Elastic N.V. (ESTC) Earnings Call Transcript & Summary

Hello, and welcome to Goldman Sachs Technology and Internet Conference. We're heading towards the home stretch of the day. It's a real delight to be able to entertain our guest, Janesh Moorjani, CFO of Elastic, which is a company that many of you might know, Janesh, who will be doing a bit of Q&A with us. But before we do that, a couple of housekeeping items. One is Goldman Sachs Research does not have coverage of Elastic. It's disclosure number one. Number two, for a list of risk factors and other forward-looking statements that will go to the definition of risk factors and such, please take a look at elastic.co website. It's got all the information that you might need. With that, Janesh, a warm welcome to the Goldman Sachs Technology and Internet Conference. Thank you for participating with us on this fireside chat.

Yes. Thanks. Thanks, Kash, for hosting us, and congrats on the new role here.

Thank you very much. Thank you very much. I'd like to say that this is my favorite day in the whole year. You know why? Because every other day, I have to answer the questions. And this is the one day of the year I don't answer any questions. I ask the question. So it is such a welcome change, I got to tell you, but it's also a great event because although it's virtual, coming together of the corporate clients that we serve, the investor clients that we serve and the platform, Goldman Sachs platform, coming together, it's really a very big day. So we appreciate you taking the time to meet with us.

Yes, of course. I feel like that about our quiet period when I stop answering questions, but I'm glad we were able to make this work.

Thank you. Thank you so much. Thank you so much. Elastic, when we first met, it dawned on me that it's a technically very elegant company. It's got open source. There is this aura about it. There is search. There's this one platform. There's a lot of things. And I can tell you that a few years after you've been public, there is still a bit of mystique and aura about what Elastic is. And I remember when we first met Shay and said, I go to say, yes, we were trying to build an application to search for food recipes since [ I came to decide ], it became this thing. And then the next thing you know is that Yelp uses you guys. Uber uses you guys. Everybody uses you guys. So to the generalists that are in this audience, how would you describe Elastic, just to level set? I'm sure the definition of Elastic has changed in the last couple of years. You're doing more things today than you did 2 years back.

Yes. It's a great question, Kash. We're doing more things, but at our core level, we've really not changed as a company because deep down, fundamentally, Elastic is a search company. And that's not changed from day 1 from when Shay started trying to write that app around recipes or the search for the app around recipes and then building on that from there because when we think about search, it's actually at a very foundational level. And how we apply search technologies may have evolved over the course of time, but the fundamental idea that as data volumes grow, there's more value in that data, and the idea that you can derive near real-time insights from that data, it's like having a conversation with your data, that's a really compelling idea. And it's -- think of it this way, right? Any time you see a wall of text or a thick document or a website that's dense with content, the first instinct you have as a person is to say, "I just want to be able to go and find something in it. I want to be able to hit Control F and search for something in it." And just at a very core level, we want to be that place where people go and they can search across that data. And it doesn't really matter what type of data they have, right? I gave you an example of a search box, but it can be e-commerce products on a website. It can be application logs, thinking from an Observability perspective, or it can be security events for somebody that's a threat hunter. So when we initially started, the biggest use case that we had was just to put that search box on a website. Think about Wikipedia, that's powered by Elastic as one example. But over the years, we started to apply this principle more and more in other use case areas. And logs became significant. APM became significant. Infrastructure monitoring became significant. And all of that then combined into broadly speaking Observability. And it's just the power of simplicity in the idea of search becomes really compelling on that. Security is the same. And so today, as we've evolved as a company, we have 3 main solutions: Enterprise Search, Observability and Security. All of them built on a single unified technology stack, which is the Elastic Stack. And all of that driven by search, all with a uniform resource-based pricing model that brings great simplicity to our customers and users. And it almost just goes back to first principles. It's hard to keep things easy. It really is. But going back to the first principles of us just being a search company.

I just muted myself, Janesh, just to make sure we don't have any ambient noise. As a result of the 3-pillar approach that you have, you got the Observability, you got the Security and Search. I really like that simplification was very evident first Investor Day meeting. There was consistency in the way you [ presented ] the business and talked about the business. But through this lens, rather, how would you describe the market opportunity and also the competitive landscape that is unique to each of these segments, if you will, right? Observability, that alone is its own little industry sector. You got the likes of Datadog and Dynatrace and whatnot. In Security, you've got the likes of Splunk and so on and so forth. So how do you look at the market opportunity? And how do you think of the competitive advantage that you have in each of these seemingly disparate markets with different competitors?

