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Splunk CEO Gary Steele On Channel Opportunities, Management Stability And Introducing Himself At .Conf22

Rick Whiting

In an interview with CRN, Steele, who started as Splunk’s top executive in April, talks about his two decades as Proofpoint CEO, his two months as Splunk CEO, his plans for the company’s security and IT observability technology portfolio and his vision for working with channel partners to expand the market for Splunk products.

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Gary Steele took the reins as President and CEO of data platform developer Splunk On April 11, filling the vacancy created in November 2021 when then-CEO Doug Merritt abruptly stepped down after more than seven years at the company, including six years as its top executive.

Steele joined Splunk after serving as the founding CEO of email security vendor Proofpoint for some 20 years before being hired in March to take the top job at Splunk.

Merritt’s departure came following a somewhat turbulent period at San Francisco-based Splunk that included the departure of several top managers including president of worldwide field operations Susan St. Ledger in September 2020 and CTO Tim Tully in April 2021.

Splunk’s revenue slowed in the company’s fiscal 2021 during the early days of the pandemic when some businesses – especially those in the hard-hit travel, hospitality and retail sector – hit the pause button on major IT projects. At the time the company was also working to integrate a number of acquisitions from 2020 and 2021 and was negotiating a transition to subscription pricing and an annual recurring revenue business model.

On June 22, 2021, global private equity investment giant Silver Lake made a $1 billion investment in publicly held Splunk to strengthen the company’s balance sheet. In February, Cisco Systems reportedly approached Splunk about a $20-billion acquisition deal. And in March of this year private equity firm Hellman & Friedman acquired a 7.5 percent stake in Splunk estimated to be worth $1.4 billion.

Today, the company is focused on selling its Splunk Enterprise and Splunk Cloud platforms, along with a number of applications that run on the platforms, for a range of cybersecurity and IT observability tasks.

Earlier this year, Splunk announced that revenue in the company’s fiscal 2022 (ended Jan. 31) was up 20 percent year over year to $2.67 billion. The company just recently announced that revenue in its fiscal 2023 first quarter (ended April 30, 2022) was up 34 percent year over year to $674 million.

Splunk is holding its Splunk .conf22 annual user conference in Las Vegas next week, marking the first time many Splunk customers and partners will get to hear from the CEO.

Steele spoke with CRN in a video conference about what he has been focusing on since assuming the President and CEO post, his views on how his work at Proofpoint prepared him for his new role, his expectations for Splunk .conf22, the market opportunities for Splunk and the role partners will play in leveraging those opportunities. The following interview has been lightly edited for clarity.

Are you in the San Francisco headquarters today?

We’re actually in our Santana Row office in San Jose today. You know, we have a very big Bay Area presence, sort of, two-thirds is probably in the South Bay and about one-third is in San Francisco. And so right now I’m doing three days down here and two days up there. But flexible. I live sort of equidistant between. When I started this role I decided I was going to be in the office every day so that if people wanted to see me they could.

You’re coming up on two months as CEO of Splunk. What have you been focused on since starting? What has been at the top of the agenda?

Three things really. The first is the people in the company and the organization and making sure that we have that right and aligned. And then, obviously, some changes as part of earnings. So really getting the organization at play.

Second thing is just really focused on business execution. How do we make decisions faster, make the company more agile, some of those things.

And the third thing is really understanding and talking to customers and partners. What [are] the right focus and priorities for the company?

As founding CEO of Proofpoint, you led the company for about 20 years. How did that prepare you for the role at Splunk?

Yeah, long time. You know, I think it's sort of interesting. That experience, of one, the cyber experience, I think is really helpful for Splunk. Really understanding the cyber world and spending a lot of time with customers and partners in that world was super important.

Two, I think it’s really unusual for a CEO to go from founding to over a billion dollars in revenue. And so while some have questioned, you know, 'Is Gary the right person to scale the business?’ the reality is, I’ve figured out how to, at every inflection point at Proofpoint, to find ways through to continue to scale the business and I think I can do that here at Splunk as well.

And I have a passion for customers and partners. And I think I can bring that passion for customers and partners here at Splunk. So I'm excited about this next chapter. Totally different.

Why did you take the Splunk job? What was it about the role and the company that attracted you?

You know, it’s interesting because I’ve known Splunk forever. Splunk went public almost on the same day that Proofpoint went public, so I followed it closely.

But a few things really resonated with me. One is the level of engagement that Splunk had with large customers, helping them solve their security problems as well as their broader IT infrastructure problems. And the kinds of deep relationships where Splunk was actually mission critical. It's really unique, to speak broadly.

That was really important. I fundamentally believe that Splunk is at a very unique position to continue long term durable growth. And I felt like I could bring to the company a balanced perspective of helping continue to drive focus on profitability overall. And that could bring great value to the company and the shareholders.

What do you see as the major similarities in the companies and the CEO roles? And what do you see as the major differences?

Well, I think that the major difference really is size and scale. Splunk is basically more than double the size that Proofpoint was at the time that I left. And I think we share many similarities. I obviously had very close relationships with CISOs [Chief Information Security Officers] in my prior role, bringing those relationships to Splunk. And that focus I think, is important.

