What happens to Observability If Code is AI-Generated? The Potential for AI in DevOps, with Datadog Co-founder/CEO Olivier Pomel

Olivier Pomel, co-founder and CEO of Datadog, the leading observability company, discusses the company’s founding story, early product sequencing, platform strategy, and acquisitions. Olivier also shares his thoughts on their more recent expansion into security, and why he’s bullish on the potential for AI in DevOps. ** No Priors is taking a summer break! The podcast will be back with new episodes in three weeks. Join us on July 20th for a conversation with Devi Parikh, Research Director in Generative AI at Meta. ** No Priors is now on YouTube! Subscribe to the channel on YouTube and like this episode. Show Links: Nov 22, 2022: Product-led Growth: Founder 1-on-1 with Datadog and Aiven - Olivier Pomel & Oskari Saarenmaa May 25, 2022: Datadog, Inc. (DDOG) CEO Olivier Pomel Presents at J. P. Morgan's 50th Annual Global Technology, Media and Communications Conference Jan 6, 2021: Datadog CEO Olivier Pomel on the cloud computing outlook Datadog’s Official Website Olivier Pomel LinkedIn Sign up for new podcasts every week. Email feedback to [email protected] Follow us on Twitter: @NoPriorsPod | @Saranormous | @EladGil | @Oliveur Show Notes: [00:10] - DevOps and AI Potential [06:54] - Datadog and Generative AI [20:40] - Datadog's Acquisition and Expansion Strategy [31:46] - LLMs in Automation and Precision [42:35] - Datadog's Customer Value and Growth

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:05Sarah Guo?

  Welcome to No Priors. Today, we're speaking with Olivier Pomel, the co-founder and CEO of Datadog, the company at the forefront of the DevOps revolution. Datadog is a leading observability and security platform for cloud applications. Its execution and ambition has impressed me for years, especially since learning more about the company after it acquired Screen in 2021, a security startup I was the board member for. I'm excited to be talking about the potential for AI in DevOps. Olivier, welcome to No Priors.

• 0:32Speaker 01

  Thanks for having me.

• 0:34Sarah Guo?

  So let's start with a little bit of personal background. You're French. You've been in the US working on startups since 99. How did you start to think about starting a company, and Datadog in particular?

• 0:46Speaker 01

  Yes, so yes, I'm from France. And yes, nobody's perfect. I am an engineer also. I got into computers largely through computer graphics. And when I was a kid, I used to follow the demo scene in Europe, which was all about 3D and doing interesting things in real time. This led me later on to be one of the first authors of VLC, the media player, who I think is mostly used for viewing illegally downloaded videos. And I should say, most of the people who made that successful came in after me, picked up the project and did something fantastic with it after I left for the US. And then moved to the US to work out of all places for IBM Research in Upstate New York. And ended up, no, I thought I would stay six months,

• 1:30Speaker 01

  and I've been here since 1999. So it's been a while. I worked for a number of startups through the, I would say, the dot com, the tail end of the dot com boom, arrived right in time for the bust. And after that, you know, worked for, I think, eight years for an education software company, education startup, that was doing SaaS for schools based in New York. And that's when I was at this company that I spent quite a bit of time with a person who was my co-founder, Datadog. And that's where we had the idea to stop Datadog, basically, which was, I used to run the Dev team there, and he used to run the Ops team. And we hired everyone on our teams. We tried hard not to hire jerks. We were very good friends. You know, we've known each other

• 2:14Speaker 01

  since the IBM days, basically. And we still ended up, you know, with Dev and Ops setting each other, people pointing fingers at each other all day long, big fights. So the starting point for Datadog was not monitoring, uh, it was not even the cloud initially. It was, let's get Dev and Ops on the same page. Uh, let's give them a platform, some place you can work together, see the world the same way.

• 2:34Sarah Guo?

  Yeah, that's actually quite different than thinking of it as like a, uh, like a ticketing relationship, right? A quite siloed relationship, um, between the two areas. Because I think most people assume that Datadog comes from a place that was more like metrics, or like, we knew the cloud was coming. And I'm sure, you know, both these things are true, but it's interesting that the, the core starting point is really around like Dev and Ops collaboration. You are, I think, pretty long NYC and have been challenged on like building in for an NYC as I think to even attempt before. Like, tell me about your original thinking on that, or if it even crossed your mind.