Yes. It's really interesting that over time, these things all tend to come together, right? So as I think about the overall market opportunity that we have, it's a pretty significant TAM. And you can look at all the different industry reports around that. At our Analyst Day back in October, we put forth a TAM based on IDC reports, that if you take all the different markets in which we play across Enterprise Search, Observability and Security, they all aggregate to a $78 billion TAM. So as we execute out there in the marketplace, we don't feel constrained by the market opportunity. In fact, I think there's significant opportunity and plenty of room for us to continue to drive growth in the future. And in many instances, what used to be thought of as disparate markets increasingly start to come together. Take Observability for instance, right? The logging companies and the APM companies and the monitoring companies all grew up differently at different points in time. And the whole term observability really came together in the industry only a couple of years ago to demonstrate that from the standpoint of the practitioner, their job is simply to keep their infrastructure and applications up and running and to ensure a great experience from the standpoint of usability of all of that. And so from the lens of that practitioner, whether it's an application that's misbehaving or the infrastructure that's misbehaving or something that's happening elsewhere that they need that they are responsible for, they care less about that. They care more about those outcomes. And that's why observability makes a whole lot of sense in that context. So as I think about how we're addressing the opportunity, we've actually been really pleased with the execution that we've been able to deliver over the past several quarters. And one of the advantages of having search technology applied to so many different solution areas is that there isn't a single company out there that can do everything that we can do. Just as one example, you talked about Uber and others. Uber wouldn't use Splunk to match riders and drivers. And that's something for which we get used. So having a single stack, having that unified pricing model, I think that helps customers really seamlessly extend from one solution to others right there in Kibana. You don't have to worry about the friction of another buying cycle, securing budget, all of that. Others can't offer that. You just click the button, and you can start to use the tools right away. So when I think about that piece and I think about the competitive dynamics, one of the other aspects around that is our pricing model, which I said is a sort of uniform resource-based pricing model. There have been companies that have tried to change pricing models to compete more effectively with us. We've really not seen much of an impact from those changes yet. We feel like we're really well positioned to deliver pretty strong value to customers and address their business needs and solve their problems. So I mean that's what we generally see. I think the competitive dynamics will play out over time. It's not about 1 quarter. We continue to win really extensively in logging, increasingly in security, in APM. And as that happens, we continue to also drive more business to the cloud. So it's already been playing out quite nicely for us. And no real shift in competitive dynamics in the last couple of quarters. We're just staying focused on execution.

Got it. So we've all worked through and continuing to work through COVID. What is -- what are the things that -- we almost learn something every day, every week as how to deal with this and how not to deal with it as well. What are your takeaways? If you could share this with your peers and investors, what is your wisdom from COVID?

