‘The Stars Aligned’: Observe CEO Spills The Tea On Snowflake’s Deal To Buy The Observability Company

‘I think in a company’s life, you get these windows of time where you have to make a decision and make it happen in that window of time,’ says Observe CEO Jeremy Burton.

Snowflake’s planned acquisition of Observe marks a strategic move to add a native observability application to its fast-growing AI data platform, bringing together a long-standing technology partnership that has been in place since Observe’s founding.

Jeremy Burton, CEO of San Mateo, Calif.-based Observe, told CRN his company is an AI-powered observability platform designed to help enterprises troubleshoot cloud-native and modern AI-driven applications. The platform unifies logs, metrics, and application performance management data into a single view, addressing what Burton described as a fundamental data problem in observability: fragmented tools that force IT teams to swivel between multiple systems to diagnose issues.

Burton said that from day one, Observe was built exclusively on Snowflake’s database. Snowflake first invested in Observe during its Series B funding round and later participated again in Series C.

[Related: Snowflake To Buy Observe: 5 Things To Know]

“We’ve always said, bring the data together, and of course the place that we chose to put the data was Snowflake,” he said. “At the time, it was a new database, and we felt like the modern architecture of Snowflake could give real advantages over any incumbent competitor, because no one had really designed the system that way. No one had already built on top of a modern database.”

And because Observe does not support any other database, the two are already integrated, a fact that helped pave the way for the acquisition, Burton said. “I feel we’ve been doing the integration work for the last seven years, and there’s nothing [left] to do,” he said.

Burton also discussed his thoughts on the future of Observe as a part of Snowflake, how he sees the acquisition impacting the company as a whole, and more. To better understand Snowflake’s acquisition of Observe, read CRN’s entire conversation with Burton, which has been lightly edited for clarity.

Remind us one last time, what is Observe?

Observe is an AI-powered observability platform. What that means is, we help people troubleshoot their cloud-native and AI sort of modern applications.

Observe has only been around for seven years, and Snowflake was an investor, right?

Snowflake came in at the series B funding round. We built the product and we had been running the company for maybe five or six years before we did the series B. Snowflake invested a fairly modest amount, and then they invested again in the series C round.

How compatible is Observe’s technology with what Snowflake and its competitors do?

I think what acquiring companies are always worried about is integration. Are we going to be able to integrate? Well, we built on Snowflake from day one. We don’t support any other database other than Snowflake. So I feel we’ve been doing the integration work for the last seven years, and there’s nothing [left] to do. That’s the good news. And why this makes sense is we’ve always said pretty much since day one that we believe observability is a data problem because when people try to troubleshoot, they look at one system that has the logs, they look at a completely different system that does the monitoring, and they look at a completely different system that does APM (application performance management), and the data is fragmented. So in order to figure out what’s going on, you’ve got to have a swivel chair and be able to look at one screen and see the logs and then try and correlate it with what you see is going on over on another screen for APM. We’ve always said, bring the data together, and of course the place that we chose to put the data was Snowflake. At the time, it was a new database, and we felt like the modern architecture of Snowflake could give real advantages over any incumbent competitor, because no one had really designed the system that way. No one had already built on top of a modern database.

So that was actually a good early bet that Observe placed on Snowflake.

It was a gamble for sure, back in 2018 when we got going because Snowflake was relatively new. But the theory was, we felt it was going to do well, and we felt that its architecture was exactly what was needed to bring all of the observability data together. But we didn’t know when we started out. We didn’t know you could actually build a unified observability offering on top of Snowflake because no one had ever done it before. But if you’re going to build, if you’re going to be disruptive, you’ve got to do something that nobody’s done before.

You built your technology only on the Snowflake database. Had you explored or were you in the process of exploring any other databases to work with before the discussions with Snowflake about an acquisition?

We do a lot of internal prototyping because obviously there are newer competitors who build on databases that are competitive to Snowflake’s, and so we certainly do our own internal benchmarking, just to see. But from the buyer’s perspective, from our customers’ perspective, they don’t really know Snowflake exists. They never see it. They log into Observe, and everything works. It’s sort of like when you log into Salesforce, you don’t see the Oracle database underneath it. You just do your thing, and you don’t really care where the data’s stored. It’s the same with Observe. So we didn’t have a good reason to change. Customers weren’t coming to us and saying, ‘Hey, can you move this to this other database,’ because they never really saw it. So it was never a top priority for us.

Does that mean going forward customers will no longer see Observe, but will see Snowflake?

They might see something called ‘Snowflake Observe.’ Obviously, we’re going to be a Snowflake product, and it’ll be branded Snowflake. And Observe Inc. won’t exist. So what do we call the product? Snowflake Observe is as good a name as any.

I have to ask: What was the acquisition price?

Snowflake is driving the ship on this. And so I can’t say.

What happens to Jeremy Burton as a result of this acquisition?

