I’m at a big data conference in which many of the companies discussed on this board are in attendance. Elastic is not here. I have a small position in Elastic, I work with the technology, I’m very bullish on its future. I’ve learned the following:
The good: A lot of companies are using the free version of Elastic (similar to my main client). These companies are testing the technology, running pilots, starting to address various use cases with Elastic, etc. I suppose the bear argument is, “You see, you can use Elastic and never pay! Their pricing model is broken!” But I think the opposite. Almost everyone I spoke with agreed that they would need to be paying for Elastic in the future. As soon as they go into proper production, etc. It’s really only a matter of time. So my takeaway is that Elastic has a huge installed base that can quickly be converted to paying customers. Most of the people I spoke with also agreed that more and more new features coming in the future would be paid, as Elastic begins to really monetize their solution.
The bad: I’ve heard some very negative feedback about Elastic’s sales teams. Especially the way they manage partners. This is a huge red flag for me now. These partners are the people out there embedding Elastic into their solutions, and helping customers understand what software needs to be bought now to deliver various use cases. These are partners that could easily be motivated to push customers to implement the paid version of Elastic sooner rather than later. Instead, they are not getting much support from Elastic. I heard the word “arrogant” a few times today with respect to Elastic. Yes, the technology is great. But I really hope Elastic isn’t thinking they won’t need partners to be successful, or that they can make more money by shutting out partners. In the short term, perhaps yes. But it’s not a winning long-term strategy.
–JC