• 3:08Speaker 01

  Uh, well, I mean, so I, I, I stayed in the US because I loved NYC, you know, that's why I, I ended up staying here. I love the energy, I love the, uh, the diversity of the city. I also met my wife in NYC and she's also not French, you know, so it's a, she's also not American, you know, so it also made sense for us to stay, to stay in the city. Uh, so when we started, it, my co-founder, right, it makes total, it made total sense to, uh, to start a company in New York. We also knew fantastic engineers we could hire in New York. So it, it was very obvious on that same point. Uh, I would say it was less obvious when we started fundraising, uh, because we didn't come from, you know, systems management or observability or anything like that. Uh, and we were based in New York, which was not seen as a great place to start a infrastructure company at the time. Um, so I would say for

• 3:51Speaker 01

  most investors, especially barrier investors, I think it was considered as a, as some form of mental impairment, you know, to stay in New York at the time. It made it harder to fundraise. Uh, and I think as a, as a result, uh, it made us more successful because we were so scared of getting it wrong and so scared of not being able to fund the company any further, that we really doubled down on building the right product, for one thing, but also, um, you know, we built a company that was fairly efficient from day one and, you know. Hover around profitability throughout its whole existence, pretty much. And I think, you know, in the long run, it's been an advantage, like everything else. If it's a, if everything has a long run or long-term advantage, it turns out to be very difficult in the short term typically.

• 4:31Speaker 02

  How else do you think New York has benefited you? Because I feel like now it's, it's kind of an obvious place to start a company. And to your point, when you first got started, it was very different. It feels like there was always some good talent pools there. I know Google had a giant office there and Meta set up one and, you know, it was really sort of flourishing over the last decade. And now it definitely feels like a very strong standalone ecosystem. But are there other aspects of either recruiting or other things that, that you really benefited from being in New York?

• 4:55Speaker 01

  Yeah, I would say there's really two things. The first one is from a customer perspective, we're sort of out of the echo chamber of the Bay Area, which makes it easier, I would say, to latch on to what really matters to customers. And what's not just, you know, fantastic idea, you told three people and then repeated three others and then it came back to you and it sounds even better now. And there's a lot of companies of basically all many non-tech companies in New York, you can sell to and can get a good idea of what they need, basically. The second aspect I think that benefited us is that, so it's a bit more difficult to recruit in New York. There's less pure tech talent, there's less deep tech talent in New York than there is in the Bay Area, but the retention is a lot higher.

• 5:36Speaker 01

  So, you know, if you give people, you know, great responsibilities, interesting work, treat them well, they're going to stay with you for three, four, five years more, you know, which I think in the Bay Area is pretty much on the, you know, very high end of what you can expect. What we see from looking at data, we have data from, most of our customers are engineers and most of our users are engineers. And so, and we, we see basically when, when their individual accounts churn at our customers' organizations and we see that it's not rare for companies in the Bay Area to have, you know, engineers churn every 18 month. We think it's, it's really hard to build a successful company that way. I think you, you do have to over invest if you want to do that.

• 6:17Sarah Guo?

  So one last background question before we ask you to talk just a little bit about Datadog today. Can you explain the name?

• 6:24Speaker 01

  So yeah, so it's interesting because the I'm not a dog person, my co-founder never had any dogs. In our previous company, we used to name production servers dogs and data dogs were production databases and data dog 17 was a horrible Oracle database that everybody lived in fear of that had to double in size every six months to support the growth of the business and that could not go down. So for us, it was a name of pain. It was the the old world. It was where we're coming from. It was name of pain. So we used it as a code name when we started the product and we actually we called it data 17. Everybody remembered data dog. So we kept it. We dropped the 17 so it wouldn't sound like a MySpace

• 7:09Speaker 01

  handle. And and you know, then we had a designer propose, you know, puppy as the as a logo among the sea of, you know, alpha, alpha dogs and things like that and hunting dogs. And I think that's, that's the smartest branding decision we've made was to keep the name and to keep the puppy.

• 7:25Speaker 02

  Love it. So data dog is clearly a leader in observability and security for cloud environments. You've had an enormous success. I think you're now approaching a $2 billion run rate, 26,000 customers. You're really mission critical to a variety of different folks who spend in some cases more than $10 million a year on you. But for the for those listeners that we have who may be a little bit less familiar, could you give us quick background on what data dog provides and almost like a data dog 101?

• 7:50Speaker 01

  Yeah, so what we do is we basically gather all the information they are they have together about the infrastructure our customers are running, the applications they're running, how these applications are changing over time, what the developers are doing to it, who the users of these applications are using them, you know, what are they clicking on? What are they going next? What do the applications are logging? What they're telling about what they're doing themselves on the systems? So we cover everything end to end. Basically, we sell to engineers. So our customers are, I would say, the the folks who buy our product are typically the ops teams or dev ops teams in the company. And the the vast majority of the users are developers and engineers. And then some of our users are going to be product managers, they're going to be security engineers, they're going to be all of the

• 8:35Speaker 01

  other functions that gravitate around product development and product operations.

• 8:39Speaker 02

  How do you think about translating some of those products or areas into the generative AI or LLM world? I know that, you know, obviously, cloud spend is now 25% of IT, and there's been these really big shifts now in terms of adoption of AI, and it's very early, right? It's extremely early days, at least for this new wave of LLMs. Obviously, we've been using machine learning for 10, 20 years. How do you think about, you know, where observability and other aspects of your product go in this, in this sort of emerging new area?