Yes. Takeaway #1 is how much tolerance I have for kids making noise in the background while on a Zoom call or with friends like you. That tolerance level has been tested many, many times, yes. But on a more serious note, as I think about it from a business standpoint, I think there's a few different aspects that we've learned as a company over the course of the past 10 months. So first is when the pandemic hit, we sort of stepped back and really started to think about what are the implications for us as a company and what do we need to do to go and address it. And we didn't dismiss it as a near-term hiccup. There were folks out there that were saying, hey, this was going to be a 1-quarter phenomenon, a 2-quarter phenomenon. It's just the flu. It will go away by the summer. You were hearing all these kinds of things. And we weren't unduly optimistic about the extent of the impact. So we took a pretty measured approach at the start of our fiscal year. Like we do with anything at Elastic, we built our plan and really thought about it from a long-term perspective. We expected that execution would get harder with more customer scrutiny, with more approvals, longer sales cycles, all of those things. And we prepared ourselves for that. So I think that's really held us in good stead over the course of the last few quarters as we continued near-term execution while also focusing on the longer term. The second key learning or takeaway for us, I think, was that our solutions are really valuable to customers even in a pandemic. So it's just like a search box on a website. As things become more digital, companies start to think about how do we start to fast forward that digital experience that we have. More applications go online. More content goes online. They need to put more of their business online. All of that translates to a bigger need for Enterprise Search. More content gets created asynchronously, whether it's written documents and e-mails or events like this that end up getting recorded and transcripted and so forth. And all of that is searchable content. And that just means it's a great opportunity for us. It also means that they have more infrastructure to monitor because workloads that were monolithic get distributed. And people that were in one location get distributed. And that just means there's more infrastructure, there's more traffic, there's more application traffic, there's more volume of content that's machine-generated content. And all of that also needs to be secured. And the attack surfaces increased quite a bit. So both Observability and Security also tend to be beneficiaries. So that was a sort of a second key learning for us. But obviously, that plays out over time because in the near term, customers think about their budgets and how do they repurpose budgets and how do they shift the composition of their spending and so forth. But net-net, this proves to be a tailwind for us. The -- I think the third piece, which was -- you referenced our open-source roots at the start. And I think that's the third key takeaway from our perspective, is that different verticals or segments get hit disproportionately in a pandemic. This is not a universal phenomenon, right? Take airlines or hospitality, they're really badly hit. And we can even help these customers in tough times. And people joke that the free and open distribution model, it's like the cockroach of distribution models because even in a nuclear winter, free source survives. And when people start spending again, then you're already there, they're already using you, you're already in their infrastructure. And so it becomes much easier for them to start to pay you again or to pay you compared to whomever they were paying earlier. And they move to the cloud as well, which is really another big area of acceleration. So the business needs don't go away in a pandemic. That person whose job it is to maintain that infrastructure, they still have that requirement. They still need the search box. They still need to protect their companies. And we can be there to help them. And finally, and I'll be quick with this last point, is that we've been a distributor company from the very get-go, from very early beginnings. So as a company, we were able to adjust very quickly to working in a distributed way because we were already used to working asynchronously, not only in terms of tools that we use but also in terms of collaborative processes and just our fundamental approach to work. So that was relatively easy for us to make that switch, and it was fascinating to watch how other companies made that switch over time as well. So I think those are the key things that we've learned so far.

Janesh, I mean, as the economy opens up, my colleague, Heath Terry, has been running a series of reports titled America Opens Up. And we've basically developed a scale system. And our chief economist, Jan Hatzius, talks about how the vaccine is going to have a reshaped recovery, accelerating economic growth of 6.4%. Once we're in that phase, as hard as it is to imagine that we're going to be in a normal phase, how does life look like? What are the things that are going to not come back? What are the things that do come back from your perspective as far as the business is concerned?

Yes. I think it's a great question, Kash. I'd love to believe that everything will come back to normal. But my sense is that customers have realized, and the industry broadly has realized, that there are a lot of things that we were used to doing in person before that don't necessarily need to be done in person anymore. And you can still do them in a distributed way. You can do them asynchronously. So think about things like business travel and think about meetings that people used to have, and they would often fly from one city to another for a couple of meetings one day and then fly back. I think you'll see a lot of people start to ease back into things more in a more gradual way and be thoughtful about, if I didn't need to do this during a pandemic, then do I really need to do this after a pandemic. And so I think you'll start to see some of those behavioral shifts come in. I mean it's great that we've got vaccines. We're very fortunate to be able -- to be in that position in such a short period of time considering how long it's historically taken to develop vaccines. And it's fantastic that people are starting to get vaccinated. But I think the rollout still takes at least several months. And social behavior also just takes time to change. So all of that then starts to affect things on the business side and in terms of spending. And I think once more people have been vaccinated, I know we'll all be a lot more confident in our own behaviors. But in the meantime, we're just going to continue to keep a close eye on how customer spending evolves in this environment and what our customers tell us, and we'll keep executing against the opportunity we see. I think from our perspective that we're in the middle of our FY '22 planning now because our fiscal year ends in April. So I think it will actually be quite timely as we think about what the outlook will be from a business perspective in fiscal '22. But at this point, we still continue to see customers shifting their underlying spending towards areas where our solutions fit in quite nicely. And so we continue to be excited about that opportunity and our positioning.

No lockdown from logs.

No lockdown for logs. There you go.

We came up with that when we had Splunk earlier today. We just really midstream came up with that. So that's my contribution for the day. Plus I also realized that once we switch to the client mode where we have questions that are coming through the channel, I just quickly realized, I could be out of my job because my job is I need to ask questions today and if the clients are going to ask those questions, then I don't have anything to do. I just sit around and be nice to you.

You get back -- you'll get to sit back and pontificate with high-level thoughts in the future.

