Snowflake Inc. is an American data warehouse company specializing in cloud-based data warehousing, big data integration, cloud analytics, and storage services. Founded in 2012, the company has its headquarters in Bozeman, Montana. Snowflake is well known for its Holistic Data Architecture and its effortless ability to handle petabytes of data at speed.
Its founders, Thierry Cranes and Marcin Zukowski are known for their experience in the data warehousing industry, having worked with Oracle Corporation, one of the world’s leading data companies. Upon its IPO in 2020, Snowflake raised $3.36 billion, making it one of the largest and most successful IPO’s of 2020 despite the Covid-19 pandemic.
The company’s share price tripled from an IPO price of $120 in 2020 to $313.52 as of October 2021. It boasts a market value equity of $94.338 billion with an estimated Q1 2021 revenue of $213.8 million, a 110 percent growth year over year. With triple-digit growth in the Q1 2021 revenue, Snowflake shows its ability to scale customer consumption and retention despite the slowing economy.
Snowflake Business StrategyÂ
While some may consider the company’s growth a bubble, Snowflake’s growth is backed by a solid business strategy. Its ability to innovate its product with a focus on key markets and retention of current clients give the company an advantage over its competitors.
Snowflake incorporates a consumption-based pricing strategy where customers only pay for the services they use. This pricing strategy is beneficial to companies with varying required data processing needs. It allows them to scale their spending when necessary and pull back during slow periods. Through this strategy, Snowflake can better gauge its client’s needs and improve its product offering while maintaining a smooth revenue cycle.
Content remains king even when the market is in a slump, and Snowflake’s content keeps clients hooked. Its success hinges on its ability to create value for its users through Account-Based Marketing (ABM), where they market to their users based on their individual needs. Who wouldn’t want their data management tailored to their specific needs?
While it may seem too early to venture into acquisitions, Snowflake is no novice to M&A. In July 2020, and soon after its IPO, it successfully acquired Cryptonumerics. This data-driven platform allows businesses to create privacy-protected datasets with quantifiable risks. This purchase places Snowflake as a leading contender in the privacy-based data market.
Snowflake SWOT AnalysisÂ
Strengths
Strong Customer Base:
Having an existing customer base is essential for Snowflake’s bottom line. Snowflake’s client base provides a consistent revenue cycle and allows the company to forecast more accurately. It boasts more than 100 clients with a trailing 12-month revenue gather of more than $1 million. Its Q1 2020 financials recorded 4,532 customers, with more than 187 of them from Fortune 500 companies.
Strong Product Offering:
Companies need a flexible, scalable data warehousing platform that meets their changing needs. Snowflake’s product offering is customizable, allowing its users to store data in the cloud according to their specifications. Its revolutionary data architecture allows for easy scalability and is compatible with cross-cloud applications and databases.
Market Recognition:
Being recognized by your market is essential. Snowflake’s recognition stems from its innovation and next-generation technologies, converging to create a new data management standard. In 2019, Gartner recognized Snowflake in the magic quadrant for Data Management Solutions for Analytics alongside significant players such as Oracle, Microsoft, and Amazon Web Services.
Strong financials:
Since its IPO, Snowflake has shown its ability to generate and maintain strong financials. Its trailing-twelve-month revenue for 2020 was $0.256 billion. In 2021, it recorded annual revenue of $0.592 billion, a 123.63 percent increase year over year. It is not surprising to see the strong current market capitalization of $94.338 billion with such growth.
Weaknesses
Use case pricing strategy can be expensive:
While its use case pricing strategy is beneficial to its clients, it may be difficult for companies with varying needs. Data management costs are usually extrapolated over time and can be an additional cost that some businesses may not want to pay for. Many users need a simple solution that doesn’t involve complicated configurations.
Limited product diversity:
With its heavy focus on data warehousing, Snowflake lacks product diversity. While it is a leading contender in the space, other companies such as Microsoft and Oracle provide more attractive features and come standard with solutions that care for most business needs. It’s not that Snowflake’s product offering is terrible; it just falls short compared to more competitive products.
Opportunities
Expansion in the Big Data market:
As businesses exponentially increase their data collection, they need big data solutions that can help them improve decision-making and grow their profit margins. With its recent acquisition of Cryptonumerics, Snowflake has expanded to offer this service, which provides anonymized datasets with quantifiable risks. This product offering will provide businesses with a competitive edge to make informed decisions.