• 9:07Speaker 01

  Yeah, so we find here quite exciting, actually. I mean, there's two parts to it. One part is the demand side, you know, so what's the, what's happening on the market, that is driving the use of, you know, compute and building more applications and things like that. And the other side is the, what we do on the solution side was a product and hope we can use the generative AI there. On the demand side, it's exciting at so many levels. You know, if you think of the, the highest level possible and the, what might happen in the long, the long run, we think that there's going to be so many more applications written by so many more people. It's going to improve productivity of engineers. And at a high level, you know, if you, if you imagine that one person is going to be 10 times more productive, it means that they're going to

• 9:52Speaker 01

  write 10 times more stuff, but they're also going to understand what they write 10 times less, just because they don't have the time to see in this and everything they do. And as a result, you know, we think it actually moves a lot or transfers a lot of the value from writing the software to then understanding it, securing it, running it, modifying it when it breaks, and things like that, which ends up being what we do. So we think, you know, for our industry, you know, it's great in general. From a workload perspective, we already see actually an explosion of the workloads in terms of providing AI services or consuming AI services, you know, so it's actually consumes a lot of infrastructure to train those models, to run them. So we're going to see, you know, a lot more of that. We also see a lot new, a lot of new technologies that are being used there.

• 10:37Speaker 01

  Uh, new components, the whole, this whole new stack that is emerging. Um, so you know, overall, it's, it's exciting at every single level. But to your earlier point though, it's a, uh, it's still very early. Um, so you know, it's hard to tell what actually is going to be the killer app, you know, for all of that. Um, you know, in six months, in a year, in two years. Uh, it's possible that some of the things we've seen with L L M's, you know, where, you know, all of a sudden, everything is a chatbot. Uh, it's possible that it's not the way people want to, uh, to eat, to, uh, interact with everything, you know, two years from now. You know, for example, you, when you start your car, you don't want to play 20 questions with it, you know, you just want to start it.

• 11:17Speaker 01

  Um, it's might be the same thing with a lot of the products that are today, starting to, uh, to implement, uh, L L M's. But what, what I think is pretty certain is that we're going to see an expansion of the use cases, an expansion of workloads. Uh, also maybe an acceleration of the transformations and whether there's visual transformation of cloud migration that are bringing all of that. You know, in, in, making all of that possible, you know, if you want to adopt A I. You, you actually, you have to have your data digitally. I mean, it's, it sounds obvious, but you know, it's not the case still for most companies. Um, and second, uh, you also have to, to be in the cloud, you know. Who else would you do it? Like if you tried to build everything on-prem today, you wouldn't even know what to buy because the technology is changing so fast. So I think it's accelerating all those trends, which is very exciting.

• 12:00Speaker 02

  I, I've definitely seen a lot of enterprise buyers sort of change their mind almost. On a monthly basis in terms of what they view as the primary components of the stack that they're using. And that could be the specific L L M they're using. Should they use a vector database or not? Like the, the whole set of components seem to be very rapidly morphing. And you mentioned earlier, you were sort of seeing this emergence of a new stack. Are there any specific components that? You'd like to call out or that you think, you know, are going to kind of stick? Or how do you kind of view the evolution of this area?

• 12:28Speaker 01

  So I would say it's extremely hard to know what's going to stick in the end. And for us, you know, it's actually a, it's a very new place for us to be, you know, we, as a company, we've been very good over the past 10 years at understanding which trends are picking up, what actually are going to be the winning platforms, you know, when the world went from the VMs to cloud instances, from cloud instances to containers, from containers to manage containers with Kubernetes, from that to serverless, like, we always had, you know, it always took, you know, a year, two years, three years for those technologies to to gain mass adoption. And it was very clear what the killer apps and what the winners were going to be.

• 13:11Speaker 01

  With generative AI, it's not the case. It's changing so fast. And everybody's exploring all of the various permutations of the, of the stack and all the various technologies so fast that it's really, really, really hard, you know, to tell what's going to stick. You can take a guess. I think the one thing that's been the most surprising was the speed at which the open source ecosystem has been innovating and building better and better models. Nobody has quite caught up to OpenAI yet in terms of what the frontier model is and the maximum level of performance you can get. But I think we've all been surprised by the, the amount of new, new technologies that has come out in the open source that does as good or even better on smaller, more identified use cases.

• 13:54Speaker 01

  And I think we should expect to see a lot more of that. So when we, when we look at our customers and what they're doing, and we do serve the largest providers of AI, but also the largest consumers, we think, we see that today, everybody is testing and prototyping with one of the the best API gated models, like typically the OpenAI ones, there are a few others. But everyone is also keeping in the back of their minds what they can still, what they can then bring in the house with an open source model, they train themselves and host themselves. And what part of the functionality they can break down to, to which one of those models. So I think we probably will have a very different picture, you know, a year, two years from now.

• 14:32Speaker 02

  Yeah, it definitely feels like the most sophisticated users are basically asking, when can they fall back on the cheapest possible solution? And when do they need to use the most advanced technology? And then how do they effectively route? A specific prompt or user action or something else against those. So it's very interesting to watch this evolve. I know that you all released an L L M E P I monitoring product. Is there a whole new observability and tooling stack needed for A I? And if so, what are the main components? And if not, you know?

