The Big Story

Drifting away?

Snowflake helped reinvent the data warehouse for the cloud. And its success paved the way for huge funding rounds for Dremio, Cockroach Labs, Starburst and even key rival Databricks. But the company has struggled to maintain the stock market momentum from its historic IPO, with the stock now down roughly 38% from its December high as of Friday's market close.

It's difficult to say exactly what investors are concerned about, but it doesn't appear to be CEO Frank Slootman's comments on Thursday about diversity taking a second seat to merit. Revenue was up 110% in the most recent quarter to $228.9 million.

But one thing is clear: The competitive environment is becoming much harsher.

• Rivals are becoming more vocal about what they believe are shortcomings in Snowflake's technology, claiming that the company is no better than legacy platforms when it comes to allowing users to share data with non-users.
• "The nefarious problem in much of our world when it comes to dealing with data isn't the point of querying the data," said Dremio CEO Billy Bosworth. It's "all the movement and copying of the data required to get you to the point."
• In a show of just how much scrutiny the company is under, Snowflake published a blog post in March co-authored by all the founders titled "Choosing Open Wisely," which aimed to debunk some of those attacks.
• Tucked away within the diatribe was a short, but telling line: "We're now undergoing one of the most substantial changes in our industry: delivering solutions as managed services." That shift, the founders argued, is changing how open-source technology should be evaluated.
• Open-file formats "limit innovation in the long run," Snowflake product head Christian Kleinerman told Protocol.

Recent announcements from rivals Dremio and Databricksunderscored the divide between where Snowflake and other companies in the industry are headed

• Last month, Databricks rolled out a new feature called Delta Sharing that enabled anyone to share data housed in the company's platform with anyone else, so long as they used another vendor that supports its Delta Lake open-source project.
• That means that if two data scientists use tools like Power BI, Tableau or FactSet, they can share information sets between each other without having to be Databricks customers.
• "It's the industry's first-ever data sharing mechanism that's open," Ghodsi told Protocol.
• Dremio also just introduced a new product that enables users to run all their SQL workloads on data lakes — a key step in its goal of eliminating cloud data warehouses, which would run Snowflake (and others) out of business.

That is unlikely to happen, given how prevalent the technology is and how devoted some Snowflake users are. The company claims a net retention rate of 168%, much higher than the industry average.

But the move to more interoperability is a big industry shift that can't be ignored.

• In the past, for example, Oracle customers could only share data sets with other Oracle customers, which locked customers into one provider.
• That forced enterprises to buy database services from many vendors, the exact situation today's database tech leaders are trying to avoid.
• In some ways, that old paradigm is as true for Snowflake customers as it was for Oracle customers: They're restricted from sharing information sets with non-Snowflake customers.
• But Kleinerman said that was a deliberate move by the company, one that allows Snowflake to make its engine continually more powerful because it's only working with one type of file format.
• "The notion of everything open sounds great. We think we can have a much better experience and more interesting use cases with Snowflake on both sides," he said.
• Kleinerman cited a recent move by Snowflake to adjust its own file formats, which he said led to as much as a 30% reduction in costs for customers.
• "That is very difficult to do with open cloud formats," Kleinerman added.

Still, there are signs that Snowflake at least recognizes the threats posed by Databricks, Dremio and others.

• It recently added support for Java and Python, for example, in an attempt to bring more data scientists onto the platform.
• And it's pushing what it calls Reader accounts, effectively very basic Snowflake accounts that allow those users to then receive data sets from the higher-paying customers.

None of this is to say Snowflake is doomed. Even its closest competitors will admit the company has an outstanding product — it just might not be as game-changing as Slootman and other leaders may be touting to the marketplace.

• The reality is many large enterprises are using Snowflake. And startups are eager to build around the technology.
• Cloud security startup Lacework, for example, has 100 data warehouses running on Snowflake and chief architect Ulfar Erlingsson plans to grow that threefold in the near future.
• Snowflake is also about to make a big push to court application developers, Kleinerman said, hinting at an announcement this week that would help further solidify the platform into the broader tech ecosystem.

What's happening now with the stock is probably more a leveling out of the insane investor interest from December based on the pandemic-fueled surge of interest in cloud companies, and less a direct reflection of any major struggles in Snowflake's business.

But as users push for open ecosystems that give them the flexibility to run their data on whatever engine they want, Snowflake will have to effectively straddle the boundary it has created between open and closed architectures.

One thing is certain: Rivals are charging hard.

— Joe Williams

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June 8: Snowflake Summit kicks off. So does Microsoft's Azure + AI Conference. UiPath reports earnings, the first since its IPO.

June 9: Healthcare execs from IBM, Google and others speak at the WSJ's Tech Health conference.

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A MESSAGE FROM MICRON

Recently, Micron announced new memory and storage innovations across its portfolio based on its industry-leading 176-layer NAND and 1α (1-alpha) DRAM technology. But what does "1α" mean, and just how amazing is it?

Learn more