Specialist
Former senior executive at Snowflake Inc
Agenda
- Snowflake’s (NYSE: SNOW) overall operating environment and sales growth outlook
- Head-to-head competitive dynamics vs Databricks and dynamics vs BigQuery (NASDAQ: GOOGL), Redshift, Synapse (NASDAQ: MSFT) and more
- Partnerships with cloud vendors and ‘frenemy’ dynamics, customer adoption trends and data warehousing performance in a recession
- H2 2022 outlook and product moat analysis
Questions
1.
Could you give a brief overview of Snowflake and its overall operating environment? What 2-3 key trends or drivers are most important for us to pay attention to when we’re looking at the business?
2.
How much of the Fortune 500 and Fortune 1000 market might already be on a modern data-management system, either data-cloud provider, warehouse, lake or anything similar?
3.
Snowflake reported that spend on database management systems as a percent of customers’ total software spend has improved quite a bit, 11% of total spend in 2016 and up 13% in 2021, and it expects improvement as close to 17% by 2026. How would you characterise the state of demand for the company’s data-cloud software? Why do you think demand is so healthy overall?
4.
Would you expect any pullback in demand as we emerge from coronavirus and normalise into a new overall demand environment? Do you think businesses are more focused on accelerating their digital transformations and adopting core products from the likes of Snowflake during that period?
5.
You mentioned enterprises possibly being in poor financial health. How inelastic would you expect the demand environment to be among this core group of customers for Snowflake as they look to possibly optimise cost, given we’re seeing a lot of signs to that we may be entering a period of flat to economic decline, a possible recession? Would you expect certain businesses to possibly leverage Snowflake more, to better understand their business needs? Do you think there would be an overall decrease in consumption? What do you feel is most likely for the net effect in a recession for Snowflake?
6.
Snowflake’s overall opportunity has gone up a lot that USD 173bn figure, that’s just the data warehouse, data lake and Unistore products. The company has added on quite a bit in terms of science and machine-learning applications, Snowpark areas and cyber-security partnerships. Why do you think it’s difficult to evaluate the scope of that market overall? Do you think its goal is to continue to add onto it and augment its portfolio to increase its addressable market opportunity?
7.
I think Snowflake’s data-lake portion is now included in its addressable market opportunity. Do you think the company is viewing Databricks as its main competition in either the near or long term?
8.
Why do you think customers choose Snowflake over Databricks? When do you think there’s a competitive environment when a deal is more favourable for Snowflake over Databricks, or do you think a lot of customers are just choosing both?
9.
Do you expect enterprises who work with both Databricks and Snowflake to continue to utilise both vendors over the next 3-5 years, even as they offer more and more overlapping solutions? As a lot of these vendors continue to go head-to-head, who do you think would be the likely vendor to take more share away from the other?
10.
Do you think there are any areas, in terms of by product or tech advancement, that might be critical for either Snowflake or Databricks to execute on and we could watch to better monitor which vendor might have an edge in the long run? Alternatively, do you think they’re both going to continue to augment and go neck-and-neck? Is there any signal we can look for that one vendor might be pulling ahead of the other in the long run?
11.
Google Query launched BigLake, a new data-lake-storage engine, although it might not be generally available yet. Synapse also has a serverless product. Do you see hyperscalers increasing investment in their products in these subsidiaries as turning up the heat on Snowflake or Databricks? How do you think Snowflake is viewing these vendors that they’re in coopetition with, to an extent, in the long run?
12.
You said AWS was seemingly not looking to innovate with the Redshift product as much because of the partnership with Snowflake. What amount of innovation or investment into Redshift might be required from AWS to try to reach any sort of competitive parity? Do you think that’s off the table?
13.
You mentioned making adjustments, and Snowflake announced a row-based storage engine for transactional data in June 2022. I think it’s under the Unistore brand now. Would you say supporting the new transactional workloads might put the company into deeper competition with any other vendors that are offering real-time data or data-in-motion products, if you think that’s the right competitive landscape to think about? Are there any others?
14.
Do you consider any smaller, potentially hyper-growth players such as Firebolt to be competitors to Snowflake? Is there a long way to go before they might reach any direct competition with Snowflake and Databricks?
15.
What do you make of Cloudera and its ability to drive growth out of its new data platform? It’s now a private company, and it’s seemingly trying to get more things right. How do you assess the company? Do you think there’s any chance it could mount a comeback against Databricks, Snowflake or any of the other hyperscalers launching products?
