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All these companies saw Snowflake's success and thought, "we want to use some kind of usage based pricing scheme to capture the value that we provide". Implici

by s17n 3y ago

All these companies saw Snowflake's success and thought, "we want to use some kind of usage based pricing scheme to capture the value that we provide". Implicit in this thought process is that the price should scale in an unbounded way - if you're providing X value for a company with 10M revenue, you should be providing roughtly 1000X value to a company with 10B revenue. And it may be true that you are providing 1000X the value! But that doesn't mean that you are going to be able to get away with charging 1000X the price when the cost of hiring a team to fully replace your product with something built in house is only 10X or 100X. Snowflake doesn't have this problem because very few companies could recreate Snowflake, period, much less recreate it for less than their Snowflake spend. But all these "hosted open source product" offerings should have realized by now that they need a ceiling on their pricing structure and/or they need to stop open sourcing their code.

antisthenes 3y ago
That's the biggest challenge - you can't capture all the value that you're providing your clients, otherwise there's 0 reason to use your product over either 1. Building it inhouse 2. Using someone who is capturing <100% of value provided. Then the only "moat" you have is lock-in, but clients tend to not like that, and you're squandering your reputational capital.
marcinzm 3y ago
The problem is that the value Terraform brings and the value Terraform cloud brings do not scale the same way. Hashicorp prices as if they did.
- janejeon 3y ago
  This is a great point. I get that companies want to price their products in a way that they don't leave surplus value on the table (i.e. the more value a customer gets out of it, the more expensive the product gets), but the fundamental problem is that it's... so hard to actually "judge" the value that's being created by using the product in many cases. In such cases, probably for the best that companies err on the side of caution with some formula they're sure is below the actual value but isn't too far away.
kfk 3y ago
Curious, how does Snowflake compare against Redshift, Trino, etc.?
kmeisthax 3y ago
"Value-based pricing" is a code word for "reach into your customers' pockets and steal the spare change". It's the end game of monopolists, actual or wanna-be, and it's a good way to burn literally all of your goodwill as quickly as possible.
- collingreen 3y ago
  I completely agree and I've been trying to shout from the rooftops how this kind of greed inherently prevents banking value in your "brand" which means you'll only ever be one mistake, incident, or bad news story from a bunch of angry customers. This puts exactly the same pressure on a company and product as only shipping "barely good enough" functionality (which makes sense since you're ratcheting up the cost with this exact balance in mind). My take is that this is a really bad trade for a saas company/team trying to build for anything except short term.
Mortiffer 3y ago
Based on recent experience with large deployments at S&P500 types, IMHO the value snowflake providers to most companies can easily be deployed in house with either old school Hadoop,Spark, Hive or old school Impala, Hbase or more recently Trino. The clients I had where we installed snowflake every is super worried about any additional copy operation because everyone is keenly aware of the unlimited cost. This makes getting shit done harder. Clients that have a decently sized k8s cluster running Trino or old school Spark/Hadoop cluster on fat VM's you know what you got you know what your paying for you make estimate of how much ram / cores you need for certain workloads and once they are purchased your engineers get really good at squeezing as much work out of the given resources as possible. And no constant complaining in meetings about what potential extra cost this additional computation may have. Also if other people working in other parts of your org don't run snowflake themselves you gotta pay for their snowflake usage on your bill or you pay for copying data back out to S3/ADLS/sFTP so that other departments can get to the results of your computations. And snowflake really doesn't like it when you do this, they even gave exporting data a new name, they call it "unloading" making you feel like your undoing something which you probably should not undo.... On that note, Snowflakes data export options are significantly underdeveloped in contrast to Databricks, Cloudera and also the original open versions Spark, Trino and Impala. </rant> :)

by s17n 3y ago

antisthenes 3y ago

That's the biggest challenge - you can't capture all the value that you're providing your clients, otherwise there's 0 reason to use your product over either 1. Building it inhouse 2. Using someone who is capturing <100% of value provided. Then the only "moat" you have is lock-in, but clients tend to not like that, and you're squandering your reputational capital.

marcinzm 3y ago

The problem is that the value Terraform brings and the value Terraform cloud brings do not scale the same way. Hashicorp prices as if they did.

janejeon 3y ago
This is a great point. I get that companies want to price their products in a way that they don't leave surplus value on the table (i.e. the more value a customer gets out of it, the more expensive the product gets), but the fundamental problem is that it's... so hard to actually "judge" the value that's being created by using the product in many cases. In such cases, probably for the best that companies err on the side of caution with some formula they're sure is below the actual value but isn't too far away.

kfk 3y ago

Curious, how does Snowflake compare against Redshift, Trino, etc.?

kmeisthax 3y ago

"Value-based pricing" is a code word for "reach into your customers' pockets and steal the spare change". It's the end game of monopolists, actual or wanna-be, and it's a good way to burn literally all of your goodwill as quickly as possible.

collingreen 3y ago
I completely agree and I've been trying to shout from the rooftops how this kind of greed inherently prevents banking value in your "brand" which means you'll only ever be one mistake, incident, or bad news story from a bunch of angry customers. This puts exactly the same pressure on a company and product as only shipping "barely good enough" functionality (which makes sense since you're ratcheting up the cost with this exact balance in mind). My take is that this is a really bad trade for a saas company/team trying to build for anything except short term.

Mortiffer 3y ago

Based on recent experience with large deployments at S&P500 types, IMHO the value snowflake providers to most companies can easily be deployed in house with either old school Hadoop,Spark, Hive or old school Impala, Hbase or more recently Trino. The clients I had where we installed snowflake every is super worried about any additional copy operation because everyone is keenly aware of the unlimited cost. This makes getting shit done harder. Clients that have a decently sized k8s cluster running Trino or old school Spark/Hadoop cluster on fat VM's you know what you got you know what your paying for you make estimate of how much ram / cores you need for certain workloads and once they are purchased your engineers get really good at squeezing as much work out of the given resources as possible. And no constant complaining in meetings about what potential extra cost this additional computation may have. Also if other people working in other parts of your org don't run snowflake themselves you gotta pay for their snowflake usage on your bill or you pay for copying data back out to S3/ADLS/sFTP so that other departments can get to the results of your computations. And snowflake really doesn't like it when you do this, they even gave exporting data a new name, they call it "unloading" making you feel like your undoing something which you probably should not undo.... On that note, Snowflakes data export options are significantly underdeveloped in contrast to Databricks, Cloudera and also the original open versions Spark, Trino and Impala. </rant> :)