That's right, yes. A beautiful mind, right? You see the ocean of data and you see the pattern in the ocean of data.

That takes work. Don't shortchange yourself. There's a lot of value there.

When we -- if we do get back to a normal economy, we did talk about how much is -- what is going to come back, what's not going to come back. Is there a risk that digital transformation gets -- as much as it is being pulled forward, do we go backward with digital transformation? Not with you but customers. Customers who are....

I don't think so. We're a small company, so we're not certainly representative of the broad economy. But from what our customers tell us, I think that wave of digital transformation and all the efforts that they've got under that, I think that continues. If anything, we've seen in the pandemic that all of that has been accelerated. Of course, there are some puts and takes. Some companies go faster, some go slower. But I think people have realized that the need to digitize their businesses makes -- it makes -- - it was not only good business sense, but it actually made their businesses more resilient. And so I think as things start to improve in the broad economy or return to a new state of normal, my sense is that the digital transformation efforts will continue. I think people see that as an opportunity not only to strengthen their businesses but also to gain competitive advantage in their respective industries. And I think that trend will generally continue. At least that's my sense of it.

Got it. So if we look at your 3 pillars, Janesh, Search, Observability and Security, where do these things stand in customers' pecking order or priority list of IT spending?

Yes. I think it varies across different customers. If you've got customers in verticals that are shifting increasingly towards online buying habits and they are trying to enable e-commerce businesses, that's business-critical for them. So they'll naturally double down in many of those areas. I think Security and Observability, both are universally applicable really across verticals. Particularly when you have events that cause people to think about their security posture or rethink what their security posture is, that ends up getting ranked pretty highly, especially when people recognize that the cost of a security breach or the cost of having a bad outcome in security can be much higher than the immediate hard dollars and cents cost. So we continue to see customer shift priorities towards all of those areas. I think it just depends a little bit on where each customer is in their journey.

Got it. And if you look at each of these pillars, if you will, any thoughts on competition, which I presume is different across these pillars? What are you seeing in terms of changes with competition in ferocity -- or maybe it's not ferocious.

Yes. It's -- I talked at a high level about some of the broad competitive dynamics. If I dig into each of the verticals -- or excuse me, into each of the solution areas, I should say, specifically. If I think about Enterprise Search, I mean, really, there isn't a single company there that we compete with that can do what we are doing. It's not just about Site Search and App Search, but it's also about Workplace Search where we extend well beyond the 4 walls of the enterprise. On the Observability side, I think it's the usual companies that come to mind. Splunk is a competitor of ours that we've traditionally competed with on both the logging and the security side. And when I think about logging, we've actually made a lot of progress there over the last several years, compete with them head to head. From a Security perspective, it's still early days for us. And we launched our SIEM product just about a year or so ago. But we haven't really seen any notable shift. As I said, I'm not talking about one particular quarter. I look at this more from a long-term perspective. So from that perspective, I think we continue to do quite well. And then similarly, with respect to some of the APM vendors, I'd say there was a point where we used to think about APM from the standpoint of a customer would start in logging and extend into APM. What we're increasingly seeing is even new customers will actually adopt us for APM even before they've adopted us for logging, for instance. We've now got hundreds of customers in APM. So we're tracking really well from the standpoint of our ambitions there. A big piece of this also comes back to just our approach to product road map and philosophy. When we enter a space, what we'll do is very quickly, we'll put a core amount of functionality out there that users can stop to derive value from and then iterate on that and improve on that really in the open over the course of the next several releases. And we do our releases roughly once every couple of months on average. And APM is a great example of that. When we joined forces with Opbeat, we put the technology in the open. And then we iterated on that over the course of many releases and kept building capabilities in APM. And so to somebody that's less trained or may not think about these things routinely, it'll seem like, oh, this is a technology that's still -- that's used for certain use cases or is more developer friendly than others. But over time, what happens is it becomes much easier to use, fully featured, and you can essentially have out-of-the-box capabilities on that. And that's what we did with logging. That's where we are headed with Security. That's what we've done with APM. So I think all of those things work quite nicely. But broadly speaking, the way I'd characterize it is we continue to execute really well against these competitors in the marketplace. And I think it will play out over the course of the next several quarters, and we feel really, really well about the way we are positioned. We feel pretty good about that.