Strategic Acquisitions:
The Company has not been shy about its capitalistic intentions; its acquisition of Cryptonumerics is a prelude to more acquisitions in the coming years. Further, with its IPO and strong financials, it can now acquire more companies to expand its product offerings.
Threats
Competition:
Strong companies do not become strong without facing worthy opponents. Like all other product providers, Snowflake faces competition from its industry-leading competitors, including Oracle, Amazon Web Services (AWS), and Microsoft. Snowflake lacks the diversity of products these companies provide and often comes in second place when necessary cross-cloud compatibility. However, Snowflake’s robust product offering and revolutionary data architecture, as well as its strategic acquisitions, attempts to reduce this gap and firmly place them as a front-runner in the industry.
Early Winner’s Curse:
A strong IPO, solid first-year financials, and recognition from industry experts like Gartner put Snowflake in a unique position with high expectations. If these traditional metrics begin to falter, investors may show some skepticism and present the classic case of the early winner’s curse. It may not be the end of the world for Snowflake, but if it doesn’t meet these metrics, investors may sour on the company and diminish its reputation.
Snowflake Competitor Analysis
The global Data Warehouse as a service (DWaaS) market size is set to grow at a CAGR of 22.3 percent to 12.9 billion by 2026. Snowflake is competing in a market with a clear opportunity for growth. This section analyzes some of the key players in this market, focusing on their competitive advantages and market share in different segments, financials, and product offerings.
1. Oracle ADW
Oracle is a multinational corporation that specializes in business software and cloud computing. Its success is primarily attributed to its good brand recognition, more comprehensive product range, and diversified revenue streams. Oracle boasts a market capitalization of $258.033 billion, with 2021 revenues totaling $40.5 billion. The company’s cloud services and licenses revenues increased by 5 percent to $28.7 billion in 2021.
While Oracle’s product diversity and comprehensive offerings give it a strong competitive edge, Snowflake is a strong competitor. Its innovative data architecture and solid financials place it as a major contender in the industry. According to Slintel, Snowflake controls 15.93 percent of the data warehousing market compared to 13.98 percent held by Oracle ADW.
This data indicates that while Oracle is an established company with profound brand recognition, it fails to use its capital and market influence in other segments to compete with up-and-coming startups like Snowflake. Not that Snowflake is a small startup; however, Oracle’s size and momentum make it an intimidating competitor.
2. Amazon RedshiftÂ
Amazon Redshift, a subsidiary of Amazon.com, is a cloud-based data warehouse that provides petabyte-scale data storage and analytics services. It delivers scalable, cost-effective data warehousing and analytic solutions. Through Amazon (AWS), businesses can scale database capacity easily to meet the demands of their applications.
In Q1 2021, AWS generated $14.8 billion in revenues. This includes all cloud computing and hosting revenues. According to Slintel, Amazon Redshift controls $23.46 percent of the DWaaS market. While it enjoys Amazon’s massive revenue stream and brand recognition, Stitchdata considers Snowflake a better platform, especially when starting your data warehouse journey.
Competing in a DWaas market heavily influenced by Amazon.com presents opportunities and challenges for up-and-coming cloud aggregators like Snowflake. The opportunity lies in the fact that Amazon Redshift is a subsidiary of Amazon, meaning it can take advantage of its massive market influence. The challenge lies in the fact that it’s challenging to compete against Amazon’s established market presence.
3. Microsoft Azure Data Warehouse
Microsoft Azure is a cloud computing platform and infrastructure created by Microsoft. Azure has evolved from its early beginnings as a Platform-as-a-Service (PaaS) cloud computing framework into a comprehensive suite of cloud services.
The Microsoft Azure Data Warehouse offers flexible, scalable, enterprise-grade cloud storage. It provides fast performance at lower costs than traditional data warehouses. In the cloud infrastructure market, Microsoft Azure controls about 22 percent of the market share. Although Snowflake is a small competitor in this segment, cloud infrastructure contributes a large chunk of Microsoft’s revenues.
In Q2 2021, Microsoft Azure’s revenue grew by 51 percent compared to Q2 2020. Although Microsoft doesn’t publish exact revenue figures, Azure contributes an overwhelming portion. Due to the sheer size of Microsoft’s market influence, its growth in cloud services will likely continue to expand.
4. Google BigQuery
Google BigQuery is a cloud-based data warehouse that uses Google’s large-scale data processing infrastructure. BigQuery provides fast query performance at lower costs than traditional data warehouses. It features server-less web service architecture that helps it compute and store massive amounts of data. In addition, in case of any scaling issues, BigQuery provides a fully automated elastic scaling feature.