• 14:58Speaker 01

  Yeah, well, there is first, there is the there is an observability stack needed period, right? So you you do need to fold that in because that's just one more component you're using. And as I said earlier, there's a whole new stack that's emerging, you know? So if you're going to use a frontier model from one of the big API gated providers, you need to monitor that. You need to understand what goes into it. You need to understand what it responds to you, whether it responds right or wrong, and how it interacts with the rest of your application. Then if you use a vector database or, you know, if you if you host a model yourself and you use specific computing infrastructure for that, and you have G P U's and things like that, you also need to instrument and observe all that and figure out how you can optimize all this.

• 15:38Speaker 01

  So there's a whole new set of components that that from this new stack that needs to be observed. And that can say can be observed pretty much the same way anything else can be observed, you know, which is with metrics, new traces and logs and that sort of stuff. I would say there's probably also a whole new set of use cases around, you know, what used to be called M L Ops or now might be called L M Ops. And that's a field, by the way, where we're only watching from afar over the past few years. And the reason for that was that, you know, we saw a hundred different companies do that. But few of them, you know, reaching true traction. And the reason for that was that the use cases for that were all over the map.

• 16:19Speaker 01

  And the users tended to be very small groups of data scientists that also prefer to build things themselves in a very bespoke way. So it was very difficult to actually come up with a product that would be widely applicable. And that would be, you know, also something you can sell to your customers. I think today it's changed quite a bit because L L M's are the killer app. Everybody is trying to use them. And the users, instead of just being a handful of data scientists in every company, end up being pretty much every single developer. And they are less interested about the building of the model themselves than they are about making use of it in an application in a way that is reliable, makes sense, and they can run day in and

• 17:01Speaker 01

  day out for their customers. So I think there's a whole new set of use cases around that that are very likely to emerge and be very valuable to those developers. And these have more to do about understanding what the model is doing, whether it is doing it right or wrong, how it is changing over time, and how the various changes to the application can improve or not improve them

• 17:24Speaker 02

  all. It seems like one of the things that has given Datadog enormous nimbleness is this unified platform that you've built, which is both a big advantage and a big investment. And, you know, my understanding is a pretty large proportion of the Datadog team is working on the platform right now. How do you think about resources being allocated towards the main platform, maintaining it versus new initiatives like AI and LLMs?

• 17:47Speaker 01

  Yeah, so the rule of thumb for us is about half the team is on the platform. And but that relates to what we do, right? We sell a unified platform. So internally, you know, as I said, half is on the platform, the other half is more on the product side, like specific use cases. But even the way we organize those use cases, those teams that work on the use cases, tend to be more focused on problems that tend to be forward looking on where the market's going. Whereas what we sell to our customers tends to be more aligned to categories that tend to be more backward looking, which is what people are used to buying stuff. And that's very important. You know, when you talk to customers, in our space, like there's like 12, 15, 20 different categories, all with interesting acronyms, and they correspond to things that customers have been buying for, you know, 10, 15,

• 18:32Speaker 01

  20 years. And that's how they understand the market. So we sell into that while at the same time delivering everything as part of a unified platform that is itself shaped towards more what we think the world is going to be. So it's very possible, even likely, that five or 10 years from now, our SKUs or our products have changed drastically because they correspond to the evolution of the market as opposed to being Pinned into very specific and static definitions of categories. An example of that being observability is emerging as one big super category that really encompasses what used to be infrastructure monitoring, application performance monitoring and log management. And we still sell those three as different SKUs today. But I think it's very likely that, you know,

• 19:15Speaker 01

  five or 10 years from now, you don't even think of them as being separate categories anymore. Like they really become part of one, you know, super integrated category. I would say there's a specific cost, you know, when it comes to maintaining a unified platform, you know, which is that we also do some M and A. Uh, and we acquire companies such as, you know, Screen, the company Saa was on the board of and gracefully signed the order to sell the company. But when we do so, the first thing we do is we actually replatform the companies who've acquired. So we spend the first year, really, post-acquisition, rebuilding everything that the company had built on top of a unified platform. So it's an extra cost. But again, what we deliver to our customers is end-to-end integration,

• 19:59Speaker 01

  uh, bringing everybody into the same conversation, into the same space, the same place, more use cases, more people, more different teams into the same place. And we see it as a necessary part of maintaining or differentiation there.

• 20:10Sarah Guo?

  You've made a handful of other acquisitions to expand the product suite and I think the sort of talent group at Datadog. What else has made them successful? Because, you know, it seems to me that it has really like continued to drive like useful product innovation at Datadog, which is not always true with acquisitions.

