$ 67 billion snowflake and $ 28 billion Databricks on collision course


  • Snowflake and Databricks will increasingly fight for dominance of big data, analysts say.
  • The two Silicon Valley companies take different approaches to both data and business strategy.
  • Snowflake has a “friend foe” relationship with Amazon Web Services, while Databricks builds careful alliances.
  • See more stories on the Insider business page.

Snowflake and Databricks, two young, muscular companies with vastly different approaches, are rapidly defining the booming big data industry, and analysts say they are “on a collision course” that could see them establish what could be the next big rivalry. in technology.

Snowflake helps companies move their data into structured virtual warehouses, where they can run granular business analytics on it. Led by cheeky CEO Frank Slootman, Snowflake launched a record $ 33 billion initial public offering in the software industry in September. His stocks have been on a rollercoaster of ups and downs recently, mostly down, ever since.

Databricks takes a different approach, both with data and with business strategy. The $ 28 billion startup helps businesses analyze their raw data wherever it is and helps customers use their data in artificial intelligence algorithms. CEO Ali Ghodsi has methodically built a $ 1.9 billion war chest of venture capital on a patient IPO route.

This is where things get really interesting. Snowflake is moving into the AI ​​space to help customers make better use of their data. Databricks is adding more business analysis capabilities. So two young companies that have grown smoothly are suddenly catching the eye of the competition and starting to square off.

Businesses are “on a collision course,” says Gartner analyst Adam Ronthal, as Snowflake adds artificial intelligence capabilities and Databricks delves further into the business analytics space. “They are converging from both sides,” says Ronthal. “Over time, they will compete more and more.”

Still, the market opportunity for Snowflake and Databricks is huge, and investors are “clearly bullish” about the data analytics market, says UBS Managing Director Karl Keirstead. Together, the combined market capitalizations of both companies are nearly $ 100 billion. Snowflake is now valued at $ 67 billion, while Databricks was privately valued at $ 28 billion.

There is a kind of “overlap” between the two companies that is likely to increase in the coming years, Keirstead says. And both companies benefit from high demand from companies that want to analyze data in the cloud. A key to the rivalry that draws analysts ‘attention is the companies’ contrasting relationships with major cloud companies.

“I think the overlap is relatively modest, but in some cases companies can use Databricks instead of Snowflake,” Keirstead told Insider. “Both are young companies. This space is extremely dynamic.”

A larger overlap is “inevitable” and may even become more direct rivals within three years, Keirstead says, with Snowflake entering AI and predictive workloads and Databricks emerging as an alternative to Snowflake.

“Obviously they go toe-to-toe and come face to face from different angles,” said Starburst Data CEO Justin Borgman, whose company works with both of them.

Databricks and Snowflake declined to comment on the companies’ relationship.

Frank Slootman, CEO of Snowflake

Frank Slootman, CEO of Snowflake

Snowflake


Snowflake has a ‘friend-foe’ relationship with the cloud giants

Snowflake collects all of a company’s data and “sits in front of” the large public cloud companies, Amazon Web Services, Google Cloud, and Microsoft Azure. Slootman positioned Snowflake as the company “in the data cloud” in the run-up to the IPO, and many bought Snowflake as the leading cloud database company, replacing local database companies like Oracle.

At one point, Snowflake even boosted to a $ 120 billion valuation, topping IBM’s. Since then, Snowflake’s valuation has fallen to $ 67 billion.

“It was one of the most successful technology IPOs we’ve seen for a relatively young company,” Keirstead said. “Hitting $ 100 billion in market capitalization is absolutely extraordinary. Clearly, the developers were excited about this phenomenon.”

Slootman brought Snowflake to the monstrous IPO, but it sometimes upset the big players in the public cloud, analysts and investors from the cloud computing world say. Snowflake found its way to the front lines of data companies in ways that increased their appeal, but may have complicated its relationships with the companies it partners with.

At the Wing Cloud Data Summit in December, where AWS and Microsoft were sponsors, Slootman told online attendees, “We completely extract the underlying cloud. You don’t see it, you don’t touch it, you don’t get an invoice from it, and so on. The experience is highly aggregated. You get an invoice from Amazon and it’s 500 order lines. That’s not the case when you do business with us. “

Snowflake partners with the top three cloud providers. Keirstead estimates that the majority of Snowflake’s revenue comes from its association with AWS. A good number also come from an “emerging partnership” with Microsoft, while their relationship with Google Cloud is “at a fairly early stage.”

At the same time, Snowflake is in direct competition with cloud data storage offerings like Amazon’s Redshift and Google Cloud’s BigQuery.

“Snowflake and AWS have an extraordinarily close partnership and ‘friend-foe’ relationship,” Keirstead said.

Snowflake took on the big business, presenting itself as the simplest solution that manages enterprise data within the enterprise public cloud architecture. That raised the IPO to great heights that may have been unsustainable. The stock was at $ 234 a share this week, down from a high of $ 388 in December.

Still, the drop has less to do with company performance or market demand, but rather the entire software sector has “traded substantially” from February to March, Keirstead said. He says the correction has largely “run its course” now, which is why he put a buy rating on Snowflake’s stock.

“The feedback we get from customers is extremely optimistic,” Keirstead said.

Ali Ghodsi, CEO of DataBricks

Ali Ghodsi, CEO of Databricks

DataBricks


Databricks has started to overlap with Snowflake

Databricks focuses more on predictive analytics, algorithms that envision the future with AI. In contrast to Snowflake sitting “in front of” public clouds, Databricks sits “on top of” large public clouds. That means customers can perform analytics and create artificial intelligence programs and apply them to their data wherever they are.

But recently, Databricks has added new functionality that could affect Snowflake’s data warehousing industry. Databricks has added SQL (Structured Query Language) lookups to its tools. SQL can search for data in its crudest forms. That could allow companies to need less help organizing their data, which is Snowflake’s forte.

In addition, Databricks recouped investment from major cloud companies as it continued to accumulate a large amount of venture capital. Snowflake remains a powerhouse with its own partnerships with public cloud companies. But some analysts, investors, and executives see a different kind of relationship forming between Databricks and public clouds.

For example, Ghodsi defended Amazon from critics, introduced customers to Google Cloud, and attracted investment from AWS, Google, Microsoft, and Salesforce.

“We are believers,” Gene Frantz of CapitalG, formerly Google Capital, told Insider of Databricks. He called Snowflake “a great company” but said he thought Databricks is a “strategic partner for all cloud companies.”

While Databricks has started to creep into the Snowflake bunch, it may take some time before there’s a major overlap.

“There’s a lot of track before it safely overlaps with Snowflake,” Keirstead said.

In about two years, Keirstead predicts there will be five to six alternatives in that market, with Snowflake and Databricks emerging as “best in class” in their respective specialties. He says there is “no way” that the market is only dominated by those two companies.

Data warehousing startups like Yellowbrick Data and Firebolt have already risen to the challenge.

“That scene is huge,” Keirstead said. “When we speak to CIOs and CTOs at large companies, I would suggest that cloud-based data analytics is now one of the top three spending priorities for 2021.”

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