Customer demand for artificial intelligence (AI) has reached such an exuberant level that budgetary considerations are swept aside when the subject turns to AI, Snowflake CEO Frank Slootman said last week.
Asked during the company’s Q3 earnings call about the level of interest in AI across the C-suite, Slootman offered up one of his classic perspectives on this crazy market: “I don’t even hear the words ‘AI’ and ‘budget’ in the same sentence. In other words, they’re going to make resources available to enable it. What, if anything, is holding it back is really understanding exactly how to do it.”
That striking comment came as Snowflake released strong fiscal-Q3 results, including a 34% jump in product revenue to $698.5 million plus a 23% increase in remaining performance obligation (RPO) to $3.7 billion.
Outlining that impressive Q3 performance, Slootman said AI is not only dominating almost every customer conversation but is also causing enterprise leaders to think long and hard about how to modernize their data estates to be able to handle the relentless generative AI (GenAI) phenomenon.
Near the top of his prepared remarks, Slootman framed the customer mindset this way:
“Generative AI is at the forefront of customer conversations, which in turn drives renewed emphasis on data strategy in preparation of these new technologies. We’ve said it many times: there’s no AI strategy without a data strategy. The intelligence we’re all aiming for resides in the data, hence the quality of that underpinning is critical.”
In that context, the comment from Slootman noted above about how that passionate desire for AI capabilities must be matched with the necessary expertise to turn that desire into reality — “What, if anything, is holding it back is really understanding exactly how to do it” — is a theme he pointedly returned to later in the call.
“In our conversations with customers, I always tell them this: Your problem is no longer the technology; your problem is your imagination and your budget, right? Not that those are easy things to overcome, but the technology is not holding us back anymore; it’s our ability to harness that technology,” Slootman said.
“And then, of course, you have to pay for it as well.”
As he said, not easy things to overcome.
When the Levee Breaks: The Move from On-Prem to the Cloud
Slootman outlined a number of ways in which Snowflake is addressing that yawning gap between what customers so desperately want — AI’s power — and their ability to methodically and intelligently unleash that power, and I’ll get to those in a later piece.
But as is the case across so many fronts in the Cloud Wars, the big obstacle — the big hill that still needs to be taken — is convincing tens of thousands of enterprises that the time has come to begin moving aggressively away from on-prem and into the cloud or else all those AI dreams will remain just that: dreams.
“That legacy replatforming is sort of the hard core of our business,” Slootman said during the Q&A portion of the earnings call.
“And almost surprisingly, there is just an enormous amount of workloads still sitting on-premise that is still waiting to get migrated to the cloud. So, I expect this to continue for a very long period of time. But what makes it very important is that once you get those data estates into the cloud, our new architectures and our new technologies are now enabling opportunities that people haven’t had before,” he said.
“So it’s not just like, ‘OK, we’re going to be doing in the cloud what we used to be doing on-premise.’ And that’s the foundation of the business, and it is definitely foundational that the opportunity is really what grows from that. That’s been the Snowflake story from day one because of what’s now possible. We don’t have the capacity constraints, so people can run unlimited numbers of workloads. So with all the new technologies in terms of programmability and AI and ML, the sky’s the limit.”
But only if business leaders first dig in and understand that becoming AI-powered requires more than flipping a switch or wishing and hoping.
“So you’ll see customers doing a lot of benchmark and compare-and-contrast experimentation and testing and all these kinds of things, and they’re going to go through many many iterations of that,” Slootman said.
“And we will as well. And I think the field will become very proliferated with large foundational models and many, many, many sub-sector specialized models that are very, very deep but also very very narrow in purpose. So it’s going to become an enormous field.”
I was heartened to hear Slootman say that business leaders are looking at this generational opportunity to go beyond the idea of simply doing what they’ve done in the past a little bit more efficiently. In fact, he said, they’re requiring that technology partners like Snowflake help them achieve a “reset of economics.”
“And I will tell you that when you talk to the C-suite in large enterprises, people are looking for a reset of economics like, for example, in contact centers, in pricing optimizations, and in supply-chain management. I mean, these are really very, very big-impact opportunities. These are not sort of marginal incremental things that have their attention.
“Data has always had that promise, but it’s really on steroids now under the influence of the newer technologies that we’re all excited about.”
So now it’s time to transform that excitement into reality.
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