• 20:31Speaker 01

  Yeah, I mean, as you know, the making an acquisition is easy. Like signing a piece of paper and wiring money is super easy. Anybody can do that. Uh, the problem is what happens next, you know? So now you've done it, now you have, you have to measure two things and make them work. I think, you know, in general, the way we approach acquisitions is they always correspond to a product areas we want to develop. And, you know, we're fairly ambitious, like we, there's a lot of different product areas we want to cover in the end, that span from observability to security to a number of other things. At the end of the day, we're ready to build them all, but if we can find some great companies to, you know, get us two or three years of a head start in a specific area, you know,

• 21:16Speaker 01

  we'll do it whenever we can. So we start with a very broad pipeline or very large funnel of companies. And then we, you know, we focus basically on the ones that are going to be fantastic fits for our post-acquisitions, meaning there are teams that want to build and entrepreneurs that can really take us to the next step there with the experience they've gained in a specific area. One thing we're very, very careful of is, so we select for entrepreneurs who want to stay and want to build, as opposed to entrepreneurs who are tired and want to sell out, you know. It's a fine reason to sell your company, it's not a great reason for us to buy, so, you know, that's what we're going to do. The other thing we do is, when we close the acquisition, but before we've closed,

• 22:00Speaker 01

  we have a very, very specific and very short fuse on the integration plan after that. So we have a plan, basically, that calls for shipping something together within three months of the acquisition, which is very short, because in acquisition, people celebrate a little bit, you know, and then they have to get oriented and new HR systems and whatnot. Three months is a very short time. We don't really care who gets shipped within three months, but we care that something gets shipped within three months. And what it does is that it forces everyone to find their way. It also makes it very easy for the acquired company to start showing value, which then builds trust. You know, the main issue you have when you acquire companies is, or the main risk, is

• 22:44Speaker 01

  that it's not that you waste the money of the acquisition, it's that you demoralize everybody else in the company, because they see this new company is being acquired and they don't understand the value, or they wonder, you know, why you would pay so new people a lot of money instead of paying the people you have a lot of money to do the same thing. And it's very, very important to show value very, very quickly for that. And we put a high emphasis on doing that. So far, we've done it well. You know, I'm still expecting us to make some mistakes someday, but so far it's worked out for us.

• 23:15Sarah Guo?

  I want to go back to something you were saying right around like calling, let's say, environmental technology changes well, like, you know, you progression from like VMs to containers to here we are with managed Kubernetes and such. But Datadog as a company has always been amazing to me because the the spectrum of things that you want to, you're ambitious to go after is very broad, right? Like, I was at Greylock investing in companies that were APM companies and, you know, logging companies and you have this platform advantage, but you also are still attacking like many different things, customer problems and different categories. Like, can you talk a little bit about how you organize that effort, like in your mind or as a leadership team and how you how you sequence it?

• 23:59Speaker 01

  Oh, so in terms of what we go after, you know, so first of all, it took us a very long time to go beyond our first product, you know, so we, I think we we spent the first six or seven years of the company on our first product. And the reason for that is it was really hard to catch up, you know, for with the demand for that product. We also realized after the fact that, you know, we were fairly lucky in terms of when we entered the market, like we had an opportunity to enter what's a sticky market, a market that's hard to displace because of the replatforming that came with the cloud, you know, so we could start with a smaller product and then expand to it as customers where themselves growing into the cloud, everybody was new into the cloud at the time. So we had to spend that time getting to the, I would say, the the minimum, you know, full product for infrastructure monitoring.

• 24:43Speaker 01

  After that, what has driven the expansion of the platform was really what we saw our customers build themselves, you know, so before we started building APM, we had our customers or we saw a number of our customers build a whole man's APM on top of that dog. We didn't have the primitives for it, you know, but our product is open ended enough that they could actually build and script around it and do all sorts of things. So we we saw it, it made perfect sense. If they, if if it made sense to them for them to build it and for us to be part of the of the solution there, we thought it would make sense for us to build it for them. So in great part, that's what guides the development of the of the platform. The first threshold was really to get from a single product company to having two or more products that were successful. It was not easy.

• 25:28Speaker 01

  Once we had done that, that's what gave us, for one thing, the confidence to take the company public because we understood we could grow it a lot for a very long time. But also it really opened us up to, you know, okay, let's let's look at what our customers are doing and with our products, what problems we can solve for them and use the secret weapon of the company, which is the surface of contact we have with customers, you know. We deployed on every single one of the servers they have because we start with infrastructure monitoring, so we deployed everywhere and we touch every single engineer. So we're used by everyone every day. And that's the first of contact is then what lets us expand, solve more problems for the customers and build more products.

• 26:09Sarah Guo?

  You guys have, I think, over 5,000 security customers now, but, you know, relative to the overall data log base for the security industry, it's still a newer effort. You know, I've been on boards of companies that sell to IT and security, but it is hard conventional wisdom is it's like quite different audiences, even if the, as you said, the surface area is there or it makes architectural sense to consolidate the tools because a lot of the data is the same. I I think, you know, the the world or the investor base might see this as a bigger jump than some of the monitoring products you guys have released before. What do you need to do as a business to succeed in security?

