In a high-stakes conflict that has gripped the tech industry, two AI data commercial titans, Snowflake and Databricks, have been locked in a fierce battle, with employees being incentivized to bad-mouth competitors and offering bonuses for winning over their clients. The latest twist in this saga sees these companies now tearing into Microsoft, with the war heating up ahead of Snowflake’s anticipated initial public offering (IPO).
The Tabular Tussle
Snowflake had its eyes set on an acquisition that could bolster its presence in the AI sector. Tabular, a promising startup, seemed like the perfect fit. Negotiations were underway for a deal worth over $600 million. However, in a stunning turn of events, Databricks swooped in and acquired Tabular for nearly $2 billion, a figure that was staggering for a startup with an annual recurring revenue of just $1 million.
The acquisition was a bitter pill for Snowflake to swallow, especially since it occurred during their annual conference, right before the incoming CEO Sridhar Ramaswamy was set to deliver a keynote speech.
The Battle for Supremacy
Snowflake and Databricks, both founded in the early 2010s, initially had different niches within the broad data software market. They even cross-promoted each other’s businesses, with Databricks’ marketing team using Snowflake in their analyses. However, as both companies began releasing overlapping products, their amicable relationship quickly turned into a rivalry.
Snowflake, with its rapid expansion, completed the largest initial public offering in the software industry in 2021. Meanwhile, Databricks has also become one of the world’s most valuable startups, with its IPO eagerly awaited. The once perceived underdog, Databricks, has become increasingly combative, employing aggressive marketing and sales strategies that have pushed their former partners into a winner-takes-all scenario.
The SnowMelt Plan
According to over forty current and former employees, customers, and partners from both companies, SnowMelt has become an open secret within Databricks. The plan’s aim is to wrest business away from Snowflake, particularly in their strongest area – data warehousing. Salespeople are incentivized with bonuses for converting potential Snowflake customers to Databricks.
For those already signed with Snowflake, Databricks sales teams offer to offset termination fees with credit incentives or extreme discounts. Their typical pitch highlights their platform’s affordability and advanced features, such as building AI models using complex unstructured data for businesses. They even provide a special program to estimate cost savings for potential customers switching from Snowflake to Databricks.
Snowflake’s Response
Snowflake, however, is not sitting idly by. They counter by emphasizing the cost-effectiveness of their own products. Christian Kleinerman, long-time product executive at Snowflake, stated, Both sides have taken cost messaging to the extreme. I tell customers to experience it for themselves, to pick a representative benchmark to compare prices.
Databricks, on the other hand, focuses on brand-building through advertising. Attendees at Snowflake’s 2023 user conference in Las Vegas were greeted by Databricks ads everywhere, boasting that their product prices were only a ninth of Snowflake’s. Databricks CEO Ali Ghodsi often speaks candidly to the media and frequently shares migration stories and benchmark prices on LinkedIn that favor his company. Many employees have been asked to like or share these posts on their accounts.
Ghodsi admitted that these posts have effectively increased Databricks’ influence among customers. Two or three years ago, no one would have been fired for choosing Snowflake’s data warehouse solution – but that seems to be changing now.
Market Impact
While it’s challenging to measure the exact impact of this aggressive marketing style, Databricks’ efforts have yielded results. According to an investor report from June this year, Databricks stands out from most other large software vendors with its increasing revenue growth. Their projected recurring revenue for July is expected to reach $2.4 billion, with Databricks’ unique approach to the market contributing significantly to this figure.
The Microsoft Factor
Both companies now see Microsoft as an imminent threat, particularly as the tech giant continues to expand its cloud infrastructure services. The battle between Snowflake and Databricks is likely to intensify as they vie for market dominance, with Microsoft looming in the background as a potential game-changer.
As the war between these AI data giants continues to unfold, one thing is clear: the tech industry is witnessing a fascinating and high-stakes competition that is shaping the future of data management and AI.
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