Telemetry data management startup Sawmills.AI Ltd. says it’s hoping to help enterprises shave millions of dollars off their observability software bills after raising a fair few million itself.

Today it announced it’s closing on a “highly oversubscribed” $10 million seed funding round led by Team8, with participation from Mayfield and Alumni Ventures. In addition, Sawmills also announced the general availability of its flagship telemetry data explorer tool today, which is built on the open-source OpenTelemetry Collector project and enhanced with sophisticated artificial intelligence capabilities.

The startup says its platform provides companies with a way to automate the management of data that flows from software applications and services to their observability tools, so it can reduce the often staggering cost of using those products.

Most enterprises understand the need for observability, as it is critical for them to maintain reliable applications without unexpected downtime. But they’re a lot less keen on the exponentially increasing costs associated with using such tools.

According to Sawmills, the average company now spends almost $2 million annually on observability, and many report experiencing unexpected increases in those costs each month. In one famous case in 2022, the cryptocurrency exchange Coinbase Inc. was slapped with an eye-watering $65 million bill by Datadog Inc. for just one year of service.

Sawmills Chief Executive Ronit Belson said the reason for these excessive costs is that observability tools process an awful lot of unnecessary data that doesn’t provide useful insights. The standard business model for observability firms is to charge customers based on the data their tools consume.

“In our conversations with VPs of engineering at leading companies, they consistently tell us that up to 90% of their observability data is useless, yet they’re still paying to collect, process and store all of it,” he said.

Another challenge is that mistakes can lead to unexpected spikes in these costs. Belson related a story from one customer that explained how a single mistake from a developer resulted in additional fees of more than $250,000 in just one day.

“Engineering teams need intelligent telemetry data management that not only improves data quality but also prevents costly mistakes before they happen,” Belson said. “Sawmills automatically identifies optimization opportunities and implements guardrails to protect against unexpected cost spikes while ensuring you capture the data that matters.”

Another problem Sawmills hopes to solve pertains to the quality of observability data, which is often rendered useless because of missing data points, inconsistent formats and duplication. This low-quality data drives up costs and makes root cause analysis far more difficult, Belson pointed out. “Observability data has become the second-largest expense after cloud costs for most companies,” he added.

Sawmills says it solves these problems by implementing more intelligent data management. Its platform leverages OpenTelemetry Collector to gather telemetry data, and then it uses its proprietary AI algorithms to analyze it, automatically identifying opportunities to reduce spending and improve the quality of that data.

Belson explains that the company’s intelligent engine can process logs, metrics and traces in real time in order to detect problems such as missing data points, duplicate data and inconsistent data formats. It automatically fixes and enriches this information before sending it to the observability system. In addition, it implements “smart sampling” policies that give companies full control over their observability data streams, safeguarding against availability issues.

After processing all of this data, Sawmills’ AI algorithms will make various recommendations that can be used to create automated policies to prevent unexpected cost spikes. By carefully managing telemetry data in this way and sending it to more cost-effective storage resources, Sawmills can reduce the amount of information that needs to be processed by observability tools and improve its quality. The result is lower costs and more useful insights.

Andy Thurai, principal analyst and vice president at Constellation Research Inc. said Sawmills’ observations about the rising costs of observability are very real, due to a combination of the shift to a consumption-based model and the fact that DevOps and site reliability engineers have a tendency to carelessly infuse data into these platforms.

“Most enterprises have been getting a sticker shock in terms of overage bills,” Thurai said. “A lot of companies are moving towards sanitary SRE and observability practices, where they define best practices ahead of time to avoid these shocks, but cost overage remains a very real thing for many firms that don’t employ these methods.”

The strength of Sawmills’ technology derives from its foundation, the OpenTelemetry Collector project, which makes it possible to process data outside of the observability platform, Thurai said. “It allows companies to decide what to send to the observability platform and what can be sent to either cold storage or dashboards,” he pointed out.

According to Thurai, the main differentiator for Sawmills is it makes OpenTelemetry easier to use. “OpenTelemetry is not easy to implement, requiring a certain expertise that is hard to come by for most companies,” he said.

Sawmills faces a lot of competition in its efforts to combat rising observability costs, with rivals including Cribl.io Inc. and other observability data pipeline startups like SigNoz Inc., Kloudfuse Inc. and Edge Delta Inc. However, its biggest competitors are the observability companies themselves, Thurai said, with the likes of Datadog, New Relic Inc., Elastic N.V. and Cisco Systems Inc.’s Splunk all embracing OpenTelemetry Collector data. 

Still, Sawmills claims it has been making progress in this competitive market. It cites the example of the Indian online travel agency Via.com Ltd., which has been using Sawmill’s tools for a while and said it has benefited from “streamlined costs, improve observability resource allocation and enhance data governance.”

Team8 Managing Partner Liran Grinberg stressed that telemetry data management is fast emerging as a critical new category for enterprise cloud infrastructure.

“The Sawmills team has a deep understanding of the problem and a comprehensive vision that perfectly positions them to own this new category,” he said. “This isn’t just about cost reduction. We believe Samills’ approach to intelligent telemetry data management will massively improve observability and become essential infrastructure for modern enterprises.”

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