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Hot tech upstart Snowflake reveals plans to go beyond its niche

June 8, 2021, 1:00 PM UTC

Buzzy cloud-software company Snowflake has some big long-term plans: becoming a major rival to business tech giants like Oracle and Microsoft.

The strategy to get there, revealed Tuesday, is to make Snowflake more than just a service that clients use to store and analyze their own data. Rather, the company will host business software and data sets that customers can tap when they want.

“Our end game is to build a massive data cloud where anybody with a Snowflake account is plugged in,” CEO Frank Slootman tells Fortune.

Snowflake’s existing cloud-database business is already doing well. In the first quarter, companywide sales jumped 110% from the same period a year earlier to $229 million. And the amount of money customers had committed to spend in the future with Snowflake more than tripled to $1.4 billion.

Since its initial public offering in September, Snowflake’s shares have been volatile. Its stock, priced at $120 in the IPO, peaked at $429 in December, plunged to less than $185 a few weeks ago, and then rebounded to $243 on Friday.

Despite the gyrations, many investors expect Snowflake to become one of the next big things. In fact, the buzz is so great that the company’s market value of $72 billion tops those of far bigger and more established tech companies like VMware, Hewlett Packard, and Workday.

Yet Snowflake faces significant challenges in its rivalry with Oracle, Microsoft, Amazon, Google, and startups like Databricks. For one thing, it’s losing huge amounts of money—$203 million in the most recent quarter alone. It’s also racing to add features and improve performance to its cloud-database offerings as rivals do the same.

Morgan Stanley analyst Keith Weiss voiced optimism about Snowflake before the latest expansion plans were announced. In a recent note, he wrote, “Snowflake is executing well on its strategy to sign and then significantly expand large customers” and that it has shown “early progress advancing its vision as an enterprise data cloud platform.”

To justify its market value and drive its stock even higher, Snowflake plans to expand beyond its early business that focused on storing and analyzing limited kinds of business data, known as a data warehouse. “Data warehousing is such an outdated concept compared to what we’re pursuing with the data cloud,” CEO Slootman says.

Under the new Snowflake, customers would be able to write their own applications that would run on Snowflake’s system. Clients would also be able to use outside applications to tap directly into data stored with Snowflake.

And while Snowflake has long hosted sets of data that clients can use, like historical weather or economic figures, it’s adding ways for the owners of that data to charge for its use within Snowflake’s system.

Companies that have agreed to build apps that run on Snowflake’s system include money manager BlackRock, food delivery service Instacart, and software developer Adobe. Meanwhile, companies including IT consulting company Infosys, data security firm Okera, and A.I. automation company DataRobot have all agreed to make their outside software apps interoperate with Snowflake’s systems.

A push for stricter rules that limit the flow of data in Europe and elsewhere could make Snowflake more useful. Already, customers can set rules about how data is used within the customer’s own organization. Now a customer using Snowflake can let another customer use its data to analyze or train an A.I. system without letting the other actually see or share any of the data. Snowflake has even invented the concept of a “data clean room,” in which a user’s data can be analyzed without any chance of being copied.

Amid the pandemic, and the remote-work trend, Snowflake recently stopped calling its San Mateo, Calif., office its legal headquarters. It now lists its base of operations as “No-Headquarters/Bozeman, Montana.”

“The whole notion of a ‘headquarters’ is inappropriate for modern enterprises that are globally distributed,” Slootman explains. “The idea that all the important people are in one place, and they’re hanging out together, and having lunch together, and they think big thoughts and make big decisions, and everybody else is sort of far removed from the action? This is complete nonsense.”

The shift is also about finding cheaper and more plentiful programmers and engineers outside of Silicon Valley, the CEO adds.

So why do the company’s filings list Bozeman as its sort-of headquarters? Regulations require companies to declare a headquarters where both CEO and CFO live, and Slootman and CFO Mike Scarpelli both have houses in Bozeman.

“The whole Bozeman thing was not our idea,” Slootman says. “I would not have had another executive office if it wasn’t for the government saying you have to have one.”

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