A rotten log in which only the surface area has been affected so the top can be replaced with some log siding and treated with borate before reapplying stain.  This log is stable throughout so it really isn't necessary to replace the log unless you just want to do so.  The damage is small enough it should not hurt the house structurally.

This log shows an example of failed stain where an oil based stain was applied trapping moisture and this shows the remaining wood which is in good shape so only a piece of log needs to be replaced.  There is no reason to replace an entire log when only 15 to 20 percent is damaged.