DDOG versus SUMO

Hello All,

I used to have DDOG and sold out to get into ETSY as a short term move as I felt there was more upside in ETSY during the holiday season. Am looking to get back into DDOG. However I have also come across SUMO and for those that work with monitoring tools or have reviewed both for their investing , was wondering if you could chime in on the differences between the two. It seems like DDOG is clearly growing much faster currently but was wondering what their similarities and differences are. Both are marketed as continuous monitoring solutions. SUMO being much smaller market cap wise seems to have room for capital appreciation if it can become a sizeable challenger. Any insight would be much appreciated

Thank you to all who post on here with their amazing knowledge and insights. Hope all contributors and lurkers have a great holiday season and society gets back to normal in 2021

Cheers
Mike

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There is a lot already written about DDOG fundamentals and growth, so I won’t repeat here. But I can share what I know about the product offerings. On the surface these two companies appear to have nearly identical product offerings, and I’ve researched and played with both products for business purposes. Everything I say here is purely my personal opinion from hands-on experience.

Both products have mastered the implementation and deployment capabilities, they are virtually as close to plug and play as you can get. They have very sophisticated ingest and analysis capabilities right out of the box, and can immediately shred the common cloud and server platforms; such as Google, Amazon, Microsoft, Windows, Linux, Unix, etc. In many respects they bring immediate value to complex enterprise ecosystems in days. And everything is cloud based, so their deployment is as easy as it could be. You simply deploy their agents, partition your data as you see fit, and immediately start analyzing and graphing to gain immediate insight into what is happening in your monitored systems, in near real-time. They are also very adaptable to allow plugging in less common server and application platforms.

SUMO, like DDOG, is cloud native and has been around for several years, so they may have a slightly more mature platform with more refined tools. SUMO has a friendly easy to use interface, and a very robust SaaS offering with lots of good features. SUMO’s product is superior in some respects to DDOG, but also more expensive to license if you don’t need all their features. In comparing cost I found SUMO to be between 100%-200% more expensive than DDOG for straight up log management, but SUMO includes many more bundled features, whereas DDOG is more “a la carte”. DDOG also lets you ingest and then filter out what you don’t want before you store it, so you don’t have to create complex log extraction filters at your source, whereas SUMO ingests and stores everything.

DDOG tends to license in very granular fashion, such as; GB ingested, GB queried, GB archived, GB re-hydrated, GB indexed, GB retained, days retained, GB cold storage, GB warm storage, daily transactions, number of extractions/month, etc. They also invoice monthly, whereas SUMO has annual invoicing, but SUMO tracks usage monthly and applies credits which carryover throughout the year like the old cell phone plans. Therefore direct comparison is challenging. On the one hand SUMO makes it easy to discover capabilities within their product set as users become more sophisticated because they bundled their capabilities together, so curious users tend to discover them over time and use them when the need arises. But DDOG makes it easier to pick and choose what capabilities you actually want, and just pay for what you need. Somewhat different marketing strategies.

Power users would likely prefer SUMO because they have a query interface that allows users to directly code their queries in a SQL like language and get right to their desired results very quickly. They also include a point and click angle for the more casual non-techie, and they blended the two capabilities into one interface very effectively, so a user can easily learn the ropes using the GUI, but quickly learn the query language from the queries produced by the GUI. It also enables users to create complex search queries and very easily share them with others, and then the audience can further refine or analyze the output using the GUI. Graphical output, with pretty charts, dials and gizmos tends to be more robust in DDOG, and so for those that favor a less busy, dashboard-style interface they would be pleased with DDOG.

When properly configured both products perform well, and can be very responsive even with terabytes of data. Both products allow administrators to establish role-based security user profiles, and partition their data along security boundaries, and both meet stringent security, privacy and data protection requirements.

As for their financial metrics, there is not much yet public about SUMO since they only IPO’d 3 months ago.


**Metric            DDOG        SUMO**
Market cap        $33B         $3B
Shares out      302.6M      102.3M
Sales/Y          $540M       $193M
Sales Q/Q        61.3%       28.1%
P/S             $61.35      $15.60
P/C             $22.15       $7.38
P/FCF           348.81       -----
EPS(TTM)        -$0.03      -$1.14
Forward EPS/Y    $0.19      -$0.51
Gross Margin     78.7%      $70.2%

From what little there is for comparison, it appears DDOG revenues are 3.8 times that of SUMO, and DDOG is growing their sales at more than double the pace of SUMO. DDOG also has a higher Gross margin. But DDOG is already valued at 11x SUMO, so investors are certainly paying a higher price multiple for DDOG’s growth. From what I can see, it appears to me DDOG will be profitable soon, whereas SUMO may take significantly longer to achieve profitability.