• 26:44Speaker 01

  Yeah, it's a great question and it's definitely, it is true that it is a bigger jump because we, you can, you can argue that most of the other new products we've released outside of security were part of the same larger category around observability, the users were the same, the buyers to a large extent were the same. With security, we get new types of users and new types of buyers.

• 27:04Speaker 01

  Our approach to it was that there's actually, there's been no shortage of security solutions today. They're all, I guess, tons of technology. It's typically sold very, very well in a top-down fashion to the CISO and everything. What it's not doing well is it's actually not producing great outcomes. Everybody's buying security software, nobody is more secure as a result. So our ambition there is to actually start by delivering better outcomes. And for that, we think we need actually a different approach. We think that if you if you if you sell a very sharp point solution to a CISO, which is how it's done today, you're not going to to have these great outcomes. On the flip side, if you rely on the large numbers of developers and operations engineers

• 27:48Speaker 01

  to personalize security and you deploy it everywhere on the infrastructure and in the application at every single layer, you have a chance of delivering better outcomes. You know, the analogy I would make I would make is that there are great medicines today for security, it's great technology, but for it to work, you need to inject it in every single one of your organs every day, and nobody's doing it. And I think the the way we intend to do it is, you know, we can deliver it to you in an IV and that's it. You know, you're going to have it always on and it's going to be fine. So again, it requires approaching the market fundamentally differently because we are building on usage and deployment, we are building on ubiquity, not building on great sales performance at the top level.

• 28:31Speaker 01

  It's possible that later on, we need to combine that with great sales performance at the top level because that's how it's done in large enterprises. But for now, our focus is really on getting to better better outcomes.

• 28:40Sarah Guo?

  I want to go back to sort of the AI opportunity for you guys, as a lot was touching on. So like, if you just take one sort of very naive example, like anomaly detection on logs, on metrics, on security data has existed for a really long time. You guys have this watchdog intelligence layer. I'm sure you're working on lots of interesting things with classical ML approaches in security as well. Like, how would you how would you rank like the AI opportunity within within your products in these different domains?

• 29:08Speaker 01

  So there are there are so many new doors that we can open. That's really exciting. One thing I would say is, you know, in general, we've been careful about not over-marketing the AI. And the reason for that is we think it's a it's very easy to over-market AI and it's very easy to disappoint customers with that. And that's the one thing I find a little bit worrying with the current AI explosion is that the expectations are are going completely wild, you know, in terms of what can be done with that. And I think, you know, there's going to be maybe a little bit of disillusionment after that, though I actually I'm a believer that we can deliver things that are that were impossible, you know, just a few years ago. So I don't think the old methods are going away. Because you you still need to do numerical reasoning on data streams.

• 29:54Speaker 01

  For example, you know, you mentioned watchdog, like watching every single metric all the time everywhere. For no statistical deviation. There are methods that work fantastically well for that. That only involve language or language models or transformers or any of that. I mean, it's possible that we see some of some new methods. Emerge using transformers because there's so much work being done on that today. But that's not yet the case. So I think those those methods are not going anywhere. Those methods are also a lot more precise than the what you get with large language models. You know, so I'll give you an example specifically for operations. If you talk to a customer and if you ask them, would you rather have the false positive?

• 30:36Speaker 01

  And you and you'll decide whether it's right or wrong, but the computer is going to bring up new situations for you. Or or false or or just nothing. If we're not sure, we won't tell you. Customers will all tell you, oh, give me the false positive, I'll decide. The reality is you send them two two false positives at night. The same week and they'll turn you off forever. So the reality is you need to be really, really precise. And with operational workflows like we do, you you're making judgments, you know, a thousand times a minute. You know, so if you're if you're wrong, you know, even two percent of the time. It becomes really painful really quickly. So you know, you need to set the bar really high and for that, those methods are not going away.

• 31:17Speaker 01

  Now, what's really interesting is that there's a number of new other other new doors that are open with L L M's. One of them is there's so much data that was off limits before that we can put to use now. Everything that's in knowledge bases and email threads and everything else. All of that actually can be used to put the information, the numerical information in context. Another way I've seen I've seen the the L L M's described online, which I thought was a very astute was. They're basically calculators on language. And you can actually use that really well. Actually, you can what you can do is. Structure or bring together metadata from many different places.

• 31:58Speaker 01

  Output from many different numerical models and use the the language models to combine that. Maybe with some other wikis you have internally and. This allows you to combine data in ways that were impossible before. And a lot of new intelligence is going to emerge out of that. Now, the challenge, of course, is you still need to be correct. And I think that's what we're working on right now. I give you one last example. We, we, so we obviously, we've been working on that quite a bit. And the first thing people do when they, they, they see an error in their production environments. And, and they have a chat G P T window open is they take the stack trace of their error. And they ask chat G P T what's wrong. Does it work?