Great. I'm going to steal a question from somebody. Somebody who used to be an analyst with me in Goldman Sachs is now a CEO of a tech company. We asked, so what is the -- what is the -- one important question to ask the management team. The question was -- but of course, you're the first one to get this question. Incredible. Incredible. What are you as the management team spending the most of your time on?

Yes. It is actually a really good question. It gives you a sense of priorities because actions express priorities more than anything else. As a team, we're really focused on continuing to elevate in a few different areas, right? One is around the idea of driving solutions adoption from the standpoint of our history and where we've come from as a set of capabilities that we would enable -- where we enabled different use cases based on search technology to shift towards solutions. And that's a pretty significant shift for us as a company overall. The second part of that, which goes hand in hand with that, is what we refer to as our driving our bottom-up motion where it's -- while we need to continue to fuel the engine that's made us so successful with the developer adoption and continuing to grow from the bottom up, we also need to continue to call higher within customer accounts, cross-sell, upsell, drive multiple solutions, drive that higher selling motion with different buying centers and continue to move further up towards -- from departmental levels to divisional levels to group level to CXOs and build those capabilities over time in sort of a traditional enterprise selling motion. And I think we've had pretty good success on that so far, and you can see that in terms of some of the customer metrics that we put out, which at the end of last fiscal year, we talked about more than 50 customers that had ACV more than $1 million. And so I think that's actually been working quite nicely for us. And that's a big part of where Paul and Justin, Paul being relatively new to the company, that's where a lot of their attention and focus is going as well. And I think the third piece is continuing to accelerate our success in the cloud where as more workloads are shifted to the cloud and as we continue to execute really well in terms of our offerings as well as doubling down on our partnerships with Google and Microsoft and driving more demand towards the cloud, we've seen cloud increase in mix, which is now a bit more than -- it's roughly 1/4 of the business. And you compare that to where it was a year ago or 2 years ago, it was a much smaller percentage of the overall business. So those are the areas where we are focused and continuing to drive for the future.

Got it. Got it. So that was a good question.

Yes.

And that is a good answer. Yes. You hired quite a few senior executives. You have a head of sales. You just mentioned Chief Product Officer and Chief Marketing Officer. How are they coming along? And what are you looking to get out of them that you couldn't get with the predecessors?

Yes. So they're all coming along really well. Sally Jenkins joined us as our Chief Marketing Officer a year ago, in January last year. Paul Appleby joined us at the end of August as the President of Field Operations. And then just last week, Ash Kulkarni joined as our Chief Product Officer. I think in all of these cases, as I described where we are going as a company and where we come from and where we are going, I think all of their predecessors did a fantastic job laying a really good foundation and helping us grow from 0 to 500 plus in a very, very short period of time. Speaking from the standpoint of life of software companies, right, in the span of less than 10 years, 8, 9 years, we've grown to be such a successful company. And I think they all did a pretty remarkable job with that. So in every case, it was really about adding to the bench, increasing the depth of talent that we've got as we scale to be an even bigger company in the future, a multibillion-dollar company at some point. And it was really with that goal in mind. And if I think about what each of them have done, they've -- Sally has been here a year, and she's helped elevate the stature of the whole marketing team. It's not that there was anything that was wrong or broken with marketing earlier. It's just that the whole team is now performing at an even higher level, which has been really refreshing to see. With Paul joining, it was much more about thinking about the long-term evolution that I talked about in terms of those selling motions, thinking more about more sophisticated models around segmentation and coverage and the evolution from a long-term perspective. It was not about near-term execution. Justin and the team do a remarkable job of that every 90 days. And Justin has been doing that for the last 8 years or so. So I think that actually worked out quite nicely. And then with respect to Ash, it was, again, just continuing to add more scale on the team. Kevin Kluge, who used to run our engineering organization prior to this, he's still at the company. He's actually got a very wide set of responsibilities within the engineering organization. He owns our entire Elastic Stack, which if you think about it is the crown jewels of Elastic as well as our infosec and all of our support organization and so forth. So he's still here. And Ash's responsibilities are just broader from the standpoint of overall product and engineering. And it's just a question of continuing to build bench strength. So if anything, those additions from a team perspective are just reflective of the market opportunity that we see and just another form of investments towards capturing that growth in the future.

Got it. And on market opportunity, the Security pillar got a big boost through the Endgame acquisition. How is that coming along? It's been more than a year, I would assume, since Endgame closed.

Yes, about 15 months.

