Snowflake may seem like just another cloud storage service. It was founded in 2012, and after a couple of years in stealthy development, it saw a public launch in 2014. They offer cloud storage and analytics, with the service typically described as a data warehouse-as-a-service. Why are we talking about it when there are other, more popular alternatives? Well, the initial public offering, or IPO, shook the cloud-based world.

The company made its IPO on the 16th of September with a price tag of $120 per share. By the end of the day, the company’s valuation had doubled to just over $70 billion. The opening IPO was considered high already, leaving the closing IPO the largest of any software company. Perhaps the evaluation wouldn’t be so shocking if analysts deemed the technology superior. However, when compared to Amazon or Google, they don’t. Should you take Snowflake seriously? Despite the above, we still think so, and here’s why.

Are They Insane?

The IPO may come as a shock to some. If the technology is good enough to warrant such a valuation, who are we to argue. And that’s what the below explores. Is it good enough to keep up with its competitors? The foremost problem analysts have is that the platform’s long-term prospects seem questionable at best. These analysts all tend to have the same six points, but you can counter them if you look a bit deeper. Despite the flak Snowflake is receiving, maybe they aren’t insane, though that’s for you to decide. The six main arguments and the counters to them start with:

1. Too Much Competition

As this article opened with, Snowflake stepped into a market that was already occupied. It’s a small grocery store next to a supermarket. Who are the supermarkets in this analogy? Google, Microsoft, and Amazon. All three have their own cloud solution alternatives:

• Google BigQuery
• Amazon Redshift
• Azure Synapse 

All three are continuing to grow in some fashion or another. Google, for example, can already provide almost instant ad-hoc analysis. It can also offer storage that can independently scale. That’s already impressive, but they are working on getting ahead of Amazon and Microsoft in other areas as well. Microsoft, as another example, has provided data lake capabilities. Consumers using the service can access data outside of the Azure platform. Not to be outdone, Amazon allows consumers to work at a petabyte-scale, however in comparison so does Azure Synapse and Google Big Table and Big Query. Companies use and store more data than ever, and until recently, no one could handle a petabyte. As new innovations get made by one, the other two work to match or outdo them. It’s estimated that these three own 60% of the market. Together, that leaves little room for new competition.

Is There Room in the Market for Snowflake?

The three market leaders will always be ahead. They have the funds and established client base to ensure that. That relates to almost any industry, not just cloud solution providers. So how did Snowflake get off the ground in the first place? Well, the data management solutions market is still in its infancy, in the grand scheme of things. It is growing rapidly, and despite three leaders with a clear lead, not yet over saturated. Snowflake is unlikely to knock them off the top spot, but there is still space for them. In fact, Snowflake’s size might play to its advantage.

The three big companies offer a wide range of services, whereas Snowflake has a single focus. Snowflake might not have the same budget as the others, but they can put the money directly into the service they offer. Targeted investment is almost always better than stretching resources across many areas. This focus could see them catch up, and perhaps overtake their competitors in the data management market. It won’t be easy for them, but don’t be too quick to write off Snowflake.

2. Snowflake Relies on Its Competitors

Snowflake relies on the public cloud services of its competitors. It also offers cloud infrastructure to its consumers, but it doesn’t have full control of it. In 2014, at its public launch, Snowflake ran on Amazon before switching to Microsoft Azure in 2018. To date, Snowflake is running on the Google Cloud Platform and has since 2019. All Google, Amazon, or Microsoft would have to do is raise the prices of the services Snowflake makes use of. Alternatively, they could limit Snowflake’s opportunities or impose strict terms and regulations. Google could set any number of restrictions on Snowflake, and Snowflake is at their mercy. If they decide that Snowflake should no longer exist, they have the power to make that a reality.

If It’s So Simple to Remove Snowflake, Why Haven’t They Already?

While the big three companies own the market, they still rely on third-parties, as both consumers and service providers. Attacking one third-party will set a bad precedent. What’s to stop them from going after other smaller companies? That’s what others will think before they set out to find alternatives. That’s not to say it won’t happen, as all three have the power to do so. That will always be a risk for Snowflake, and they have acknowledged this. 

Consider, then, that Amazon increased the price of its infrastructure. First, they are now more expensive than the other two market leaders. Second, the economy of the cloud-solution market is somewhat self-governing. If one provider raises or lowers its costs, the others will follow. Raising the prices for Snowflake will affect everyone else. Every provider will then have to raise their prices, and the end consumer will be the one who pays more.

 In short, Snowflake could find it challenging to stay on the market if one of the larger competitors decided there was no place for them. This could happen in many different ways. However, it will have a snowball effect, one way or another. Never say never, though at this stage it seems unlikely.

3. What About Open-Source Alternatives?

Open-source technology has several advantages over a paid service: 

• It’s cheaper to implement. The development costs are low, and there is no need for marketing. The end costs get passed on to the consumer.
• The overall community has a say on its growth. Many people are behind the development of open-source software, meaning some consider it more secure. An entire community of users is working to improve and review the system.
• It allows companies to avoid getting locked into a particular service provider. 
• Open-source provides flexibility. Open-source is very flexible, meaning a company can modify it to meet its needs.

These are just some benefits. However, when looking into this argument deeper, it’s obvious why open-source isn’t always the answer.

If Open-Source Technology Exists, Why Isn’t Everyone Using It?

