Behind Snowflake’s debut: Rising data demands3 min read . Updated: 22 Sep 2020, 09:02 AM IST
The startup’s roaring IPO was due to fortunate timing and growing data needs, tech chiefs say
Moves to accelerate digitization in the wake of coronavirus lockdowns are forcing businesses to manage a swelling tidal wave of data. Last week, startup Snowflake Inc. rode that wave to become Silicon Valley’s hottest export.
Shares in the San Mateo, Calif., company, whose software helps enterprises rapidly analyze business information, closed Wednesday at $254 a share, more than double the initial public offering price. Enterprise tech chiefs, speaking broadly on the market reaction to the data-warehouse provider, point to the challenges they face in unifying and analyzing their data in real-time across multiple data sources.
The company is “also in some sense more easily understood as a phenomenon of how do we make sense [of data]," said Arthur Hu, chief information officer at Lenovo Group Ltd.
Business data over the last decade has become both more valuable and more abundant, the result of the push toward digital processes, such as e-commerce and automation, that simultaneously consume and generate information. The data deluge is only likely to increase, thanks to emerging technologies like edge devices and 5G, which are poised to enable data to come from more places at a faster pace.
Within this framework and defined broadly, “anything that smacks of ‘how can I take data and make it relevant and accessible and break down the barriers’ is going to be highly attractive," said Mr. Hu.
An April IDC report estimated that some 59 million petabytes of data would be created, captured, copied and consumed in 2020, up from 45 million petabytes in 2019. One petabyte is equal to 1,000 terabytes.
Data warehouses date to the 1970s as a way for companies to store and analyze huge amounts of information in their on-premise servers. Starting in the 2010s, companies including Amazon.com Inc. and Alphabet Inc.’s Google began selling cloud-based data-warehousing services.
Snowflake’s offering made its debut in 2015, giving customers the ability to dissociate storage and computing power. That was a novelty at the time; back then, if a user needed more processing power but not more storage, they’d have to pay for both, and vice versa, said Gartner Inc. analyst Adam Ronthal. Competitors have since introduced similar features, he said.
“So they picked up a lot of [Amazon customers] in the early days," Mr. Ronthal said, “and then built on that market momentum and expanded into [Microsoft] Azure, and then most recently into Google Cloud Platform. So now they’re on the three largest clouds."
Snowflake’s customers cite the software’s ability to streamline data-sharing, a plus when business data is housed in disparate systems.
Chris Dillon, vice president of architecture and cloud enablement at Cox Automotive, says Snowflake allows the company, whose brands include Autotrader, Kelley Blue Book and Manheim, to easily share data, such as car valuations with dealers and other partners.
“They can just access it directly from our Snowflake repository," Mr. Dillon said.
Brian Lu, a data product manager at DoorDash, also noted the software’s ability to make it easier to share data across different groups. The on-demand delivery platform does analysis of all its business functions, from product development to sales, in Snowflake. Snowflake makes it easy to build data-access policies and adjust them as needed, he said.
One of the more appealing features of the platform is the ability to share live data—such as metrics for push notifications or email open rates—with customers who are also Snowflake users, said Jon Hyman, co-founder and chief technology officer at Braze Inc.
The company, which sells software that helps companies manage communications such as push alerts, signed up for Snowflake to help it more quickly analyze the nearly 100 billion messages it delivers every month.
“We benchmark email and push engagement rates across multiple industries, take that anonymous data set and make it available for any Snowflake customer," he said.
The pandemic may have also played a role in Snowflake’s successful stock market debut, said IDC analyst Dan Vesset, partly because of the need to analyze business data more frequently.
“Maybe in the past you got reports once a month or quarter," he said, “and now you need it multiple times per day because things are changing so, so rapidly."
—John McCormick contributed to this article.
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