15 months. Okay.

Yes. Yes. We closed in October of 2019, and it's actually coming along really well. So if I think about just our overall evolution in Security, it's reflective of how we entered many of the other areas where, as I said earlier, very often, customers would start to use us for use cases even before we formally decided we wanted to have a product in that area. And that's what happened with Security as well. People started to use us in security use cases, leveraging Elastic as a SIEM in many instances. And that's what led us to eventually building our own SIEM product. And then back in October of 2019, we acquired Endgame and joined forces with them. And as an endpoint security company, our goal was to fold endpoints into the Elastic Stack because at the end of the day, the value that we see is in the data. It's where you derive insights. And bringing that data into Elastic Search and making sure that there is -- and if there's data coming in from multiple sources there, you can derive that much richer outcome from the standpoint of security. So with that goal in mind, we acquired Endgame mainly for the technology, not because we wanted to go up and sell endpoints on a stand-alone basis. So we stopped selling endpoints and folded that into the Elastic Stack itself. And our endpoints are just included in the Enterprise subscription. If you get a subscription at the Enterprise level, you can have the endpoints -- all the endpoints you want because we care about that data being brought into Elasticsearch. So that's worked really well. The story resonated really well with customers. We've enjoyed pretty strong success with that offering in the marketplace. It's still relatively early days, as I mentioned, but it's been really encouraging. And you probably got a glimpse of that back in August of this past year, in August 2020 when we announced our first major milestone towards comprehensive endpoint security integrated directly into the Elastic Stack. We launched the endpoint agent, which then -- which combines endpoint and logging and metrics data, all shipped from a single agent. So you get a sense of where we are going with that. And over time, we will keep adding more capabilities from that perspective as well. So it's been -- it's worked remarkably well, and we're quite pleased with the progress there.

Got it. Got it. Got it. How is Search looking? Do we still -- what kind of runway do we still have for your core product that made you Elastic?

Yes. It's as exciting as the initial days, I would say. Search for us includes Site Search, App Search as well as Workplace Search, and we are seeing strong growth in all with -- particularly with e-commerce and more business moving online on the Site Search and App Search side. And then on Workplace Search, we launched a new product there last year, where we now can connect to multiple sources of data. Your enterprise -- think about the enterprise data that you have. It no longer sits within the 4 walls of the enterprise. So much of it is sitting with other SaaS providers out there. And so the ability to search across all those SaaS assets with a single search box, you can search across Salesforce and GitHub and ServiceNow or SharePoint and Microsoft 365 and Google Drive and Gmail, search across all of that with a single search box with enterprise features like single sign-on and document-level security. So it takes Enterprise Search to a whole new level. And when you think about that, the opportunity set around that and the fact that there's no one else that can actually do that, that becomes pretty compelling. So we're quite pleased with the traction on that front. It's a complex set of engineering problems to solve that our team has done a remarkable job with. And we've seen really strong customer conversations around that. So I think there's significant opportunity there, too.

Got it. I have a question from the [ corner ] here. How do you define the -- do you see it as a unified buyer in an IT department? Or is it a buyer in DevOps and Search and Security and Observability?

Yes. I think that actually can vary quite a bit based on the nature of the customer and how large they are, right? And you'll have larger organizations that have much larger teams, where you will have much more specialization. And in many of those instances, you'll see centralized or decentralized model. Some companies are completely top-down in terms of their architectural preferences, in terms of their security posture. Other companies have much more of a federated model. Some companies are much more decentralized. Companies have internal service delivery organizations. Very often, we'll engage with a team that is responsible for providing Elastic as a service internally to their various divisions and groups. So I think we see a variety of different models. But what's true is that certain groups, like think about security, the whole posture of security, the vernacular, the language, their concerns, their [ hot patterns ], their issues have tended to be very different from the infrastructure teams or the applications teams in the past. And I think over time, you'll start to see that come together. Initially, we saw that between development and operations and the whole DevOps movement. And increasingly, you start to see security become part of that as well because if you're developing it and operating it, you're best positioned to secure it as well. And while you observe, why not protect? And we just made every developer, every user of Elastic a threat hunter as well when we included SIEM and endpoints into the Elastic Stack. So I think that's how we see it evolving. And clearly, in smaller organizations, it's much more centralized because they don't have the breadth of the resources.