Then, I think the thing that is really different is Splunk’s broader market opportunity spans not only security, but the broader IT market, helping organizations deal with the resilience of their overall IT systems.

What do you see as Splunk’s strengths right now? And in what areas do see needing improvement?

I think Splunk’s strengths are a passionate and loyal customer base, where we're solving mission critical problems for them. And being able to do that across security and observability. I just think there’s opportunities to continue to extend that footprint in observability and more broadly in the IT market.

Splunk has primarily targeted its data platform for security, observability and IT operations tasks. Do you foresee any shifts in the company’s product strategy? Any expansions into new product areas?

I don't feel the need to broaden the product line given the significant TAM [total addressable market] that we’re driving against. Having said that, I think we can tune our efforts both from a product point of view and from a go-to-market point of view to better capitalize on those opportunities. And so I think there's more that we can do in the security world helping customers deal with this very complex threat environment that we’re dealing with.

And then I think on the observability side, we've made tremendous progress bringing together the various acquisitions that we have. But I think there’s opportunity in extending the reach of that and accelerating our go to market efforts there.

Just before you started at Splunk you said in an interview with CNBC that you could be a “stabilizing force” for Splunk and its customers. How so?

I think it comes in a number of factors. I think one is, there's been a lot of organizational change in the company. And so I think, for spelunkers, in particular, stabilizing the organization [and] being a force of stability in a time where there has been too much change.

And I think for customers, continue to champion their efforts. From a customer experience point of view, I think it's something that’s super important as well. I think that force stabilization really spans employees [and] customers. And I think it extends all the way to partners because there has been a lot of change in leadership within the company and we need to slow that change down and be very predictable. Be great partners, be great vendors to our customers.

One year ago, Silverlake invested $1 billion in Splunk and in March Hellman & Freeman acquired a stake in the company. Do you see any additional moves on the financing front in the near future?

We're thrilled to have Silverlake as an investor in the company, [and] also taking a board role. We get to benefit from their operational experience. So that’s been a big win for us. You also probably saw that H&F [Hellman & Friedman], a private equity firm, took a significant position in the company. We view that as continued validation [of] the opportunity in the company.

We do not anticipate that we need additional capital [for] the company in any way. We're obviously well-funded with a very strong balance sheet. But we think having these private equity firms as investors, we can leverage their operating knowledge.

How important were channel partners for Proofpoint and how did you work with them?

In the Proofpoint world, a very high percentage of our business went through partners. And we were always looking to engage partners whenever possible. Our basic, standard go-to-market model was with partners. That was security resellers for the most part…security resellers around the globe that the sales team would engage with.

At Splunk it’s a little bit different because you have your cloud service providers, the AWSes, the GCPs – they represent really important strategic partners to the company – as well as many of the global systems integrators, people like Accenture and others where we've actively engaged in deep partnerships to help drive value. And then here at Splunk we also engage with resellers as well.

What's really different here, what I find very exciting, is that the value proposition to partners is incredibly compelling because the types of implementations that we do require a significant amount of services and integration work. And as a result of that the value proposition to a partner is incredibly strong and we can create great customer outcomes collectively.

So the thing that I'm super excited about here is, how do we take advantage of the fact that there’s tremendous opportunity for partners in driving integration and special project work alongside our customers? In the Proofpoint world, there [were fewer] service opportunities and this really represents significant service opportunity. So I'm super excited about that.

How important do you see Spunk’s channel partners being to the company’s success? Do you see their role changing in any way?

You know, if you look back at the last couple years, one of the primary priorities has been cloud migration, helping customers that have traditionally been on premises to move their environments to the cloud. In that context, partners are incredibly, incredibly important.

Customers need the support and the services by our partners to make those migrations happen and happen successfully. We also see, more broadly, that as customers leverage the broad platform of Splunk, partners can be an integral part of that, helping extend the opportunity and value around Splunk into other applications and other disciplines. So partners are a very important component of our overall growth strategy and we think they represent a unique opportunity for us to extend the broader footprint and success of the Splunk platform. So super important.

What kind of message do you plan to offer Splunk customers and channel partners at next week’s Splunk .conf22 event? What do you want their key takeaway to be?

For customers, I think what people will be excited about – and the message they will see – is that the pace of innovation is rapid at Splunk and there's a lot of great value that is being delivered to Splunk customers. And from a partner point of view, it’s really reaffirming the importance of partners, showing them the value proposition that we can collectively deliver to our customers and building enthusiasm and excitement around the opportunity of working with Splunk.

What are you looking to hear from customers and partners? What are you hoping will be your key takeaway?

You know, for me, I made a commitment that I would talk to 100 customers in 100 days and I'm on track. But .conf22 is an important catalyst and helping me reach that particular milestone. I really want to understand customers’ experience overall and make sure that I can champion the efforts of what customers are asking for.

And then with partners, really understanding how we can be better together and how we can drive better customer outcomes together. So I'm really looking forward to spending time with both customers and partners at the event. And it’ll help me focus on priorities.

I would just summarize and say that I'm just super enthusiastic about the opportunity here. We’re obviously very closely aligned to customer success and we want to do more with partners. So really continuing to drive that collaboration for customer success is something that's super important to me.

 

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