- Analysts say Snowflake and Databricks will increasingly fight for the dominance of big data.
- The two Silicon Valley businesses follow different approaches to data and business strategy.
- Snowflake has a ‘frenemy’ relationship with Amazon Web Services, while Databricks builds close alliances.
- See more stories on Insider’s business page.
Snowflake and Databricks, two young young companies with very different approaches, are rapidly defining the booming industry of big data – and analysts say they ‘are on a collision course’ that could determine what the next big competition in technology could be can be.
Snowflake helps companies move their data to structured virtual warehouses, where they can perform detailed business analytics. Led by Frank Slootman, a major CEO, Snowflake had an initial public offering of $ 33 billion in September. His stock has been on a roller coaster ever since – recently, mostly downhill.
Databricks follow a different approach – both with data and business strategy. The $ 28 billion startup helps companies analyze their raw data wherever it is, and helps customers use their data in AI algorithms. Ali Ghodsi, chief executive, built a $ 1.9 billion venture on a patient IPO route.
Here things get really interesting. Snowflake is moving into the AI space to help customers make better use of their data. Databricks add more business analytics features. Two young companies that have grown without obstacles, therefore suddenly attract each other’s competitive eye – and start to gather.
Gartner analyst Adam Ronthal says the companies’ are on a collision course as Snowflake adds AI capabilities and spreads Databricks more into the business analytics space. “They come together from both sides,” says Ronthal. “Over time, they will increasingly compete.”
Still, the market opportunity for Snowflake and Databricks is huge, and investors are “clearly optimistic” about the data analytics market, says Karl Keirstead, managing director of UBS. Together, the combined market capitalization of both companies amounts to almost $ 100 billion. Snowflake is now valued at $ 67 billion, while Databricks is privately valued at $ 28 billion.
There is an ‘overlap’ between the two companies that is likely to increase in the coming years, Keirstead says. And both companies are benefiting from the huge demand from companies that want to analyze data in the cloud. One key to the rivalry that is attracting analysts’ attention is the contrasting relationships of the companies with the big cloud companies.
“I think the overlap is relatively modest, but in some cases, businesses can use Databricks instead of Snowflake,” Keirstead told Insider. “Both are young businesses. This space is extremely dynamic.”
It is ‘inevitable’ that a greater overlap will emerge and even become more direct competitors within three years, says Keirstead, with Snowflake going to work in AI, and predictive workload and database appearing as an alternative to Snowflake.
“They’re clearly going head to head and coming from different angles after that,” says Justin Borgman, CEO of Starburst Data, whose company works with both.
Databricks and Snowflake declined to comment on the relationship between the companies.
Snow Business CEO Frank Slootman
snowflake
Snowflake has a ‘frenemy’ relationship with the cloud giants
Snowflake collects all the data of an enterprise and “sits in front” of the major public cloud companies, Amazon Web Services, Google Cloud and Microsoft Azure. Slootman positioned Snowflake as ‘the data cloud’ company in the run-up to the stock market, and many acquired Snowflake as the main database company for clouds and replaced database companies such as Oracle.
At one point, Snowflake even entered into a $ 120 billion valuation that surpassed IBM. Since then, Snowflake’s valuation has dropped to $ 67 billion.
“It was one of the most successful technological IPOs we’ve ever seen for a relatively young company,” Keirstead said. “Achieving a market capitalization of $ 100 billion is absolutely extraordinary. Clearly, developers were excited about this phenomenon.”
Slootman famously led Snowflake to the monster fair, but sometimes the big public players ranked in the cloud, say analysts and investors from the cloud computing world. Snowflake has bullied itself in the ways of data companies in the ways that have boosted its appeal – but it may have hampered its relationships with the companies it works with.
At the Wing Cloud Data Summit in December – where AWS and Microsoft were sponsors – Slootman told Internet users: “We are completely pulling out the underlying cloud. You do not see it, you do not touch it, you do not get an account “from that, etc. The experience is very complex. You get an Amazon account, and that’s 500 line items. That’s not the case when you do business with us.”
Snowflake does work with all three major cloud providers. Keirstead estimates that the bulk of Snowflake’s revenue comes from its AWS partnership. A number also come from an ’emerging partnership’ with Microsoft, while the relationship with Google Cloud is ‘fairly early’.
At the same time, Snowflake competes directly with cloud data storage offerings like Amazon’s Redshift and Google Cloud’s BigQuery.
“Snowflake and AWS have an exceptionally close partnership and a ‘frenemy’ relationship,” Keirstead said.
Snowflake has adopted the big companies and sees it as a simpler solution that manages the data of enterprises within the architecture of public cloud companies. This has propelled the IPO to great heights that may not have been sustainable. The stock was at $ 234 a share this week, up from a high of $ 388 in December.
Yet the decline has less to do with company performance or market demand, but rather that the entire software sector ‘traded significantly’ from February to March, Keirstead said. He says the correction has now largely ‘expired’, which is why he put a buyout figure on Snowflake’s share.
“The feedback we get from customers is extremely positive,” Keirstead said.
Ali Ghodsi, CEO of Databricks
DataBricks
Databricks started overlapping with Snowflake
Databricks are more focused on predictive analytics – algorithms that predict the future with AI. Unlike Snowflake, which sits ‘in front’ of the public clouds, Databricks sits ‘on top’ of the large public clouds. This means customers can do analytics and build AI programs and apply it to their data wherever it is.
But recently, Databricks added a new feature that could impact Snowflake’s data packer sector. Databricks added SQL (Structured Query Language) searches to their tools. SQL can search data in the roughest form. As a result, businesses may need less help organizing their data – this is at the forefront of Snowflake.
What’s more, Databricks has picked up investments from the big cloud companies as it has continued to build up a large amount of venture capital. Snowflake remains a powerhouse with its own partnerships with the public cloud companies. But some analysts, investors and executives see a different kind of relationship between Databricks and the public cloud form.
Ghodsi defends Amazon against critics, for example, places customers with Google Cloud and attracts investments from AWS, Google, Microsoft and Salesforce.
“We are believers,” Gene Frantz of CapitalG, formerly Google Capital, told Insider or Databricks. He calls Snowflake “an excellent company”, but says he thinks Databricks is a “strategic partner for all the cloud companies. ‘
While Databricks started walking around in Snowflake’s pool, it could take a while before there was a major overlap.
“There are a lot of runways before they overlap safely with Snowflake,” Keirstead said.
In about two years, Keirstead predicts that there will be about five to six alternatives on the market, with Snowflake and Databricks being the “best of the breed” in their respective specialties. He says there is ‘no way’ that the market will only be dominated by the two companies.
Startups for data warehouses such as Yellowbrick Data and Firebolt have already taken up the challenge.
“The scene is huge,” Keirstead said. “If we were talking to CIOs, CTOs of big business, I would suggest that cloud-based data analytics is now a top 3 spending priority for 2021.”