far in excess of $100 Billion.
Spending in observability, the core value proposition of Datadog, is expected to grow to $62 billion in 2026, according to Gartner Research.
Overall spending in security will rise to $188.3 Billion in 2023, with cloud application security growing the fastest at 26.8%. Datadog has been investing in could application security, beginning with its Sqreen acquisition in 2021.
It is still early innings with respect to the Digital Transformation and Cloud Migration. Datadog is core to both long term trends, as the legacy solutions companies are using today simply do not work in the Cloud. Datadog is the natural, cloud-native solution that will be considered for every project.
Platform approach continues to resonate with customers
Datadog’s fast paced innovation is paying off with customer purchases, and sets up a multi-year acceleration of revenue. The number of Datadog customers using two or more products has increased to almost 80%, those using four more products has increased to 37%, and those using 6 or more products has increased to 14%. For a company that had only one product five years ago, this is remarkable.
Pomel noted that the same sales team can sell all solutions to buyers – meaning that Salesperson productivity at Datadog is increasing.
The reason for this uptake is related to Datadog’s platform strategy. All products need to add context and value to the data being collected and solve use cases for engineers. Datadog does not have standalone products – all products are well integrated with the Platform.
You can see this in Datadog’s acquisition strategy, which historically has targeted smaller, earlier stage companies that boast strong talent and entrepreneurial leaders. The teams are brought into Datadog to integrate their code with the Datadog platform, and the leadership runs the product team to grow the business. This has resulted in great success, beginning with Logmatic (log management team that is putting Splunk out of business), Sqreen (application security monitoring), and others.
The future is bright for Datadog as it fixes its gaze resolutely on the horizon, and continues to do what it does best:
- Maintain high customer retention (130%+)
- Grow revenues through its low friction, land and expand model
- Invest heavily in R&D
- Make strategic acquisitions
- Stay profitable and cash flow positive
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