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You severely underestimate the value of large govt. contracts. Govt. contracts are very sticky. The govt. doesn't often change the software it uses, and when

You severely underestimate the value of large govt. contracts. Govt. contracts are very sticky. The govt. doesn't often change the software it uses, and when it does change the software it uses it signs up for ludicrously huge sums. You need terrific political connections to get these govt. contracts. Even with better technology, a start-up can't win a govt. contract. Ask one of your friends that works at Amazon about how long it took them to get govt. to use AWS. Also, if you have worked with a govt. institution you'll quickly learn that the processes and human capital used by the govt. are quite poor compared to the private sector. As a result, govt. contractors quickly figure out special tools/processes/training to serve the govt. which are not easy to replicate without the experience of actually serving a govt. dept. Many things, which in the private sector you might leave to your intelligent counterpart at the customer, with the govt. you have to handle yourself, or develop a special training program. The govt. can budget for these training programs or additional assistance, so it will not affect the bottom line ... but you have to develop those programs and processes, and you can't underestimate the importance of it. In the private sector if on the customer side an engineer cannot figure out how to go through a simple 3 step process to configure some software, he may be fired by his supervisor. In the govt., you will be asked to break the 3 step process down into 10 smaller, simpler steps, and to create a special video tutorial for govt. workers. Even after that, you may need to staff a help-line that is open during East Coast working hours. It is very easy in Silicon Valley to overestimate the capabilities of the people who will be using your software, because you may be dealing with very good talent at your early customers in California. The minute you get your first govt. contract you'll see that you were badly mistaken about what kind of resources you need for customer support.

bane 11y ago
So in the government contracting space there's effectively two kinds of work that are relevant here: - products, which Palantir claims to be - services, which Palantir appears to be by offices and head count You are right that product contracts (and associated services like installation and training, O&M, etc.) can be fairly sticky, but the government has been on a trend towards open-standards, open-source etc. and proprietary software products are under lots of pressure to be incomparably better than anything else out there. But "cheeks-in-seats" service contracts are not. The government is notorious at tossing out incumbents on service contracts and bringing in new companies, who then simply hire all the people who worked on the previous contract. Palantir seems to push themselves out there as a two-product company with some sales-staff. It's obviously not going to be turn-key software, there's likely to be some configuration and support stuff up-front. But once you, as a product company, get big enough, even those tasks can be handled competently by other companies. [1] But their product sales don't look to be a huge dollar amount. fbo has a couple awards from 2011 for ~$750k licenses. This is four years ago, but we're not looking at dozens of millions of dollars. edit here's an award for $20m for Palantir support to the war in Afghanistan. Note that DoD only reports contracts over $6.5m. So the bulk of their DoD awards must be falling under that threshold. edit here's a 5 year contract from DoJ for ~$10m. http://www.govconwire.com/2014/04/doj-selects-palantir-software-to-analyze-money-laundering-cases/ http://www.govconwire.com/2014/04/doj-selects-palantir-softw... hardly $20billion dollar valuation contract sizes. So it's likely most of their growth trajectory has been in specialized consulting services that direct customers to their products, but also use other tools and solutions. But again, once the ecosystem is big enough, the government can just try to compete that work out and hire another company to handle that work...companies that might not direct the solution-space towards Palantir's products. 1 - https://www.palantir.com/partnerships/service-providers/ https://www.palantir.com/partnerships/service-providers/

bane 11y ago

So in the government contracting space there's effectively two kinds of work that are relevant here: - products, which Palantir claims to be - services, which Palantir appears to be by offices and head count You are right that product contracts (and associated services like installation and training, O&M, etc.) can be fairly sticky, but the government has been on a trend towards open-standards, open-source etc. and proprietary software products are under lots of pressure to be incomparably better than anything else out there. But "cheeks-in-seats" service contracts are not. The government is notorious at tossing out incumbents on service contracts and bringing in new companies, who then simply hire all the people who worked on the previous contract. Palantir seems to push themselves out there as a two-product company with some sales-staff. It's obviously not going to be turn-key software, there's likely to be some configuration and support stuff up-front. But once you, as a product company, get big enough, even those tasks can be handled competently by other companies. [1] But their product sales don't look to be a huge dollar amount. fbo has a couple awards from 2011 for ~$750k licenses. This is four years ago, but we're not looking at dozens of millions of dollars. edit here's an award for $20m for Palantir support to the war in Afghanistan. Note that DoD only reports contracts over $6.5m. So the bulk of their DoD awards must be falling under that threshold. edit here's a 5 year contract from DoJ for ~$10m. http://www.govconwire.com/2014/04/doj-selects-palantir-software-to-analyze-money-laundering-cases/ http://www.govconwire.com/2014/04/doj-selects-palantir-softw... hardly $20billion dollar valuation contract sizes. So it's likely most of their growth trajectory has been in specialized consulting services that direct customers to their products, but also use other tools and solutions. But again, once the ecosystem is big enough, the government can just try to compete that work out and hire another company to handle that work...companies that might not direct the solution-space towards Palantir's products. 1 - https://www.palantir.com/partnerships/service-providers/ https://www.palantir.com/partnerships/service-providers/