Sumo Logic recently published their Continuous Intelligence Report, which details trends in application architecture, deployment processes and management tools in the cloud, based on observations across their 2,000 customers. By reviewing the data in this report, we can glean several insights for software stack company investments.
If you aren’t familiar with them, Sumo Logic provides a cloud-native platform that allows companies to collect the large volume of event data created by their software applications. This application data is processed to generate “continuous intelligence” or insights that help improve operational, business and security performance. Sumo Logic has over 2,000 customers, including many large enterprises.
Their Continuous Intelligence Report leverages the configuration data from their customers’ application stacks to calculate usage trends for modern software application architecture and management. This configuration data is collected from customer installations across all major cloud providers, AWS, Azure and GCP, as well as hybrid cloud infrastructure. Customer data is anonymized, but the general trends are accurate. Environments represent the state of production.
While Sumo Logic customers span all cloud providers, AWS clearly has the lion share.
The report highlights a couple of interesting trends around this:
- While AWS dominates, multi-cloud adoption has increased by 50% year/year. The growth of multi-cloud adoption is an important consideration for the software stack companies that we recommend, as it indicates an avoidance of single cloud provider lock-in and preference for software stack solutions that span multiple cloud providers. MongoDB (MDB) Atlas for data storage, Fastly (FSLY) for CDN and Okta (OKTA) for authentication are examples.
- A typical enterprise only uses an average of 15 AWS native services out of the 150+ available. While even 15 sounds like a lot, you have to consider that core infrastructure services like EC2 and S3 count. This is favorable for software stack companies that provide solutions with AWS counterparts. For example, AWS has a service for sending customer emails (SES), monitoring applications (CloudWatch) and collecting data for analytics (Data Pipeline), but third party specialists like Twilio, New Relic and Alteryx are likely being utilized to address more sophisticated use cases.
- Docker adoption in AWS continues to grow. Docker is a container technology that allows DevOps teams to build and run distributed applications more efficiently. Docker usage is often associated with the adoption of microservices. The interesting part of growth in microservices is that each microservice implementation is free to choose a purpose-built technology stack. Engineering teams may deploy different software stack solutions for each microservice, based on its use cases and data characteristics. It is common for different microservices to choose different database solutions, relational or NoSQL, to store their data. This is an argument against the idea that relational databases will never be displaced.
- Kubernetes use has increased by about 50% on AWS in the past year. Kubernetes container orchestration is another technology that facilitates a multi-cloud approach. This further underscores the trend that enterprises are moving to a multi-cloud footprint.
All of these trends favor independent software stack companies that provide a point solution outside of the complementary services offered by the cloud providers. As cloud providers have rolled out these overlapping services in past, fear of competition and lock-out grips the markets and creates an immediate drop in the related software stack company’s stock price. This tendency of modern enterprises towards multi-cloud solutions mitigates that concern and favors the independent software solution providers.
In the area of data storage, the Sumo Logic report provides a pretty significant headline, which is that “the adoption of NoSQL databases has overtaken traditional RDBMS databases in AWS environments.” They attribute this to cloud migration and the growth of microservices, both of which provide an application architect the ability to choose the optimal data storage model based on the application’s use cases. Of customer installations this year, Sumo Logic reports that 56% of databases are categorized as NoSQL versus 48% for RDBMS (relational).
Some qualifiers regarding this data:
- Redis is primarily used as an in-memory temporary data store (cache). This is usually in addition to the actual permanent database of record. Data is persisted in both the cache and the permanent store. So, considering purely permanent data storage solutions, we would need to remove the use of Redis.
- MongoDB is the most popular NoSQL database of record. This, of course, bodes well for software stack company MongoDB (MDB), which provides the most full-featured, multi-cloud solution for enterprise level MongoDB implementations.
- Oracle has low usage percentage on AWS, relative to the size of their overall share of the database market. This implies that the majority of their implementations are on-prem, or outside of the scope of Sumo Logic customers. As enterprises continue to migrate to the cloud and microservices, it is hard to see how Oracle would maintain share.
- Microsoft SQL similarly has a low usage percentage. It would be interesting to see this database usage data on Azure.
Another interesting trend from the Sumo Logic report has to do with CDN adoption. They report usage data for three CDN providers on AWS. While the AWS solution CloudFront is used by 25% of customers, the other two providers are Akamai at 6% and Fastly at 5%. The position of Fastly (FSLY) is noteworthy for investors as it is a relatively new entrant into this space at scale. Akamai and CloudFront offerings have been available for 10 years or more. Sumo Logic called out the emergence of Fastly as well – “Fastly, a relatively new CDN vendor is experiencing similar adoption as Akamai, the global leader.”
Boiling this all down for software stack company investors, I will call out the following take-aways:
- Trends towards multi-cloud deployments of software applications favor adoption of services from independent software stack providers outside of AWS, GCP and Azure. Much noise is made in the markets when a large cloud provider launches a competitive service, but the Sumo Logic data shows that these services do not experience broad adoption. This favors independent software stack companies like Twilio (TWLO), Alteryx (AYX), Datadog (DDOG), Okta (OKTA) and others.
- Adoption of NoSQL data storage solutions is growing. This is primarily driven by the ability for architects to select the optimal solution for the needs of their software application. Microservices and cloud migration re-architecting are driving this “reset”. This trend clearly favors MongoDB (MDB), as the leading NoSQL solution with their new Atlas offering that spans AWS, Azure and GCP.
- Fastly’s (FSLY) share of CDN implementations on AWS is impressive. The fact that its share is almost the same as long-time leader Akamai (AKAM) is surprising and doesn’t bode well for AKAM.
- None of these trends appear to be favorable for Oracle (ORCL).