I think I’m not getting any younger, and if it was any other company, it would have been maybe tempting to ride off into the sunset. But Snowflake has always been a special company for me. I’ve been on the board there since 2015. I know the founders. I used to play soccer with Thierry [Cruanes, Snowflake co-founder] back at Oracle many, many years ago. So it’s a special company. I’m actually a big fan of the new-ish CEO, Sridhar [Ramaswamy].

The way that they’re going to set this up feels very similar to the way we did things at EMC in that I’m going to be the general manager of the observability business unit, if you like, and I’m going to report up to Sridhar. We’re going to keep Observe together. And we’re going to go for it. Let’s see how big we can grow this thing giving me the accountability to make the decisions as I do today. So I think that’s the right approach. I’ve seen this work well many times at EMC. It’s what we did with things like Isilon and Data Domain. And obviously EMC’s acquisition of VMware is probably the most famous example.

I’m actually quite fired up about this, and I’m looking forward to working with Sridhar. And yeah, for me, at least, it’s probably a great way to finish my career.

Did you always hope that Observe might be acquired by Snowflake someday?

I think every startup hopes they go public, right? And that was our hope. The hope was we want to grow this thing and take it public. The second choice, if I was to do a survey and ask everyone in the company, I think they would say that Snowflake was the right place for it to land, if we couldn’t take the company public. So it definitely has been a very popular announcement internally.

Did Observe have the financial ability to grow to a profitable company and maybe someday do an IPO?

I mean, everything’s possible, right? You’ve always got to weigh your risk and reward. And we’ve had a great run. We’re having another great year. The temptation is always to keep going. But we tend to sell [our technology] to larger companies. My entire career has been doing enterprise software, and that does come with risk, because these deals tend to be bigger and more complex, and as the numbers get bigger, you got to keep doing more of them. And we’ve seen in this market that if you slip up a quarter or two in a row, then you play in defense. And I think you never want to get into a position where you think, ‘Oh, we have to sell the company.’ Because companies are bought, not sold. And usually, if you have to sell, things are going to probably go pretty bad. So you always weigh the risk/reward. And we concluded that, if we’re going to get big quick, getting access to the accounts that Snowflake has access to is a beautiful thing.

I think it really changes the economic picture. We don’t have to pay our Snowflake bill anymore, so look at the sort of economics that we can drive for the customer. I think it’s going to be mind-blowing. And finally, I’d also say, we’re going into a new world that is absolutely AI-driven. And I think being part of a company that’s got an AI data platform helps us big time. So you weigh up all these things versus the risk with a company that is almost like a second home for us. And I think obviously the conclusion was that we’re better off in Snowflake. It’s a good outcome for the team. It’s the place where we honestly would say we belong. And you know, folks here are going to do okay. It’s not an IPO, but Snowflake is taking care of the team.

Who reached out to who for the acquisition?

It’s a little bit like dating. We have a great partnership. I mean, we rely on them. We have bugs to fix and support tickets. It’s a company we talk to every day. They were investors in our series C funding, and so they were up to date with our latest financials and knew what we thought we were going to do in the back part of the year. And as they saw us continue to exceed what they thought we were going to do, then the discussions got a little bit more intimate, let’s say, and then it was all about, is the time right? It’s got to be right for us, but it’s also got to be right for Snowflake. They also have a lot going on. Can they do it justice? And do they have the bandwidth and all those things?

And yeah, the stars aligned. And so, as I said, I think in a company’s life, you get these windows of time where you have to make a decision and make it happen in that window of time. And certainly as a startup you don’t know whether another window is going to come along. Maybe you’ll get a chance to IPO, but who knows? Snowflake might have gone off and built their own observability product, or gone on to acquire another company. So I’m pretty happy that we made it happen.

Well, given the importance of data and managing that data and keeping it safe and keeping it available, why didn’t Snowflake have its own observability offering?

I was at Oracle for many years. And at Oracle, it took them many, many years before they moved into applications. And I think that maybe a little bit about what you’re seeing here is that you’ve got a great database company or a data platform, and the growth has been amazing, but they’re getting bigger. And so then you start to question, ‘All right, how do we keep this growth going? Maybe we need applications.’ You can think of Observe as essentially an application on top of Snowflake. And if we can continue to grow maybe even faster inside of Snowflake, it helps Snowflake keep their top line growing. And as I said, I saw the same thing at Oracle back in the day. They were a database company day one, but then they became an applications company and started to capture more value as they migrated north towards applications.

How far is your headquarters from Snowflake’s?

Not very far. It depends on traffic, maybe 15 minutes down Highway 101. So very close. And in fact, that office is probably only about 400 yards from where the old Snowflake office was.

So after the close of the acquisition, will the Observe team move over to the Snowflake headquarters?

Yes, they have an amazing campus in Menlo Park with amazing food and an amazing gym and lots of amazing things that we don’t have. So we’re very keen to go down to the Menlo Park campus. I’ll be there banging on the door the day this deal closes.