Supported Browser
  • About Us
  • Subscribe
  • Contact us
Entrepreneurship - BLOG

What Kind of Company is Splunk?

Henrich Greve |

Let me begin by answering the question in the title. Splunk (http://www.splunk.com/company) describes itself as a company founded to “make machine data accessible, usable and valuable to everyone.” With machine data they mean not just any data on a computer, but rather the data generated by machines rather than humans; by accessible they mean that they are making programs to analyze data that would normally be in an unstructured form, so not in a database.

Their software deals with system configuration and monitoring, security logs, servers, virtual machines, and so on. The name comes from spelunking, or cave exploration, because supervising machine data is like cave exploration when the software tools are poor.

To someone outside the computer industry, like me, most of this description is hard to follow. For those inside the industry, each function and piece of software may be easy to understand, but it is not necessary clear why a single company would be founded to take care of these services and not others. What would we call such a company, and who are its competitors? That is the question of categorization. Customers care about categories because they want to know which firms to approach for bids when there is a need for new software. Investors care about categories because they want to understand the strategy of a firm they want to back.

Usually when I look at a problem of categorization I want a clear answer. Green tea ice cream bothers me because a non-dairy product that is usually served hot is frozen and milky. There is something fundamentally wrong with three-wheel cars and four-wheel motor scooters. And, as Elizabeth Pontikes has found in recent research, I seem to be a typical consumer in that respect. If a firm is difficult to categorize because it belongs to a category that is hard to delineate or has significant overlap with other categories, then they assign a lower value to it.

The surprise came in how venture capitalists made the same judgment: they took the exact opposite tack and thought such companies were more valuable, not less. Why is that? The key seems to be that (potential) customers don’t have any control over the firm, and are facing with a possibly unclear product or service that they have to take or leave. Venture capitalists, on the other hand, will invest in a firm and take a role in setting its strategy, and for them the unclear labeling may indicate novelty and opportunities to maneuver. So, it is not just the category that matters in how one reacts, but also the degree of control over it. For consumers, that still means staying with four-wheel cars. For entrepreneurs it means that the radical but still half-baked idea might be more interesting to investors than they imagine. Oh, by the way: When I looked today, Splunk was worth approximately 3 billion USD.

Pontikes, E. G. 2012. Two Sides of the Same Coin: How Ambiguous Classification Affects Multiple Audiences’ EvaluationsAdministrative Science Quarterly, 57(1): 81-118.

Add a comment Already a member?
We welcome your comments and encourage lively debate. However, to ensure the quality of discussion, our moderators reserve the right not to publish personal attacks, abusive comments or overly promotional content. You can view our Terms & Conditions
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.

Your Privacy

INSEAD takes your privacy very seriously. For this reason, we inform you that the data collected via the form above is processed electronically for the purpose(s) specified in this form and will not be used outside this framework. In accordance with the Data Protection Act of 6 January 1978 amended by the GDPR, you are granted statutory rights of access, modification, update, deletion and limitation of treatment of your personal data. You may exercise these rights at any time by writing or sending an email to INSEAD at insead.knowledge@insead.edu. You have the right, on legitimate grounds, to object to the collection and processing of your personal information. For more information, please see our privacy policy.