Cloudflare (NET) – M&A – April 06, 2024

Third-Party Content. Provided for informational purposes only. Not investment advice or a recommendation to buy or sell any security. See disclosure here.

Cloudflare (NET) – M&A – April 06, 2024

Cloudflare announced its intention to acquire an observability platform called Baselime. Observability simply refers to the practice of monitoring an entire software ecosystem to track issues, vulnerabilities and performance. This category can be more neatly split into 3 smaller buckets: infrastructure monitoring, log management and Application Performance Monitoring (APM). Other players within this niche include the hyper-scalers, Splunk, Elastic, CrowdStrike (through its Humio acquisition) and many more. 

Baselime’s observability offers precise data matching and surfacing thanks to userID-tagged querying and related context. It also offers granular data categorization to better understand your data, apps and ecosystem. That’s table stakes at this point within observability. Baselime will also “embed its native OpenTelemetry” software into Cloudflare’s runtime software environment as part of this combination. What the heck does that mean? OpenTelemetry, in Baselime’s view, as definitions differ a bit among companies, “provides a common set of tools, APIs and software development kits” for developers creating apps. The common tools more naturally integrate and work with each other to create a more open and larger base of relevant signals to flag issues and improve interfaces. Extending this to runtime formats (so post-software package deployment), means developers will gain more flexibility and diminished disruption with app performance and hygiene perfection even after shipping a product.

Observability is a very natural use case extension for Cloudflare. If it’s handling your network’s performance and security, it makes sense to also let them handle log management and data observability. That will remove potential siloes and should improve cohesion/performance. Think about it… these new assets essentially give Cloudflare the ability to ingest, store and organize data in a more scalable manner. That scale means better algorithm seasoning to sharpen its security functions and to better contextualize network performance. Baselime unlocks usage of more training data and brings it closer to security and connectivity use cases. That’s valuable and something I think will make Cloudflare’s entire product suite more effective. And in a truly win-win fashion, Baselime’s observability prowess will get a large injection of data from Net’s large data and developer bases.

But that’s not the only perk. The theme of software earnings in 2023 was vendor consolidation. This gives Cloudflare another arrow in its quiver for driving that consolidation and threading that rare needle of cutting cost while also augmenting efficacy. The terms of the purchase were not shared, but Baselime is very small. The price tag should be low in gross dollar terms and the added use cases for Cloudflare are compelling.

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