The next big tech rivalry will be between $67 billion Snowflake and $28 billion Databricks, which are on a 'collision course' as the AI and data analysis market heats up

  • Snowflake and Databricks will increasingly battle for dominance of big data, analysts say.
  • The two Silicon Valley companies take different approaches to both data and business strategy. 
  • Snowflake has a ‘frenemy’ relationship with Amazon Web Services, while Databricks builds careful alliances. 
  • See more stories on Insider’s business page.

Snowflake and Databricks, two brawny young companies with very different approaches, are quickly defining the booming industry of big data – and analysts say they are “on a collision course” that could see them establish what might just be the next great rivalry in tech. 

Snowflake helps companies move their data into structured virtual warehouses, where they can run granular business analytics on it. Led by brash CEO Frank Slootman, Snowflake barreled to a software industry record $33 billion initial public offering in September. Its stock has been on a roller coaster ride of ups and downs – recently, mostly downs – ever since. 

Databricks takes 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. CEO Ali Ghodsi has methodically built a war chest of $1.9 billion of venture capital on a patient IPO route. 

Here’s where things get really interesting. Snowflake is moving into the AI space as it seeks to help customers better use their data. Databricks is adding more business analytics features. So two young companies that have grown without obstacles are suddenly catching each other’s competitive eye – and beginning to square off.

The companies are “on a collision course,” says Gartner analyst Adam Ronthal, as Snowflake adds AI capabilities and Databricks wades more into the business analytics space. “They’re converging from both sides,” Ronthal says. “Over time they’ll be increasingly competing.”

Still, the market opportunity for Snowflake and Databricks is huge, and investors are “clearly optimistic” about the data analytics market, says UBS managing director Karl Keirstead. Together, the combined market caps of both companies are nearly $100 billion. Snowflake is now valued at $67 billion, while Databricks was privately valued at $28 billion.

There is somewhat of an “overlap” between both companies that will likely increase over the coming years, Keirstead says. And both companies benefit from the high demand from companies that want to analyze data in the cloud. One key to the rivalry that gets analysts’ attention is the companies’ contrasting relationships with the major cloud companies. 

“I think the overlap is relatively modest, but in some cases enterprises are able to use Databricks instead of Snowflake,” Keirstead told Insider. “Both are young companies. This space is extremely dynamic.”

It’s “inevitable” that a larger overlap will emerge and may even become more direct rivals in three years, Keirstead says, with Snowflake stepping into AI and predictive workloads and Databricks emerging as an alternative to Snowflake. 

“They clearly are going head to head and coming at it from different angles,” said Starburst Data CEO Justin Borgman, whose company works with both. 

Databricks and Snowflake both declined to comment on the companies’ relationship. 

Snowflake CEO Frank SlootmanSnowflake

Snowflake has a ‘frenemy’ relationship with the cloud giants 

Snowflake collects all of a company’s data and “sits in front of” the big 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 IPO, and many bought into Snowflake as the main cloud database company, replacing on-premises database companies like Oracle. 

At one point, Snowflake even propelled to a $120 billion valuation, surpassing that of IBM. Since then, Snowflake’s valuation has fallen to $67 billion.

“It was one of the most successful tech IPOs we’ve ever seen for a relatively young company,” Keirstead said. “To hit $100 billion in market cap is absolutely extraordinary. Clearly developers were excited about this phenomenon.”

Slootman famously led Snowflake to the monster IPO – but at times rankled the big public cloud players, analysts and investors from the cloud-computing world say. Snowflake bulled its way into the front line of data companies in ways that boosted its appeal – but may have complicated its relationships with the companies with whom it collaborates. 

At the Wing Cloud Data Summit in December – where AWS and Microsoft were sponsors – Slootman told online attendees: “We fully abstract the underlying cloud. You don’t see it, you don’t touch it, you don’t get a bill from it, and so on. The experience is highly aggregated. You get a bill from Amazon, and it’s 500 line items. That’s not the case when you do business with us.”

Snowflake does partner with all three major cloud providers. Keirstead estimates that the majority of Snowflake’s revenue comes from its AWS partnership. A good number also comes from an “emerging partnership” with Microsoft, while its relationship with Google Cloud is “fairly early stage.”

At the same time, Snowflake competes directly with cloud data warehousing offerings like Amazon’s Redshift and Google Cloud’s BigQuery.

“Snowflake and AWS have an extraordinarily tight partnership and a ‘frenemy’ relationship,” Keirstead said. 

Snowflake took on the big companies, billing itself as the a simpler solution that manages companies’ data within the public cloud companies’ architecture. That vaulted the IPO to great heights that may have been unsustainable. The stock was at $234 a share this week, down from a high of $388 in December. 

Still, the falloff has less to do with company performance or market demand, but rather that the entire software sector has “traded off substantially” from February to March, Keirstead said. He says now the correction has largely “run its course,” so he put a buy rating on Snowflake’s stock. 

“The feedback we’re getting from customers is extremely bullish,” Keirstead said. 

Databricks CEO Ali GhodsiDataBricks

Databricks has started to overlap with Snowflake

Databricks is more focused on predictive analytics – algorithms that foresee the future with AI. In contrast to Snowflake sitting “in front of” the public clouds, Databricks sits “on top of” the big public clouds. That means customers can do analytics and build AI programs and apply them to their data wherever it is. 

But recently Databricks has added a new functionality that could affect Snowflake’s data warehousing sector. Databricks has added SQL (Structured Query Language) searches to its tools. SQL can search data in its roughest forms. That could allow companies to need less help organizing their data – which is Snowflake’s forte. 

What’s more, Databricks picked up investment from the major cloud companies as it continued to build a warchest 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 forming between Databricks and the public clouds. 

For example, Ghodsi defended Amazon from critics, pitched customers with Google Cloud, and pulled in investment from AWS, Google, Microsoft, and Salesforce. 

“We’re believers,” Gene Frantz of CapitalG, formerly Google Capital, told Insider of Databricks. He called Snowflake “a great company,” but said he thought Databricks is a “strategic partner for all the cloud companies.”  

While Databricks has started wading into Snowflake’s pool, it may take some time before there’s major overlap. 

“There’s lots of runway before they overlap securely with Snowflake,” Keirstead said. 

In about two years, Keirstead predicts that there will be about five to six alternatives in that market, with Snowflake and Databricks emerging as the “best of breed” in their respective specialties. He says there’s “no way” the market will only be dominated by those two companies. 

Already, data warehousing startups like Yellowbrick Data and Firebolt have risen to the challenge.

“That scene is enormous,” Keirstead said. “When we talk to large enterprise CIOs, CTOs, I would suggest that cloud-based data analytics is now a top 3 spending priority for 2021.” 

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