$ 67 billion in snowflakes and $ 28 billion in Databricks on collision course


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

Snowflake and Databricks, two muscular start-ups with vastly different approaches, are quickly defining the booming big data industry – and analysts say they’re “on a collision course” that could see them establishing what may well be. the next big tech rivalry.

Snowflake helps organizations move their data into structured virtual warehouses, where they can perform granular business analysis. Led by brash CEO Frank Slootman, Snowflake embarked on a $ 33 billion software industry initial public offering in September. Its stock has been on a roller coaster ride of highs and lows – recently, mostly lows – since then.

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

Here’s where things get really interesting. Snowflake enters the AI ​​space because it seeks to help customers make better use of their data. Databricks adds more business analysis functionality. So, two young companies that have grown up without obstacles suddenly get noticed by the competition – and start to clash.

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

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

There is some “overlap” between the two companies that will likely increase over the next several years, Keirstead says. And both companies are benefiting from strong demand from companies looking to analyze data in the cloud. One of the keys to the rivalry that is capturing analysts’ attention is the contrasting relationship between corporations and large cloud companies.

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

It’s “inevitable” that a greater overlap will emerge and could even become more direct rivals in three years, Keirstead says, with Snowflake entering AI and predictive workloads and Databricks emerging as an alternative to Snowflake.

“They are clearly facing issues from different angles,” said Justin Borgman, CEO of Starburst Data, whose company works with both.

Databricks and Snowflake both declined to comment on the relationship between the companies.

Frank Slootman, PDG de Snowflake

Frank Slootman, PDG de Snowflake


Snowflake has a “frenemy” relationship with the cloud giants

Snowflake collects all of a company’s data and “ranks ahead” of large public cloud companies, Amazon Web Services, Google Cloud, and Microsoft Azure. Slootman has positioned Snowflake as “the data cloud” ahead of the IPO, and many have bought Snowflake as the leading cloud database company, replacing on-premises database companies like Oracle.

At one point, Snowflake even rocketed to a valuation of $ 120 billion, surpassing that of IBM. Since then, Snowflake’s valuation has fallen to $ 67 billion.

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

Slootman drove Snowflake to the monster IPO – but at times beat the big public cloud players, analysts and investors in the cloud computing world. Snowflake has made its way into the front line of data companies in a way that has heightened its appeal – but perhaps complicated its relationships with the companies it collaborates with.

At the Wing Cloud Data Summit in December – where AWS and Microsoft were sponsors – Slootman told attendees online, “We have fully summarized the underlying cloud. You don’t see it, you don’t touch it, you don’t get an invoice from there, and so on. The experience is very aggregated. You get an invoice from Amazon, and it’s 500 line items. This is not the case when you do business with us. “

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

At the same time, Snowflake competes directly with cloud data warehousing offerings like Amazon’s Redshift and Google Cloud’s BigQuery.

“Snowflake and AWS have an extremely close partnership and a ‘frenemy’ relationship,” Keirstead said.

Snowflake took on the big business, pitching itself as a simpler solution that manages enterprise data within the enterprise’s public cloud architecture. This took the IPO to highs that may not have been viable. The stock was at $ 234 per share this week, from a high of $ 388 in December.

Still, the drop has less to do with business performance or market demand, but rather that the entire software industry has “traded significantly” from February through March, Keirstead said. He now says the correction has largely “run its course,” so he put a buy note on Snowflake stock.

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

Ali Ghodsi, CEO of DataBricks

Ali Ghodsi, CEO of Databricks


Databricks started to overlap with Snowflake

Databricks is focusing more on predictive analytics – algorithms that predict the future with AI. Unlike Snowflake sitting “in front” of public clouds, Databricks sits “above” large public clouds. This means that customers can perform analysis, create artificial intelligence programs, and apply them to their data wherever it is.

But recently Databricks added a new feature that could affect Snowflake’s data warehousing industry. Databricks has added Structured Query Language (SQL) searches to its tools. SQL can search for data in its coarsest forms. This could allow businesses to need less help organizing their data – which is Snowflake’s strong suit.

Additionally, Databricks recouped investments from major cloud computing companies as it continued to build a venture capital warchest. 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 criticism, offered Google Cloud customers, and attracted investment from AWS, Google, Microsoft, and Salesforce.

“We believe,” Gene Frantz of CapitalG, formerly Google Capital, told Insider of Databricks. He called Snowflake a “big business” but said he believed Databricks to be a “strategic partner for all cloud businesses”.

As Databricks has started to wade through the Snowflake pool, it may take some time before there is a major overlap.

“There are a lot of trails before they solidly overlap with Snowflake,” Keirstead said.

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

Already, data warehousing startups like Yellowbrick Data and Firebolt have risen to the challenge.

“This scene is huge,” Keirstead said. “When we talk to CIOs at large companies, CTOs, I would say cloud-based data analytics is now one of the top 3 spending priorities for 2021.”

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