Elastic NV at Berenberg Design Software, Cybersecurity & DevOps Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : So yes, we'd just like to start out with just sort of a broad overview. Just maybe for some generalists, Elastic's identity is very clearly as a search company. And your core search technology has found different use cases over time. If you could just provide a little bit of a vague overview there.

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That's an amazing overview. Thank you. So just to touch on the sort of the enterprise search area. It's where you began, it's where many customers have originally found Elastic. I think observability itself drove a lot of growth in the business. So where do you see that enterprise search market today? And is there something that you think could happen that would catalyze its growth further?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Right. I think you have the versatility of the search. It -- just in your standing, like workplace and app is something that is truly differentiated. So I think what is not necessarily well understood by every investor is just kind of the dynamic path Elastic could take through an organization just to build as with a -- to build their usage. So I mean I guess it could happen a number of different ways, but could you provide any high-level trends and how it might move across buying centers or grow maybe as they adopt security or adopt -- observability on top of search?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Yes, exactly. Yes. I mean we've seen recently that it's not only something that you can do, but it's becoming more imperative than if security's an afterthought. It's not a -- it's sort of a broken model. But just, I guess, a little bit on the types of buyers that may be exposed to the product and how they react differently. Or is there a typical number of buying centers that may emerge in an organization you found, maybe it's like it's 3 or 2, depending on the revenues (inaudible)?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That makes sense. And would you describe those as more of mimicking like traditional enterprise software sales? Or it's sort of a -- sort of like an expansion of the type of model that you already have, with a focus on customer success and driving use case across different departments?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. That's really helpful. So we keep touching on open source, but there's a lot to go into here. I mean, I noticed you've changed your licensing a few times over the years, but more recently, made another change to help protect your own IP against some other cloud providers that had been sort of hosting it as their own product. So could you -- I guess, could you provide a brief overview of how this protects the best interests of your existing customers today and how it can just help you grow as a platform?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Yes, definitely. So you mentioned the 4 criteria that sometimes could define what buyers view as open source or what developers view as open source, with the fourth being licensing. And so I think it's either the Elastic License v2 or SSPL. So I'm curious, say, that they're not open source -- and so I guess just in terms of a label, is that -- how are you embracing that or navigating that just as you grow as a platform?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That makes sense. I'm curious on just sort of the thinking behind the timing of the change because I know that this has been a central portion of Elastic forever and still is in terms of its -- the licensing of its main products. So was it a decision that you think that you're at the right scale and that it's the -- you have enough support from your customers as well as achieve enough growth existing? Like in the past that you -- this is the right decision to make now? Or just curious about your thoughts over the past few years into what went into this licensing change.

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Right. Yes. No, I think the timing seems attractive. I guess, in terms of the -- where we are, like as an industry or just software companies that use open source business model or like distribution models compared to 20 years ago. I mean, you've been a pioneer with your own model with, I guess, Elastic License v2, and Mongo has worked on SSPL. Do you think we're at a position where it's more sustainable to build open source business today? Like we've solved some problems with the licensing models. And then how much do you think that this is like still a ongoing work in progress?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Right. Yes. This is -- I have a question just is kind of maybe more theoretical, but -- about what's fair in open source. I mean AWS would -- like they'll use open Source products. They do contribute a relative amount back to some of these projects, yet they're one of the largest companies in the world. So it seems to not be completely black and white issue. I mean, do you have any thoughts on what makes open source, like, I guess, fair in some cases? Or is it really just that -- not necessarily, but that it's right for your business to pursue your own interest?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Absolutely. I agree. I think it's a distraction in some ways. So sort of relative to open source. You recently announced a partnership with Grafana Labs. It was a joint plug-in. You had a longer history with them, the sort of forking off of Kibana. So I guess, it seems like the development of the plug-in itself was preliminary or just relatively limited. So do you see more strategic partnerships in the future? Or like growing more development efforts with Kibana?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. Okay. That makes sense. I want to touch on the searchable snapshots. I think as you said before, just the significant data presences that these customers can have. And sometimes, they've been forced to make tough decisions about what data they can observe in one platform and what they can't. So I guess, like as an overview, like what is -- is this more enabling customers to put more data into the platform in terms of expanding spend? Or is it sort of just increasing customer retention? What other things does it enable for Elastic besides necessarily just increased spend?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That's a good point. So yes, in terms of the pricing and spend. Would empowering customers with a slider bar of different SLOs or just like a bill -- price per cold tier or frozen tier or warm tier, does that make them more cost sensitive? Or is it really just -- it's -- as you're saying, it's like Elastic increase in demand that will generate more revenue?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. Let me try to fit maybe 1 or 2 more in. But -- so there -- we talked about AWS, but you're great partners with Azure and Google. We're also just seeing, in general, partnerships across the space deepen from being earlier product integrations to now including things like -- billing integrations are also joint sales initiatives. So I guess, where do you see public cloud and the observability space interplaying over the next like 3 to 5 years? Do you think public cloud could become more of this procurement platform where more spend flows directly through them initially before coming to an observability company?

Question: William Kingsley Crane - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Great. I'd like to ask more, but I think we're about running up on time. So Janesh, I really appreciate you joining, and it's been a great conversation.