Disclaimer : This blog post is a personal investment opinion triggered. I have hands on experience in implementing & integrating Sumo Logic for enterprise customers. As on 13/09/2020, I am not employed by Sumo Logic & do not have any direct financial transaction with Sumo Logic. This is not investment advise. Please do your own research before investing in Financial Markets.I am also analyzing competing IPOs of Snowflake, JFrog & Unity

Sumo Logic started their journey in 2010 by ArcSight veterans Kumar Saurabh & Christian Beedgen. As digital adoption is growing organically, bad experiences lead to bad branding and negatively impact topline and bottomline over time. Sumo Logic makes business leaders aware of any such bad experiences, help find the root cause and proactively detect future issues using AI & ML. Here’s my analysis of Sumo Logic’s S-1 filing & investor advantages for the upcoming IPO

Investor Advantage 1 : Gross Margin Network Effect

Sumo Logic is built upon AWS public cloud with a combination of open source and IP based technologies. Such tech stack is challenging , but brings immense benefits to Sumo Logic especially – gross margins per customer. A new paying customer at Sumo Logic incurs cost of setup using 3rd party hosting, professional services and other support. As a result the first year results in negative contribution to Sumo Logic. In the later years, Sumo Logic’s tech stack uses momentum of network effect for the costs to go down and the customer starts contributing positively. To elaborate here’s an example of contributions made by 2018 Cohort of customers across FY 18 FY 19 & FY 20 :

Now assuming that these enterprise customers use Sumo Logic in the same manner across the years, here’s how the contribution across the years would look like, in millions :

Investor Advantage 2 : Ready & Essential for Multi Cloud

Enterprises have realized cloud computing as essential utility to power their business provided by Amazon Web Services, Microsoft Azure & Google Cloud. As these utility vendors compete on price and capabilities, enterprises can expect using various cloud providers at the same time for different initiatives across various departments/functions. Sumo Logic is built on AWS but compatible to ingest data from AWS, Azure and Google Cloud. Additionally, enterprises would want a single source of truth like Sumo Logic, rather than look at performance dashboards managed by each individual cloud provider

Investor Advantage 3 : $55.1 Bn Market Opportunity & More Growing

Sumo Logic’s presents an opportunity to reach an addressable market of $55.1 Billion and growing. they operate in a niche product category of Continuous Intelligence which ingests application lifecycle data i.e. logs, events and metrics. As consumers adopt digital organically, applications supporting the digital experience across various platforms would start generating more data. With a scalable, multi-tennant and multi-cloud compatible architecture, Sumo Logic would be able to scale data up and across automatically according to enterprise use cases.

Investor Advantage 4 : Single Source of Truth & Intelligence

As enterprises adopt multi-cloud strategy to feed their digital transformation needs, they would setup & adhere to enterprise-wide performance benchmarks. Instead of monitoring dashboards from each data provider, Sumo Logic’s multi-cloud compatibility helps aggregate monitoring in a centralized location. Additionally, with AI & ML capabilities built in , there are no technical debts to build intelligence based on the aggregated data. Hence business stakeholders across business functions can access a centralized location to manage performance and deep dive on issues.

Investor Advantage 5 : Essential for Digital Transformation

With a large number of enterprises in various stages of digital transformation journey, they would need a measure of digital impacts to end user or customer experience. Down time – is inevitable, can have complex root causes and never good for business. Enterprises can use Sumo Logic’s capabilities to predict and action upon issues in real time across platforms. As they progress in their digital transformation journey, Sumo Logic can answer the question – if the direction is correct. In their S-1 filling , Sumo Logic mention that they have a growing base of partners that help drive top line & bottom line growth. As these partners play a key role in delivering digital transformation for enterprises, tools like Sumo Logic are essential to drive excellence in customer support, real time issue debugging and anomaly detection.