Open-source is cheap on the surface. Actually, most open-source technology is free, and this is a significant selling point for enthusiasts. However, if you plan to use one, don’t take the initial price tag at face value as these same enthusiasts are often invested in the software, so look at it through rose-tinted glasses. You will need to invest in your systems to cater to the open-source software.

Don’t forget the additional costs to keep those systems running. You then need to employ a team of experts to manage the systems. And if something goes wrong, you only have their knowledge to rely on, as there isn’t any tech support to call upon. Is open-source starting to sound expensive? If everyone can choose free software, why would there be ones that cost? Google, Amazon, and Snowflake take the technical burden away from you. You can focus on your business instead of dealing with the implementation of technology you might not understand. At this time, there isn’t an open-source alternative that does things better than a paid service. Maybe that will change, but not anytime soon. Additionally, in the near future it may become more difficult to open source technology to work seamlessly together. 

4. What About More Specialized Solutions?

The above already explores Snowflake’s competition that can do the same, to a degree and more. Snowflake isn’t out of the running because they specialize, but they aren’t the only ones. Other companies also offer specialized cloud solutions. Why should a company pick Snowflake when their specific need is better met elsewhere?

Snowflake Does What It Does Well

Specialized solutions are nothing new. If a company has specific requirements for its cloud-based solution, they will pick a provider that can do it. Snowflake serves a purpose, and it does it well. If a company has a requirement that Snowflake can meet, then they will choose them. If they would instead prefer to stick with smaller specialized providers that suit their immediate needs and then one day has a need for Snowflake’s specialty, they might come back. Either way, Snowflake wins, so this argument really lacks any weight behind it.

You don’t go to a car dealership shopping for a boat. If you need what Snowflake offers, they can meet your needs. However, to counter that counter, Snowflake has the flexibility that larger companies don’t have. For example, Google has its services outlined, and though there is a lot on offer, they can’t always offer something specialized. Many of these services rely on third-parties, so changing the service for a single customer is more trouble than it’s worth. Snowflake, on the other hand, can alter their services to meet the needs of consumers. They offer a specific use but can provide flexibility.

5. Snowflake Does Nothing New, and There Are Flaws in Its Architecture

Snowflake allows consumers to scale the service with their needs. If they need less computing power, they can pay less, and if they need more, Snowflake can provide it. Scaling isn’t unique to Snowflake. The argument here is the Snowflake does nothing innovative. Snowflake opts to use a hybrid shared-disk/shared-nothing design, a storage architecture that is over 30 years old. They could have done something innovative. Instead, they stuck with an architecture that has been around for a while. This lack of innovation also raises security concerns. Instead of starting from scratch, Snowflake works off architecture that already sees lots of use. It can easily get copied by competitors for their own use.

The Analysts Failed To Analyze

The adage, “if it ain’t broke, don’t fix it,” comes to mind. Hybrid shared-disk/shared-nothing architecture works, so why should Snowflake start from the ground up. In truth, they have taken steps to make improvements, but the analysts presenting these arguments appeared to ignore them. Yes, Snowflake has reused technical concepts, but they have made them their own. Snowflake’s architecture splits customers’ data into micro-partitions, which are stored in virtual storage. Snowflake then stores the metadata of these partitions for easy access.

A consumer makes a request for specific information. The system will then examine the metadata to find the necessary micro-partitions. Instead of pulling all the data, it only scans the relevant micro-partitions, which makes the service a lot faster. It is fair to assume that Snowflake has patents protecting this unique architecture layout. That means a competitor won’t be able to copy the system as easily as some thought. They may be able to reproduce the results with different methods, and if so, good for them. As you might have guessed, the arguments against Snowflake are reaching now, which leads to the last one.  

6. Snowflake Only Appeals to Small Companies

Snowflake isn’t bringing in as much profit as some of its larger competitors. Lower profit correlates to the size of their customers. With that being the case, Snowflake doesn’t cater to nor attract the attention of large clients.

Every Company Started as a Small Company

Google and Amazon were small companies once, but not anymore. To say that only catering to small companies is a disadvantage is an odd statement. To be the cloud-solution provider to companies that are growing is a privilege. As they grow, so will their requirements, and they already have an established relationship with Snowflake. Furthermore, the claim that Snowflake only works with small companies is wrong. Their portfolio has over a hundred Fortune 500 companies. That number is likely to grow as the years go by, and they gain more recognition. Yes, Snowflake is appealing to small companies, but the same can be said for larger companies. If Snowflake can cater to both, they have a healthy future. Capital One uses Snowflake, and they are by no means a small company.

In Conclusion

The above arguments against Snowflake came about due to the overly optimistic IPO. Despite that, the above counters show that Snowflake should not be underestimated. They offer an excellent specialized alternative to the prominent three market leaders. Yes, their competitors make what they do possible. However, in a world where Google, Amazon, and Microsoft dominate multiple markets, that is the case for many companies. Snowflake is an innovative cloud-service provider that caters to big and small companies. However, the points raised all have merit, though as we got to the end, it became a little desperate. Snowflake became one of the most expensive names in tech. To keep that position, the company will have to perform without fault. For this reason, it has speculated that Snowflake might face a violent sell-off. Only time will tell, but until then, when looking purely at the technology, Snowflake is an excellent option. 

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