On January 8, 2026, Snowflake announced its acquisition of Observe, a San Mateo-based observability platform. The deal targets the "AI SRE" (Site Reliability Engineer) market, positioning Snowflake to capture machine data volumes that have historically been locked in proprietary vendor silos. But the real story isn't the acquisition itself—it's whether Snowflake can actually execute on a fundamentally different architecture than every other observability vendor.
Who Observe Actually Is
Observe was founded in 2017 by Jacob Leverich, Jonathan Trevor, and Ang Li. The company raised nearly $500 million in venture capital, including a significant Series C in July 2025. CEO Jeremy Burton joined from Dell and Oracle, which gave the startup credibility with enterprise IT buyers. The fact that Sutter Hill Ventures—which also backed Snowflake—was an early investor matters: it signals that venture firms see architectural coherence in the combination.
The Architecture Gamble
Unlike Datadog or Splunk, Observe was built on top of Snowflake from day one. This means customers don't export telemetry data to a separate vendor black box; instead, logs, metrics, and traces live in Snowflake's cloud storage. The theory is elegant: separating storage from compute eliminates the cost penalties of traditional observability vendors, which charge by data volume and retention.
In practice, this creates a dependency. Customers must already be using Snowflake (or commit to it). For enterprises already embedded in Datadog, this architecture offers no advantage—switching costs are too high. Snowflake is betting that new workloads and greenfield deployments will find this model attractive.
image: Snowflake Press Release The Economics Question
Snowflake claims the combined platform can ingest and retain "100% of telemetry data" without traditional indexing penalties. That's theoretically true. But "100% retention" only matters if you can query it fast enough to be useful. The stated goal is resolving production issues "up to 10x faster," but this claim comes from Observe's marketing, not independent benchmarks. Post-acquisition, these claims will face scrutiny.
The real value prop is consolidation: if a CIO is already spending millions on Snowflake, adding observability workloads at the margin becomes cheaper than maintaining a separate vendor relationship. This is a powerful argument in contract renewal conversations, but it only works if Observe's feature set reaches parity with Datadog's APM (Application Performance Monitoring) capabilities—which it hasn't yet.
The Competitive Reality
Datadog, Splunk (now Cisco), and Dynatrace have spent years building specialized UX and feature depth that Observe is still maturing. These incumbents own massive installed bases and are not sitting idle. Datadog has already expanded beyond metrics into CI/CD and security. Splunk has pricing flexibility that Snowflake may not match if it insists on leveraging its own infrastructure.
Snowflake's advantage is data gravity: if an organization treats observability as a data problem rather than a specialized tool, the math favors consolidation. But this is a bet on a different category entirely. It's not that Snowflake will out-feature Datadog; it's that some buyers will choose cheaper, longer retention over specialized tooling.
The Unspoken Risks
Integration timelines for billion-dollar deals are notoriously optimistic. Snowflake must convince Observe's existing customers that the roadmap justifies staying, while simultaneously building the feature parity needed to compete in the mid-market. If either falters, churn could be significant.
Additionally, Snowflake's pricing model is built on consumption (compute credits). Observability workloads are unpredictable—a production incident can spike compute usage dramatically. If customers perceive observability as a cost center with variable billing, adoption will slow. Incumbents offer fixed-price observability tiers, which CIOs often prefer for budgeting.
Source List
- Snowflake Official Press Release, "Snowflake Announces Acquisition of Observe," January 8, 2026.
- Observe Inc. Funding Data (Nearly $500M raised), Market Reports, 2025.
- Market Analysis on IT Operations & Observability Trends, 2025-2026.
Disclaimer: This blog post reflects my personal views only. AI tools may have been used for brevity, structure, or research support. Please independently verify any information before relying on it. This content does not represent the views of my employer, Infotech.com.
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