• 32:41Speaker 01

  Well, one hundred percent of the time it says you, oh, I tell you, this is, this thing is wrong. Problem is, in more than a majority of the case, it is wrong. And it, there's a good reason for it. It's that it just can't know, because if you don't have the problem to the program state, you just can't know. What we found, though, is that if you combine that stack trace with the actual program state, you know, which is what are the variables and what were the things when, when it error up? You actually can get a very, very, very precise answer pretty much all of the time from the large language model. So I think the, at least in the short term, the magic is going to come from combining the language models with the other sources of data and the, I would say, the more traditional numerical models to bring new insights to, to our users.

• 33:27Speaker 02

  That makes a lot of sense. It seems like there's a real opportunity to build. And I'm sure it, it sounds like, you know, this is the first steps towards building almost like an A I S R E copilot. Or eventually a more automated solution that can really help not only surface different things, but also understand them in real time and, you know, provide an opinion on what, what, what a potential issue may be.

• 33:47Speaker 01

  That's, that's definitely, I think we are at the cusp of a maybe doing more automation than we could before. I would say on the cusp, you know, because we, we're still not there. Like there's still quite a bit of what needs to happen there. I would say the, the best test for that is even at places that are extremely uniform and have very large scales, such as, you know, the Googles of the world. The level of automation is still fairly low. It is there, it's increasing, but it's still fairly low. And you, and if you use the, the self-driving cars metaphor, like, you know, a Google is, is all highway, you know? So if that can be automated, like, most of the other companies out there cannot either, right? Because most other companies are like downtown Rome, you know? So it's a quite a bit more complicated.

• 34:29Speaker 02

  What do you think is missing, though? Do you think it's a technology issue? Or do you think it's just implementation? Because I feel like LLMs are so new, right? ChatGPT launched six months ago. And GPT-4 launched three months ago. So is it just new technology and people need to adapt to it? Or do you think it's other obstacles in terms of actually, you know, increased automation through the application of this technology?

• 34:49Speaker 01

  So for one thing, it's very hard, right? So many of the problems you need to solve, like if you think of a self-driving car, like, you know, everybody over the age of 15 can drive. With debugging production issues in a complex environment, you need a team of PhDs and, you know, it would take them time and they will disagree and, you know. So I think it's hard. That's one reason. That being said, I think a lot of it might be possible in the end. The biggest question, I think, not just for observability, but for everything else with LLMs is, is this the innovation we need? Or do we have, do we need another breakthrough on top of it to make it to the end? You know, so if I were to clarify, again, I love analogies, so I keep throwing them at you.

• 35:33Speaker 01

  But with LLMs, we have, we clearly have ignition. Like there's innovation everywhere, it's happening. We might have liftoff probably in the next year or so with real production use cases, because right now, most of the stuff is still not production. It's still demo ware and, you know, private beta and that sort of stuff. I think the question there is, do we need a second stage or not? I don't know. And I think that won't be clear for another maybe a couple of years as all those, this current wave of innovation reaches production. I would say, though, there's some use cases for which it's very clearly there. Like, for example, creativity, generating images, generating text. As humans, we're good enough for debugging what comes out of the machine.

• 36:16Speaker 01

  Like, you know, you generate an image and the dog has five legs. You immediately, you know, reroll the dice and, you know, you get to get something that works. I think when you, when you try and write code or debug an issue in production, like it's, when the system is wrong, it's less obvious. And so that's what we still need to work on.

• 36:33Speaker 02

  Yeah, makes sense. Are there any other near-term sort of productivity gains that you think are most likely to occur? Either for Datadog or customers in terms of this new type of AI, because I feel like to your point, there's a lot of forward-looking complexity in terms of some of these problems. And some of them may be the self-driving example in terms of you need more stuff to happen before you can actually solve it. And then separate from that, it seems like there's a set of problems or class of problems where this new technology actually is dramatically performant. If you look at notions incorporation of LLMs into how it's rethinking documents, or if you look at mid-journey and art creation, to your point on images, and the sub summation of teams that are generating clip art or marketing copy or other things like that. I'm just sort of curious, like, where do you think the nearest terms gains are for your own area are likely to come?

• 37:18Speaker 01

  Well, we see it already in everything that has to do with authoring, writing, drafting. I think it's there. It's already good enough. It hasn't dramatically changed anybody's processes just yet, but I think it's going to happen in the near term. We see, and all you see, and we'll see much more of an improvement when it comes to developer productivity. I think there's a whole class of development tasks that are becoming a lot easier with an AI advisor, like using a new API, for example, used to be painful. Now, it just takes a few minutes to ask the machine to show you how to do it. And that's a real immediate productivity gain there.

• 38:02Speaker 01

  I think there are some areas that will probably be completely rewritten by AI in terms of not just we can do different things, but also we'll stop doing things because it has become inefficient as everybody does them with AI. I'll give you an example, so email marketing and things like that. When you don't need a human to send an email anymore, you can send a million of them from a machine and everybody's doing it. That whole avenue and whole field might change quite drastically.

• 38:26Sarah Guo?

  You think we just killed the channel?

