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The Datadog IPO: An Analysis of Datadog’s Future.

First, congratulations to Datadog for building a strong business and its IPO today!

Datadog’s rapid growth illustrates a couple of key industry themes: First, growth in cloud applications continues at an unprecedented rate, and second, cloud applications require enterprises to rethink existing tools for visibility. Most significantly, the fact that Datadog has grown rapidly even as traditional monitoring companies have floundered, is a clear illustration of how companies built for a cloud era will disrupt those that were built for an on-premises era.

Datadog leveraged the first wave of cloud adoption

The first wave of cloud adoption meant that companies had to build applications using individual cloud provider’s APIs and services. Companies had to be willing to accept vendor lock-in. Early adopters rushed in despite that barrier because of the benefits of cloud — flexibility, pace of innovation, elastic spend and so on. Datadog was an early pioneer of visibility tools for customers building cloud applications and benefited enormously as the initial trickle of early adopters transformed into more significant adoption by large enterprises over the last several years.

The second wave: Cloud-native applications

We are at the beginning of a generational shift from monolithic applications to highly distributed microservices, powered by containers (and soon serverless functions) and Kubernetes as building blocks. Docker started the evolution and Kubernetes is kicking it into high gear. Docker popularized the idea of a lightweight container runtime by providing a simple way to package, distribute and deploy applications onto a machine — on-premises or on any public cloud. Kubernetes enables the operation of containerized services at scale. Microservices that are powered by containers and Kubernetes eliminate the fear of vendor lock-in associated with the first wave of cloud adoption, while further accelerating application development and lowering the cost of cloud deployments.

In the last six months alone, our conversations with customers have shifted. Dozens of banks, web-scale companies, and other large enterprises are fully embracing cloud-native architecture as the default for new applications.

The shift to cloud-native architectures requires reimagining visibility yet again!

Application development teams recognize the advantages that come with cloud-native and are rapidly making the move. Yet, DevOps and security teams tasked with translating cloud-native architectures into operational reality struggle with ensuring reliable, secure, performant applications. One key challenge they face is the lack of visibility into containers and applications hosted in the cloud. The second key challenge they face is ensuring security and compliance as they deploy cloud-native applications in production. This is especially painful because existing security, monitoring, and APM tools simply lack the in-depth visibility and rich context needed to be relevant in cloud-native environments.

Enterprises will require container-native and Kubernetes-native solutions. As cloud applications move toward cloud native, there is no denying that Kubernetes is the orchestrator of choice and just like enterprises today need solutions built for the cloud, the next step will be solutions built for Kubernetes.

Proprietary monitoring approaches will be challenged by Prometheus. Prometheus has rapidly emerged as the monitoring standard in the industry. Prometheus, as a graduated CNCF project, has a massive community of contributors and users and is rising as rapidly as Kubernetes itself. Many enterprises rely on Prometheus, which is ultimately disruptive to proprietary approaches that do not fully embrace Prometheus-compatible metric exporters and community dashboards and alerts.

Security and visibility are converging. As enterprises move toward DevSecOps they are demanding visibility and control from a single tool. The convergence of security and visibility is a big theme that will need to be addressed because enterprises are demanding tooling that supports this model. They want to be able to prevent issues pre-deployment, monitor operations, stop threats at runtime and perform forensics from a single platform, especially as security becomes everyone’s responsibility.

Conclusion: Cloud Native is here

It is exciting to watch the positive response to Datadog. It firmly establishes the importance of visibility in migrating applications to the cloud, and Datadog has been very successful in addressing that problem through extensive cloud integrations and an “easy-to-use” approach to monitoring. As customers continue to migrate to cloud applications, Datadog’s market opportunity remains significant.

We address the same pain point of visibility for reliable operations, but our focus is on serving large enterprises that require integrated visibility and security for containerized cloud-native applications. We believe we have a unique and differentiated approach. We have an open core foundation that is fully Prometheus compatible, leverages Falco for Kubernetes security and compliance, Sysdig for forensics and Anchore for vulnerability management. Our product architecture is container and Kubernetes native, and our data platform converges security and visibility and provides a single source of truth for secure operations.

Congratulations to Datadog — we look forward to following Datadog’s journey and to emulating their success as the market evolves towards containerized cloud-native applications.

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