10/07 The database business: Steam engine in the cloud

Snowflake has raised $3.5bn in a record software listing. Now what?

Snowflake stands out, for now

CATCHING SNOWFLAKES is fun. It has become lucrative, too. Investors scrambled for shares in Snowflake, a maker of database programs, as it went public on the New York Stock Exchange on September 16th. The eight-year-old firm more than doubled its valuation the first day of trading, from $33bn to over $70bn, making its initial public offering the largest ever for a software firm. Even Warren Buffett, abandoning his customary tech-shyness, got in on the action. The legendary investor’s conglomerate, Berkshire Hathaway, put $735m into the firm, through a separate private placement and by purchasing shares from a former chief executive—a stake that is now worth $1.56bn.

The excitement shines a light on an obscure corner of information technology: software for managing corporate data. This database market already generates $55bn a year in sales (see chart). It is expected to expand rapidly as data become, if not the new oil, then at least an input for most companies. And it is changing in intriguing ways—not all of them good for Snowflake.

A database used to be best understood as a digital steam engine. Before electricity came along, a factory’s machines sat near a single power source. Similarly, corporate…