On September 16, 2020, history was made on the New York Stock Exchange. A software company named Snowflake (ticker: SNOW) made its IPO as the largest publicly traded software company, ever. As one of the most hotly anticipated listing in 2020, Snowflake began publicly trading at $120 per share and almost immediately jumped to $300 per share within a matter of minutes. With the never before seen hike in price, Snowflake also became the largest company to ever double in value on its first day of trading, ending with a value of almost $75 billion.
What is Snowflake?
So, what exactly does Snowflake do? What is it that makes a billionaire investors like Warren Buffet and Marc Benioff jump all over a newly traded software company? It must be something special right? With all the speculation surrounding the IPO, it’s worth explaining what the company does. A simple explanation would be that Snowflake helps companies store their data in the cloud, rather than in on-site facilities. Traditionally, a company’s data is been stored on-premises on physical servers managed by that company. Tech giants like Oracle and IBM have led the industry for decades. Well, Snowflake is profoundly different. Instead of helping company’s store their data on-premises, Snowflake facilitates the warehousing of data in the cloud. But that’s not all. Snowflake has the capabilities of making the data queryable, meaning it simplifies the process for businesses looking to pull insights from the stored data. This is what sets Snowflake apart from the other data hoarding behemoths of the IT world. Snowflake discovered the secret to separating data storage from the act of computing the data. The best part is that they’ve done this before any of the other big players like Google, Amazon, or Microsoft. Snowflake is here to stay.
Snowflake’s Leadership
Different than Silicon Valley’s tech unicorns of the past, Snowflake was started in 2012 by three data base engineers. Backed by venture capitalists and one VC firm that wishes to remain anonymous, Snowflake is currently led by software veteran, Frank Slootman. Before taking the reigns at Snowflake, Slootman had great success leading Data Domain and Service Now. He grew Data Domain from just a twenty-employee startup venture to over $1 billion in sales and a $2.4 billion acquisition sale to EMC. I think it’s safe to say that Snowflake is in the right hands, especially if it has any hopes of maturing into its valuation.
Snowflake’s Product Offering
We all know that Snowflake isn’t the only managed data warehouse in the industry. Both Amazon Web Service’s (AWS) Redshift and Google Cloud Platform’s (GCP) BigQuery are very common alternatives. So there had to be something that set Snowflake apart from the competition. It’s a combination of flexibility, service, and user interface. With a database like Snowflake, two pieces of infrastructure are driving the revenue model: storage and computing. Snowflake takes the responsibility of storing the data as well as ensuring the data queries run fast and smooth. The idea of splitting storage and computing in a data warehouse was unusual when Snowflake launched in 2012. Currently, there are query engines like Presto that solely exist just to run queries with no storage included. Snowflake offers the advantages of splitting storage and queries: stored data is located remotely on the cloud, saving local resources for the load of computing data. Moving storage to the cloud delivers lower cost, has higher availability, and provides greater scalability.
Multiple Vendor Options
A majority of companies have adopted a multi-cloud as they prefer not to be tied down to a single cloud provider. There’s a natural hesitancy to choose options like BigQuery that are subject to a single cloud like Google. Snowflake offers a different type of flexibility, operating on AWS, Azure, or GCP, satisfying the multi-cloud wishes of CIOs. With tech giants battling for domination of the cloud, Snowflake is in a sense the Switzerland of data warehousing.
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Snowflake as a Service
When considering building a data warehouse, you need to take into account the management of the infrastructure itself. Even when farming out servers to a cloud provider, decisions like the right size storage, scaling to growth, and networking hardware come into play. Snowflake is a fully managed service. This means that users don’t need to worry about building any infrastructure at all. Just put your data into the system and query it. Simple as that.
While fully managed services sound great, it comes at a cost. Snowflake users need to be deliberate about storing and querying their data as fully managed services are pricey. If deciding whether to build or buy your data warehouse, it would be wise to compare Snowflake ownership’s total cost to building something themselves.
Snowflake’s User Interface and SQL Functionality
Snowflake’s UI for querying and exploring tables is as easy on the eyes as it to use. Their SQL functionality is also a strong touching point. (Structured Query Language) is the programming language that developers and data scientists use to query their databases. Each database has slightly different details, wording, and structure. Snowflake’s SQL seems to have collected the best from all of the database languages and added other useful functions.
A Battle Among Tech Giants
As the proverb goes, competition creates reason for caution. Snowflake is rubbing shoulders with some of the world’s largest companies, including Amazon, Google, and Microsoft. While Snowflake has benefited from an innovative market advantage, the Big Three are catching up quickly by creating comparable platforms.
However, Snowflake is dependent on these competitors for data storage. They’ve only has managed to thrive by acting as “Switzerland”, so customers don’t have to use just one cloud provider. As more competition enters the “multicloud” service industry, nonalignment can be an advantage, but not always be possible. Snowflake’s market share is vulnerable as there are no clear barriers to entry for the industry giants, given their technical talent and size.
Snowflake is just an infant in the public eye and we will see if it sinks or swims over the next year or so. But with brilliant leadership, a promising market, and an extraordinary track record, Snowflake may be much more than a one hit wonder. Snowflake may be a once in a lifetime business.
