Palantir IPO: Is Palantir the Next Big Digital Business Platform?
by Betsy Burton
This week, Palantir held its investor day sessions in preparation for the company’s upcoming IPO. Palantir’s IPO has been highly anticipated, and there are a number of financial analysts focused on the company’s financial health and investment opportunity. Our interest is focused on the company’s business model and technology. And specifically, its potential impact or entrance into the digital business platform market.
Highly Customized Service-Driven Business Model
Palantir started out as a CIA-funded entity with a primary focus on serving the complex analytics needs of defense-related government agencies. As a result, the company developed a business model that is focused on providing highly-specialized and customizable information analytics capabilities on top of an integrated data asset.
Palantir’s differentiation is that it is focused on building a complete end-to-end stack solution. Palantir’s business model is to apply a team of engineers, project managers, and data scientists to address a customer’s complex data-analytical and operational problems, deliver a software solution (on-prem and/or cloud-based), and teach the customer how to use the system.
Platforms Abound Driven By Experience
Given its history, the company has organically grown several “platforms," including:
- The Gotham platform, which was designed to support very complex integration between relational data and complex data (documents, video, images, sound, etc). This enables the company to support applications such as terrorist movement mapping or the impact of weather pattern changes.
- The Foundry platform, which was designed to support complex analytics on relational data.
- The Apollo platform, which was added to support the management of its platform solutions. Apollo enables the company to more easily track versions of the software's components, and send updates to customer installations (cloud or on-prem).
The platforms clearly grew out of the company’s experience working with clients. Unlike other TSPs that are focused first on developing products that are then applied to customer’s needs, Palantir evolves its platforms based on experience working with customers and on the company’s need to streamline its own services operations.
Market Integration Remains Unclear
During the investor day, we posed several questions to the company that were not addressed. Specifically, we were interested in the company’s plans to integrate with other industry technologies, including Kubernetes. We were also interested in plans to provide integration with other vendors' popular digital business platforms, such as Microsoft, Salesforce.com, IBM, etc. However, the company did discuss several AI and digital twin initiatives.
Our questions arise from our perception that Palantir is more focused on end-to-end solutions and less on a broad partner ecosystem. The ability to integrate with other systems are key characteristics of digital business platforms. Will Palantir remain a specialized analytics platform or emerge as a broader digital business platform? We plan to keep tracking these questions and issues as the company evolves.
Brash and Unabashed Culture
Palantir operates its business with a flat organization focused on collaboration. The company currently refers to its employees and investors as “Palantirians.”
The company’s reputation is very mixed. On one hand, the company has a controversial reputation with respect to supporting DOD and CIA black ops projects and controversial government policies. On the other hand, the company has been involved in major healthcare initiatives, including responding to the COVID pandemic.
The company management states that it will walk away from business that it does not believe is ethical, and that it will not support government activities that are viewed as tyrannical. However, many raise questions and issues with past and recent projects, such as its involvement in ICE raids, including the Bronx 120, and the US administration’s policy on child separation.
The company management states that its culture will not change due to its IPO. However, we believe it will evolve significantly as it faces increased regulatory requirements, increased investor demands for transparency, and increased market pressure to expand its business ecosystem.
Palantir is introducing the market to a very different business and operating model. We believe both buyers and investors will have a hard time digesting this as the company goes public. We would not be surprised if the company adopts either a more consulting-based or more product-based business model.
We will be tracking Palantir's platforms over the coming months, and particularly its role in the digital business platform market. Palantir has been able to operate its business with a degree of privacy, and even mystery for years. As it becomes public, it will go through business model and cultural changes, despite the wishes of its current senior management.