• 38:29Speaker 01

  It will change, it will have to take a different shape, I would say. Someone will have to get to the noise a different way.

• 38:37Sarah Guo?

  Super interesting, and I love the analogies. Okay, we're running out of time, so I want to ask a few questions on leadership to wrap up, if that's okay, because we have a lot of founders and CEOs who listen to the podcast, and Data Dog is a company that just keeps executing. The company delivered thirty percent revenue growth when, you know, a lot of people are slowing as they face a different macro environment. You guys released a cloud cost optimization product, so you're doing certain things that are very specific to the environment, or maybe they were in the works for a long time. What else are you changing about how you run business, if anything?

• 39:13Speaker 01

  So we're actually not changing who run business. So we've always run the business with the profitability in mind. So we've always looked at the margins, looked at building the system from the ground up in a way that was sustainable and efficient. We never actually built things top-down and thinking, well, we'll get it to work and then we'll optimize it. And the reason for that is we were scared initially that we wouldn't be able to finance the business. But also, we think it's really hard to shed bad habits. You know, once you start doing things in an efficient way, it's really hard to move away from that. We've definitely seen that around us in the industry. The one thing we're a bit more careful of is we're tuning our engine a little bit differently

• 39:57Speaker 01

  when it comes to understanding customer value and product-market fit. Because customers themselves are more careful about what they buy and how they buy and how much of it they buy. So we need to retune our sights a little bit, or adjust our sights a little bit, so we don't make the wrong decisions based on that. To the point I was making earlier, at the same time, we also need to move a lot faster in some areas, such as generative AI, just because the field itself is moving so fast, which is also causing us to message with teams internally a little bit differently. So we're telling teams, hey, I know you used to having, to be really good at filtering out the noise and taking, you know, three, four quarters to zeroing on the right use case. For generative AI, you can't actually do that. Because the noise is part of how it's being developed.

• 40:42Speaker 01

  So accept the fact that you might be wrong a little bit more, but we need to iterate over it with the rest of the market.

• 40:48Sarah Guo?

  Do you guys need new talent to go attack these areas, or does it change your view on talent at all?

• 40:54Speaker 01

  Not really. I think it's a, it, Tana is always about, you know, finding, so finding people who are entrepreneurial, who want to build, who want to grow, and who are going to prove themselves by making a whole array of the business just disappear. Like, you know, you find the best people just obliterate problem areas. You, yeah, black holes for problems, you send problems, they disappear. And that's how you know you can promote them. You can easily find them in organizations because you see all the work going to them. Like, work avoids people that are not performing, and it finds people that are fantastic. And so, following the work is a great way to find their performance.

• 41:35Sarah Guo?

  I want to ask one last question because I feel like Datadog has so many unique attributes as a company. Another, perhaps, sort of less obvious path that the company took was sort of many different customer segments, right? From sort of very small engineering teams to Fortune 100s. And, you know, my understanding is you guys have done that for quite a long time. You've grown up a little bit into the enterprise, as everyone does. How did you think about that, or why did it work for you?

• 42:01Speaker 01

  Well, I mean, the, look, the starting point was bring everybody on the same page. So, we focused on the humans. We focused on thinking, well, the humans, whether they're in Dev or in Ops, are wired the same. So, let's bring in the same page, on the same platform. And it turns out, the humans are also largely the same, whether they work for a tiny company or for a large multinational. I think it was made possible also by the fact that, in the cloud and open source generation, like, the tooling is the same for all companies. If you go back 15 years, if you were a startup, you were building on open source. And if you were a large company, you were buying whatever Oracle or Microsoft was selling, and, you know, building on top of that enterprisey platform.

• 42:44Speaker 01

  Today, everybody's building on the WOS as open source. It's the same components up and down the stack, so it's really possible to serve everyone. It's been good for us, you know, it's given us a lot of network effects that you wouldn't find in an enterprise software company otherwise, by giving us this very broad spectrum of customers.

• 43:07Speaker 01

  It's a great differentiator because it's really hard to replicate, you know, you can't just replicate the product, you have to replicate the company around it, which is hard, you know, from a competitive perspective. It also creates some complexities, you know, because as much as you serve, like the users are humans and they feel the same across the whole spectrum, commercially you don't deal the same way with individuals and with large enterprises, and it's hard for your messaging not to leak from one side to the other, you know. So one example of that is, I think, so recently there were some articles in the news about some of our customers that pay us tens of millions of dollars a year, and you have on the individual side, you have people who wonder, how is it possible to pay even tens of millions of dollars a year, whereas on the high end, obviously, like customers do

• 43:50Speaker 01

  that because it's commensurate to the infrastructure they have, and they do it because it saves them money in the end. So, you know, you do have this balancing act between the very, very long tail of users and the very high end of large enterprises.

• 44:05Sarah Guo?

  Awesome. Thanks so much for joining us on the podcast. This is great.

• 44:08Speaker 01

  Thank you so much. Thank you. This was fantastic. Thanks.