16.
Snowflake is running on the consumption-based revenue model. Do you think this structure exposes the business more to economic volatility or negative externalities? Are there any scenarios where existing accounts don’t increase usage?
17.
Do you think the consumption model over the seat-licence model helps increase stickiness? Snowflake announced 174% net-revenue retention in Q1 2022, and it posted 170%-plus consistently over the past few quarters. Do you think this retention is sustainable? What makes these types of solutions so sticky? Do you think there’s any floor, closer to around 140% or 150% net-revenue retention?
18.
Snowflake’s new announced partnerships, such as with Dell Technologies and Pure Storage, seemingly open the door to increased consumption in accounts that may be averse to loading specific data to the cloud. How much growth can be gained there? What do you think about these partnerships and how beneficial they could be to Snowflake?
19.
It seems a lot of the enterprise seems to prefer a hybrid-cloud environment. Do you agree with this assessment? Is hybrid cloud, as the broader concept, particularly relevant for most enterprises? Would you say Snowflake’s move to partner with Dell and Pure Storage was defensive or offensive, given one of the company’s strategies we’ve discussed at play here, including hyperscaler partnerships involving on-premise vendors as well?
20.
How successful is Snowflake in converting customers to Snowflake editions, the different pricing packages? How much pricing power does the company have to move customers onto higher-paying packages? What is Standard to Business Critical and up based on? Is it higher consumption?
21.
How might Snowflake’s go-to-market strategy or approach have evolved around trying to introduce customers to editions at a higher price point? Does that seemingly improve gross margin overall? Gross product margin was already around 70% in 2021. Do you think the goal is to try to land new accounts on the higher-edition solutions? Might customers prefer Standard over Business Critical in any specific situations or verticals?
22.
Snowflake seems to have leveraged its channel partnerships well. It has about a 30% mix of channel and indirect sales, and it’s seemingly more effective at leveraging the channel than peers. Why do you think this is? Would you expect the company to continue to leverage its partners to increase use cases and continue to scale the business?
23.
Who are the strongest partners for Snowflake? Where do you think the company should focus most of its efforts in forming channel partners and alliances? Databricks has talked a bit about trying to approach partners in a similar way. Do you think there’s any room for other vendors to form as strong partnerships as Snowflake has had to date?
24.
What might be the customer perception around Snowflake vs Databricks’s pricing? Databricks seems to come in cheaper in terms of reducing its TCO [total cost of ownership], whereas Snowflake’s TCO is typically a bit pricier. Do you think this is a difference-maker to customers? Is Snowflake content with being a bit more of a premium offering?
25.
We discussed how Snowflake and Databricks’s use cases seem to increasingly be overlapping. Could you quantify how differentiated these players are today? How long do you think it would take for them to continue to overlap until the solutions were relatively or directly comparable?
26.
We talked about the hyperscaler competition, and you mentioned it would probably take a significant effort for AWS or Azure to re-architect. Might it ever be a possibility or probability that those businesses could look to make those investments? In what place could this leave Snowflake, if they were to do so?
27.
What is the most important and critical place for Snowflake to execute on to reach USD 10bn-plus in revenue? Do you think 100% YoY top-line growth is sustainable over the next 1-3 years?
28.
Snowflake seems to have brought down the time-to-ramp or time-to-value a bit. It was as high as 281 days in Q4 2020, and it’s down to about 210 days in Q2 2022. What is reasonable or critical for the company to execute on to continue to bring that down for customers? Is it continuing to form and leverage those channel partnerships? What do you think is its ability to continue to reduce that, or do you think there’s any floor as to how well that can go?
29.
What’s your take on potential acquisition opportunities for Snowflake? Are there any adjacent products or end markets that would be complementary? Are there any areas within the platform that might be particularly lacking and the company could look to innovate on or add onto?
30.
How verticalised would you say Snowflake’s sales force is? What do you think enables the company to compete effectively over its broad use cases in the many different verticals it operates in within that key Fortune 500, Fortune 1000 customer-account base?
31.
Are there any other potential wild cards or disruptors that we should monitor that could impact Snowflake and its ability to grow over the next 1-3 years?
32.
What’s your 3-5-year outlook for Snowflake and the data cloud sector? Who would you consider the probable medium-to-long term winners and losers in the space?
33.
Are there any industry assumptions that we should be challenging about Snowflake?
