Splunk today announced an agreement to acquire SignalFx for $1.05 billion. Splunk hopes the company, which provides real-time monitoring and metrics for the cloud, microservices, and applications will help bolster its position in observability and application performance management among enterprises that have cloud-native or on-premises applications.

The deal, which Splunk expects to close in the second half of fiscal 2020, is slated to be paid with about 60% in cash and 40% in Splunk common stock. Splunk says the acquisition will lower costs for customers and reduce friction points for enterprises that seek a central hub for multiple applications and capabilities at scale.

Splunk is an incumbent in the security information and event management (SIEM) space alongside IBM, and multiple startups are aiming to displace its position in the $124 billion market. Splunk and SignalFx have been part-time collaborators as well, particularly on serverless applications that use open source licenses on the Amazon Web Services (AWS) Lamba serverless computing platform.

“Data fuels the modern business,” said Doug Merritt, president and CEO at Splunk, in a prepared statement. “SignalFx will support our continued commitment to giving customers one platform that can monitor the entire enterprise application lifecycle.”

By combining the capabilities and talent of both companies, Splunk intends to provide developers and IT leaders a data platform that can monitor and observe data in real time regardless of the infrastructure or data volume. 

According to Gartner research cited by Splunk, more than 75% of global organization will be running containerized applications in production by 2022. That number is fewer than 30% today. Moreover, IDC expects SaaS-based offerings in application performance management to grow at triple the rate of on-premises services during the next five years.

“By joining Splunk, we will create a powerful monitoring platform — one ready to support CIOs whether they have fully embraced cloud or have existing applications in the data center,” SignalFx founder and CEO Karthik Rau said in a prepared statement. “As the world continues to move toward complex, cloud-first architectures, Splunk and SignalFx is the new approach needed to monitor and observe cloud-native infrastructure and applications in real time, whether via logs, metrics, or tracing.”

Enterprises will be able to use technology from both companies to deploy applications in the cloud, on-premises, or in hybrid environments, according to the companies. The SignalFx team, including leadership, is expected to join Splunk when the transaction closes.