Why is Snowflake so expensive

[disclaimer: comment written by one of cofounders of iomete - a YC-backed startup - active in the same market as Snowflake]

I think Snowflake is (still) expensive because it is a venture-backed enterprise software company and goes through a typical trajectory...

Story goes like this: founders are product-driven and first movers -> find PMF -> need VC funding -> VCs only fund enterprise software ventures with 70%+ gross margins and high retention rates -> product/service gets priced to achieve these metrics -> VCs happy to fund sales & marketing machine needed to obtain sales growth, nobody cares about profitability until after IPO -> startup is everyone’s darling until ~2 years after IPO.

Then: economic crisis hits, customers become more price sensitive, competition intensifies. Plus now management is exposed to quarterly pressure of financial markets to deliver on top-line and margin expectations.

Meanwhile a bunch of startups are building (lower priced) alternatives. Perhaps not as mature or feature-rich as Snowflake, but good enough for 80% of use cases that Snowflake covers.

Therefore the assertion that Snowflake is not optimizing their product sounds a bit crazy to me. It would be optimizing for short-term gain, while jeopardizing its reputation as the leader in the space. Obtaining excessive margins through excessive pricing only works under monopolistic conditions or if they had a truly distinctive product. Both are not the case imo. Also, it's early days. Not exactly sure what Snowflake's market share is, but I bet it is I bet that Snowflake will be forced to compete "also on price" in the next five years because free enterprise is a powerful thing. The title of the article could be “Why Snowflake is (still) expensive but will get more affordable over the next few years”..

While I think it is definitely in a company's best long term interest to implement features that benefit its customers; it might not be in the best interest of those who are currently running the company.

We have seen many, many examples of executives who are willing to sacrifice the future of the company to get a personal short-term gain. Jack up the revenues (or slash costs) in ways that alienate customers is a great strategy when you plan to jump off with your golden parachute in a couple years when all your stock options vest.

By the time I reached this comment I counted no fewer than five completely separate links to offerings to help reduce your Snowflake bill. For something that is already a focused SaaS product, I have to say that starts to smell a bit.

I would guess that this is less likely to be true of Snowflake than CircleCI.

Most dev teams are underinvested in CI. That is, if you queried some random team, they'd probably have a dozen ideas for tests or processes they'd like to write/run if they had the resources, most of which would provide some real value - the ideas likely coming from some previous actual bugs that hit prod.

Most BI teams are overinvested in data. They have way more than is valuable. Large scale analysis is mostly exploratory and speculative, and rarely yields results. Any induced usage is more from fear they might throw away the magic bits than real value being unlocked by better efficiency. (And I think this is probably necessarily true. Any BI process that gets to the point the data is clear and regularly actionable also gets operationalized and right-sized through a more normal dev process.)

Standard disclaimer: I work at AWS in consulting and could easily be accused of drinking the Kool Aid.

Everyone from consultants, SAs, Sales, support etc is constantly working toward getting customers to “optimize” their spend. Of course any business wants you to give them more money. But, none of us are pushed to get them to spend money on services or methods to do things inefficiently.

I specifically work in consulting specializing in “application modernization”. That means most of my implementations are cheap and I’m constantly spending time making sure my implementation is cheap as possible and still meet the requirements. I first noticed this attitude from AWS when I was working for a startup.

This isn’t just with AWS. I spent years working in enterprise shops and saw the same attitude working with Microsoft.

I can’t speak for any other large organizations - AWS and Microsoft are the only two I’ve worked with as either a customer or employee where there was huge spending on infrastructure or software.

Now I could easily get started about my opinion of Oracle from the customer standpoint. But I won’t.