Got it. The unified pricing model, how much of an advantage is that for Elastic? Do you run into situations where the customer says, "This is -- everything else being equal, I'm going with you guys because I like the pricing"?

Yes. It's pretty amazing because when you step back and think about what customers want, right, at the end of the day, customers don't mind paying you more as long as they get more value for what they are paying. And what better way to do that than to have a pricing model that is uniform across the different kinds of resources that are consumed and directly ties to the value that a customer is actually getting based on their resource footprint. So in many of these -- I think about each of these pillars, right now in logging traditionally, that was ingest-based pricing. And we know that -- we know that, that is not a good indication of how a customer is getting value. You go home on a Friday afternoon, you come back on a Monday morning, just because you've got more data flowing through your pipes doesn't mean you've got any more business value out of that solution. So why pay more for that? The same for -- think about it in terms of hosts and agents for APM and for infrastructure. In the context of containers and micro services, what does the host even mean when you've got an application that can be running across literally thousands of micro services across thousands of containers is highly disaggregated. All can be spun up and spun down based on the need for that application and those containers and micro services gets spun up and spun down. And so customers were generally dissatisfied with those pricing models. And I think a number of our competitors see it, which is why they are trying to evolve their pricing models, but they've also got the legacy of where they have come from. So it's really hard to truly change. But from our perspective, the resource-based pricing model and the fact that it doesn't matter whether you're trying to observe, analyze logs or manage APM data or monitor your infrastructure, it's all the same. By the way, if you're trying to secure your infrastructure, it's still the same. As long as the data is in Elasticsearch, you pay for the data. And points are free. They are included with the Enterprise subscription. No longer needed. So that becomes very liberating. Now from the standpoint of a customer that is used to thinking about the old way because that's the way they always bought and they are trying to figure out what does this really mean for me, we've got many, many easy ways in which they can on-ramp on to that, right? Maybe they will start with a certain product, and they'll use us only for logging or maybe they'll use us only for APM and then extend into others. Or alternatively, just start a cloud trial, which is free for a couple of weeks, and then swipe your credit card and you can spend as little as a few hundred dollars a month, if you want, just to get a sense of what that looks like and what the pricing model feels like to you. And once you're convinced, then you'll continue to scale. And that's the strength of the land and expand motion that we have as well. So all of that, I think, makes for a very strong combination in terms of setting us apart from a competitive standpoint.

got it. We have time left for maybe one last question. I want to ask you the 2-letter word question. AWS, Elasticsearch, the open-source version of AWS that they created a fork with and try to compete with these guys, running it on their service. That's been a debate for quite some time. What's the latest thinking on that offering as potentially a competitor to you guys?

Yes. That's a lot longer than a quick question. But the headlines are -- when we started out a few years ago to widen the competitive moat by introducing proprietary features that are free, and so AWS can't offer those because they are proprietary to us. I think that strategy has worked really well for us. And it's allowed us to create competitive differentiation. You see the strength in our SaaS growth numbers, and it's worked really well. AWS, it was not technically speaking of fork with open distro, but they tried to fork -- effectively open a fork with Open Distro. And when you've got a SaaS behemoth like AWS or an IaaS behemoth like them and a company like Elastic forces them to create a downloadable product, you can imagine how different it was from the standpoint of getting the 800-pound gorilla to do something that is so [ counted ] to its DNA. So that's just a reflection of the fact that our strategy has worked quite nicely. And in terms of evolution, I think we are continuing to see the strength on the SaaS side in our business, and we continue to expect that SaaS will grow even more strongly and faster than the rest of our business.

Got it. I think we've -- it's perfect. It's 02:50. That's the number we're supposed to wrap up. Thank you very much. It was exactly a year back when we came by your office. And lo and behold, the world has changed. We were -- it's a virtual world, but truly appreciate our dialogue and truly appreciate your investment in the Goldman platform. And to our clients who took time to listen to this, especially people on the East Coast and some of you that are probably dialing in from Europe or getting on the Internet from Europe, thank you so much for your patience. It's been a terrific, terrific day. And we're going to wrap it up with one last presentation, which happens in about 8 minutes from now. That will be Marc Benioff. So with that, Janesh, thank you very much once again. Say hi to Shay from my end.

Will do. And thanks again for hosting us, Kash.

Absolutely. True pleasure. Have a lovely day. And all the best for 2021.

Take care. There you go. Thank you. Bye.