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Is the Traditional Observability Market Finally Collapsing into Data Clouds?
Snowflake plans to acquire Observe to integrate native observability into its Data Cloud, aiming to reduce data silos and lower monitoring costs.
1/21/2026
Key Highlights
The acquisition aims to consolidate monitoring and security data into a single platform.
Native observability within Snowflake seeks to eliminate the cost of moving data to external monitoring tools.
The deal reflects a broader trend of data warehouse providers moving into the application performance management space.
Observe was already architected on Snowflake, making this a natural evolution for the two companies.
The News
Snowflake has announced its intent to acquire Observe, a company focused on transforming how enterprises manage observability data. This move is designed to integrate deep monitoring capabilities directly into the Snowflake Data Cloud to help customers manage growing volumes of machine data. The acquisition represents a significant shift in Snowflake’s strategy to compete more directly with established monitoring players. You can find out more by clicking here to read the press release.
Analyst Take
The observability market is crowded, and the large players, such as Splunk, Dynatrace, and Datadog, fight it out with smaller players like New Relic and LogicMonitor for market share daily. The introduction of AI functionality in the last two years to assist SRE’s with logs, traces, metrics, and alerts has only made the landscape more competitive.
Against this competitive landscape, we see this acquisition as a pragmatic and somewhat inevitable step for Snowflake as it seeks to capture more of the enterprise data lifecycle. For years, the observability market has been dominated by vendors whose primary charging model is based on ingesting and storing logs, metrics, and traces. We observe that customers are increasingly frustrated with the double tax of storing data in a warehouse for long-term analysis while paying separately to keep that same data in a monitoring tool for real-time visibility. By bringing Observe into the fold, Snowflake aims to deliver a unified environment where the data stays put. This is not just about adding a feature; it is about challenging the fundamental economics of the monitoring industry.
What Was Announced
The planned acquisition centers on Observe’s platform, which is architected to handle massive volumes of telemetry data. The platform is designed to use a "hub and spoke" model where Snowflake acts as the central repository for all machine-generated data. Specifically, the technology aims to deliver a "Live Data" interface that allows users to explore relationships between different data types without needing to pre-index everything. It is architected to leverage Snowflake’s micro-partitioning and compute scaling to provide fast queries on petabytes of data. The announcement highlights that the integration is designed to work with Snowflake Horizon for unified governance and uses the Polaris Catalog to ensure data remains open and accessible via Apache Iceberg. Furthermore, the system is architected to include automated discovery of resources, providing a map of how different applications and infrastructure components interact.
The logic behind this deal is sound when you consider the pedigree of Observe. The company was founded by several former Snowflake executives and was built from the ground up to run on the Snowflake engine. We see this as a "coming home" story that allows Snowflake to bypass the usual integration headaches that plague large acquisitions. The technology aims to deliver what they call "The Observability Cloud," which is essentially a specialized application layer sitting on top of the data platform. This approach is designed to treat observability as a data problem rather than a siloed tool problem.
We have noticed a shift in how large enterprises view their infrastructure. In the past, monitoring was a back-office function. Today, it is a significant line item in the budget. Accenture research suggests that as companies move toward more complex, distributed architectures, the volume of telemetry data is growing at an exponential rate. Many organizations find that their current monitoring bills are growing faster than their actual business revenue. By integrating Observe, Snowflake aims to deliver a more predictable cost model. Instead of paying for ingestion and retention in two different places, users can simply pay for the underlying storage and compute they are already using.
However, we must be careful not to view this as a guaranteed win. Established players like Datadog and Dynatrace have spent a decade building deep libraries of integrations and sophisticated user interfaces that DevOps teams love. Snowflake’s challenge will be moving beyond the data layer to provide a user experience that appeals to the person who has to fix a broken server at three in the morning. The technology is architected to be powerful, but it must also be intuitive. We see the market moving toward a "bring your own storage" model, and Snowflake is positioning itself to be the primary beneficiary of that shift.
Looking Ahead
Based on what we are observing, this acquisition is a shot across the bow for the entire monitoring ecosystem. The key trend that we are going to be looking out for is how quickly Snowflake can transition Observe from a standalone product into a core component of the Snowflake user interface. Our perspective is that the boundary between "data management" and "application monitoring" will dissolve over time, at least that is what Snowflake is banking on.
When you look at the market as a whole, the announcement signals that the era of proprietary, closed-loop monitoring silos is drawing to a close. You can look back and ascertain that the most successful cloud platforms are those that can consolidate multiple disparate workloads into a single, governed environment. By adding observability, Snowflake is moving closer to becoming the operating system for the enterprise. Going forward, we are going to be closely monitoring how the company performs on its promise to maintain an open ecosystem while pushing its own native tools. There is a risk that if Snowflake becomes too aggressive in pushing its own observability stack, it may alienate the very partners who helped build its ecosystem. Put simply, how will the likes of Splunk, Dynatrace, and DataDog react to their former partner becoming a direct competitor?
HyperFRAME will be tracking how the company does in future quarters regarding the adoption rate of these native observability features among its existing large enterprise customers. The success of this deal will not be measured by the technology alone, but by whether Snowflake can convince a skeptical DevOps community that a data warehouse company truly understands the pressures of real-time systems management. It is a bold play that aims to redefine the center of gravity for enterprise telemetry.
Steven Dickens | CEO HyperFRAME Research
Regarded as a luminary at the intersection of technology and business transformation, Steven Dickens is the CEO and Principal Analyst at HyperFRAME Research.
Ranked consistently among the Top 10 Analysts by AR Insights and a contributor to Forbes, Steven's expert perspectives are sought after by tier one media outlets such as The Wall Street Journal and CNBC, and he is a regular on TV networks including the Schwab Network and Bloomberg.