I don’t know if any of this will help you choose one over the other. Maybe others can chime in with more in-depth growth analysis and potential.

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This absolutely does help a huge deal. For me the biggest thing I was trying to decipher was the underlying technology between the two and if was vastly inferior to the other. To me it did not seem so but without knowing and using the technology was unable to put my pulse on it. Your response allowed me to gain the insight I was looking for from a tech perspective

I was leaning towards SUMO if the tech was not vastly inferior as to me it seems like they have a much larger market cap gain opportunity if they can get their selling side in order and get to a higher growth percentage than they currently are. If they can start achieving that I think market would re rate the stock leading to outsized gains as compared to DDOG

Thank you very much for your detailed response.

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Great comparison CMFSoloFool

I would also add ESTC in the mix.

compared to SUMO, DDOG has higher growth rate, presumably thanks to better sales execution off a higher revenue base. That makes it a clear winner in the marketplace and I would stick to the winner.

While DDOG and SUMO are very comparable in terms of product, packaging and pricing. ESTC on the other hand is more for DIY developers in large organizations… has different pricing structure… and higher stickiness, and expansion possibilities as Elastic platform use cases grow.

And it is growing at higher rate than SUMO with similar revenue base (TTM $500M+) as DDOG… and its cloud offering is growing at 80%+ rate with more moderate valuation compared to DDOG.

Therefore, I am holding 7% in DDOG, 1% in ESTC and not considering SUMO at this point. I am also tempted to move some more into ESTC.

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We use Elastic too, mostly for powering the client-facing search capabilities in our SaaS solutions. There are other capabilities besides what we are leveraging, we’re not using it to it’s full potential. Although there are some overlaps with DDOG and SUMO, I tend to see them as different product categories, maybe because of the way we have chosen to use these products in our enterprise. I think of DDOG and SUMO as more specialized and uniquely designed for accelerated value creation within their main and narrower use cases, whereas ESTC seems more pliable and developer oriented, so you can do more things with ESTC, but you have to invest more effort and technical skills into building your solutions with it. Each has it’s place, and each is very powerful, so they all offer great value and reward to the enterprise. Perhaps a hack saw versus a jigsaw.

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nilvest, "ESTC on the other hand is more for DIY developers in large organizations… has different pricing structure… and higher stickiness, and expansion possibilities as Elastic platform use cases grow.

and CMFSoloFool, I concur with both of your opinions on ESTC. I had personally used it in one of my projects and there’s a lot I liked working with it but yes, you need to have the right skills.

However, ESTC doesn’t belong in my portfolio for the reasons I have called out in other threads on the subject.

Here’s my rule of thumb: “Devs should be able to focus on writing their features; any supporting tool/tech that enables that in the easiest and an effective manner is my choice.”

ronjonb

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FWIW we have a very small group of 2-3 folks that are using ESTC. They tried to demo it to a couple of us that are more application folks but understand some SQL type tools. After looking at it and the price we were paying for the license we just did not have any appetite for moving forward with a conversation with the rest of the team for trying to expand it. Ours is a very cash constrained company so do take our experience with a grain of salt but the fact that it seemed very techy and pricey were things that put us off. That is why I do not have ESTC in my watch list as well. Thanks

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compared to SUMO, DDOG has higher growth rate, presumably thanks to better sales execution off a higher revenue base. That makes it a clear winner in the marketplace and I would stick to the winner.

I agree about DDOG over SUMO. ESTC continously continously adds customers (800/Q), and has more than 50 customers paying more than $1M/y using its solution for search, observability and security. If VW is spending many millions and has expended much efforts in developing several inhouse tools on the Elastic platform for observability, and security why would they want to shift to a different solution for observability?

I do expect DDOG to grow faster than ESTC and become a larger company ultimately but ESTC should get its share. That is my thesis anyway and reason why I have more DDOG than ESTC. YTD ESTC is catching up with DDOG and I get a sense that market is slowly giving it its due. If it can grow around 40% next year I expect its multiple to increase.

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Texmex, GrowthConvert, ronjonb, CMFSolo…

thank you for following up and sharing your insight. You tempered my enthusiasm for ESTC… appreciate it.

Great discussion of DDOG vs. SUMO here. Much appreciated. For the technologically inclined, I’m curious about how sticky they are and whether they experience much churn. I have a position in DDOG, but none in SUMO.

I opened a <1% position on ESTC back in August with the idea that doing so would force me to learn more about the company etc. I liked the stickiness. I got busy and didn’t get around to really digging in and following the company and learning more about the tech, and I still like the stickiness. My little position is up 83% since then, which really is not too shabby. Part of that is the ongoing rush into SaaS companies generally, but they do seem to be executing well. I will likely add on any significant pull back.

Regards,

Dorset

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