As part of the larger Google Cloud Platform, BigQuery contributes to the robust growth of Google’s cloud services segment. In Q2 2021, Google cloud contributed $4.6 billion, representing 54 percent growth year over year. Data from Slintel indicates that Google BigQuerry has a 12.17 percent market share in the data warehousing market with about 4330 customers.Â
BigQuerry stands out against Snowflake because it has an enormous market influence, combined with Google’s massive revenue stream. Snowflake must balance its unique selling points against Google’s existing brand recognition and revenue stream. Although Snowflake is a small competitor, its brand recognition and subscription model might help it stand out to customers.
5. Teradata
Teradata is an international data warehousing corporation specializing in database technologies, analytics, business intelligence, data management services, and consumer engagement applications. Its cloud data analytics platform supports a hybrid multi-cloud environment, allowing companies to leverage Teradata’s enterprise data warehouse management.
While Teradata is a massive enterprise with more than 8,500 employees and an international presence, it faces stiff competition against Snowflake and other cloud competitors. Snowflake’s use-based pricing model and focus on simplicity could prove attractive to Teradata’s existing customer base.
Its revenue for FY 2021 was $1.927 billion, up 4.5 percent year over year. Teradata’s public cloud ARR for Q2 2021 was $139 million, a 157 percent increase year over year. Snowflake and Teradata are strong contenders in the data warehouse and cloud data analytics markets.
Teradata’s main advantage is its sheer size and brand recognition. It’s been around for decades (since 1997), has an extensive customer base in the enterprise market, and serves as a trusted resource for data analytics solutions. Although Teradata faces stiff competition against other cloud providers, its market presence should help it maintain a solid customer base in the future.
How Snowflake Stands Out Against Its Competitors
Snowflake is not just a cloud data warehouse service with a standard user-based pricing model. Its focus on simplicity, transparent pricing, and ability to scale make it a strong competitor in the cloud data warehousing market. Snowflake enables faster data processing and efficient storage and offers a more flexible analytics solution than most competitors.
Through strategic partnerships with industry leaders such as Trade Desk, Snowflake offers a comprehensive and secure data management solution. Marketers can leverage its suite of tools, including the Big Data Platform, a real-time marketing platform for fast and efficient data processing.
By providing resources in the form of eBooks and Guides, Snowflake has succeeded in building a brand that appeals to customers. Its data architecture best practices, for example, are valuable resources for companies looking to simplify their data management operations.Â
The Data Cloud Academy gives insight into the data cloud market through educational webinars and courses, offering an opportunity for customers to learn more about the cloud data space.
Notably, Snowflake’s Partner Network provides customers with access to many industry-leading data and marketing solutions. This gives it an edge over other cloud data warehouse providers, which may not have industry-specific tools or training resources.
Snowflake Competitor Analysis (FAQs)
Question: Who are Snowflake’s main competitors?
Answer: Snowflake’s major competitors include Amazon Web Services, Microsoft, Cloudera, IBM, Oracle, Databricks, Teradata, and Google Bigquerry. Other competitors include Actifio, Amplidata, ArangoDB, AskF5 Networks, DataStax, HPE Helion Eucalyptus Cloud, Infinidat, Internap Corporation, Iron Mountain Digital Solutions, MapR Technologies, MarkLogic Corp., MemSQL Inc.
Question: What makes Snowflake company different?
Answer: Snowflake offers a flexible cloud data warehouse service that differs from other competitors in its focus on simplicity and transparency. Its use-based pricing model makes the cost of acquiring new customers easier to forecast, allowing businesses to avoid unexpected expenses. Business-wise, Snowflake had an excellent IPO, raising $3.36 billion. It also commands a strong reputation in the cloud data space, with Gartner and other companies’ recognition.
Question: Why is Snowflake so valuable?
Answer: Snowflake is valuable because it started from the ground up, offering a cloud data warehouse service that focuses on simplicity and transparency. Its pricing model, high product quality, and effective marketing campaigns not only attract customers but also help to maintain an active customer base.
Conclusion
Snowflake is a strong competitor in the data warehousing market with a unique focus on simplicity, transparency, flexibility, and scalability. Its transparent use-based pricing model could allow businesses to avoid paying for features that they don’t need. Its focus on simplicity makes it a reliable partner for data management.
Despite strong contention from industry leaders such as Teradata and Amazon Web Services, Snowflake could become a market leader in the data cloud space. Even with a strong IPO and strong financials, Snowflake’s future success will depend on its ability to maintain existing customers and attract new clients.
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