Palantir Technologies Inc - Introduction 101

From my point of view - Take it as initial point to build your own hypothesis

What Palantir Technologies Inc does

Palantir Technologies Inc. is a SaaS company that is used by the government and private institutions. Their services are focused on data analysis, predictive analysis, machine learning, and AI implementation at enterprise scale and Edge over 20+ industries including, Defence, Health services, humanitarian supply chain, Energy, Crypto, Financial services, Data-based drug discovery

In the company of their own words defines itself as - We build software that empowers organizations to effectively integrate their data, decisions, and operations.

Palantir's view of the world entails that organizations can create Alpha values over peers when they focus their critical resources on core business problems instead of building a Frankenstein system of ERP products coupled tightly and at varying views on solving problems. This claim is supported in several of the researches and most notably by Gartner’s – DIY AI problem have a failure rate of 85% and higher”.

What is Palantir's impact on a company and organization?

Palantir's clients typically need to analyze large amounts of data with multiple variables and be able to make sense of it quickly. They also need to be able to interact with the data in a way that cannot be done by human beings. Palantir helps its clients by providing software that synthesizes all the information into one single source, so they can make sense of it quickly and easily.

The challenge in doing so is the siloed nature of data and types of data and the ability to transform this data into information and this is where the concept of Dynamic ontology comes in handy. Palantir's unique technology claims significant 'Time to value' gains when it comes to starting from ground zero and starting reaping benefits. It's even more critical when companies and organizations are in critical need of support and decisions are of high impact as we have seen its contribution during the supply chain disruptions and during COVID19 related efforts. This is not 1st time Palantir contributed to humanitarian efforts with its employees on the front line.

Palantir clients are generally companies and organizations that have seen repeated failures of several digital and data transformation initiatives gone bad. The way Palantir solution is introduced the companies must commit to new ways of working and change from their core to adapt to new digital abilities in is business. This is also a challenge in its growth as CHANGE sounds good but difficult to implement. In its 17 yrs of existence, Palantir has a long list of successfully used cases of implementing Digital/Data/AI and predictive abilities on several high impacts used cases.

Is it a unique company, worthy to be called 'Most Important Software Company'?

This can only be answered in two parts due to the implicit nature as BEING UNIQUE can be a reason for the title of 'Most Important Software Company' but it's not entirely related.

Palantir plays in the digital space what is more commonly referred to as Big Data. The way this term is used today is confusing as people make different meanings out of it. For the purpose of this discussion, we call it Big Data OS – a core system that covers E2E needs for an organization related to Digital, Data, AI, Edge, etc.

Big Data OS has several components – Data layer, Infrastructure layer, Legacy ERP system, API layer and management, Microservice and business apps, DevOps, Cybersecurity, Site reliability. All these layers have several sub-layers as well. Most of the companies in the Big Data OS space have focused on 1-2 layers or products limited to 1-2 layers only. Best e.g. is Snowflake who has pioneered the domain of Data Layer and has successfully partnered with many companies to deliver clients digital solutions with minimum disruptions to existing solutions and its key value to clients is Simplicity.

Palantir on the other hand focused on providing solutions in Data layers, Business apps/Microservice, Edge,  DevOps, and Security by integrating all of those layers above in one E2E package that can be deployed faster than any other solution in the industry. It is something i.e. is frowned upon by many Big Tech Companies. Palantir core value to its customer is 'Time to Value'

So in this regard Palantir is a Unique company.

Can it be the 'Most Important Software Company' in the world -> 'Most important' in this regard is subjective – a company that makes the most impact on world events OR used by most companies in the world OR create the most $$$ value on a cumulative basis for its clients. Since its make part of several core decision-making process in govt and defense institutes and as we have seen in the case of COVID support, also being regularly part of SaaS related policy discussion and Panel in the context of defense focus on AI and Data – its claim for 'Most Important Software Company' is likely true. In another context, it has a LONG way to go before it is crowned the same title.

Since we are looking at the company from investors’ POV so for us the other two categories matter most. Now the company has shown an increased range of products, GTM strategies, and growth in revenue but still, a lot is desired by the company. The success of the company is dependent on the view of the future world – if we believe the 'Simplicity' will trump 'Time to Value', Palantir at best is a niche company then | If our view of the world includes companies fatigued by endless digital transformations looking for one finished product and govt focus on increased digital spending and AI implementation at the edge, Palantir is a positioned strongly to win market share. Future is unknown and we should never underestimate the power of human ingenuity, greed, hate, and endurance to build or destroy something and the butterfly effects it creates in the success OR destruction of a company and trend.

The success of the company is largely attributed to its culture, the company's leadership team, its ability to use data analytics in high-impact business processes, and its unique software model. Can it stay true to its core and values as it expands i.e. yet to be seen…

One unique thing that caught my attention was Palantir's ability to create super-sized contracts with clients. I work in Energy sector and I noticed that Palantir's deal with BP was almost 40% larger than any deal that ever happened related to data and software services despite Palantir wasn’t offering a single-core O&G software and service. I haven’t seen a single instance like this, later as BP pivoted to a low carbon future, Palantir's scope was extended to its low carbon business. I have spent 18 yrs in the energy industry. I advise some of the largest companies in the sector, regulators, and several sectors that depend on energy clients, and still, this feat is not yet repeated by any of its peers. BP had an exclusivity agreement with Palantir and that should open Palantir's door for other companies in the sector now. So the ability to draw a supersize company, be a strategic partner to some of the largest companies across the globe, and be able to sit at the table with govt and defense policymakers on SaaS, AI and Big Data is truly unique ability among its peers.

What are the risks in Palantir's growth?

Before the advent of Silicon Valley, the technology development is largely fueled by govt and govt related products but with silicon valley, this trend has changed and it has taken a route where there is a growing debate in silicon valley to even support or provide support and tech to critical defense-related activities. And this is where the debate gets political – Should we support govt and democratic institutions or boycott. Silicon valley carries a lot of weight when it comes to driving narrative globally on a topic. 400 vocal employees even in a company with 150 k employees can drive the narrative for the whole of the world. This is where Palantir has taken a stand i.e. unpopular in Silicon Valley and corporate America. This fueled by the support of Trump by Peter Theil has literally drawn lines in Silicon Valley and from my outside-in views, companies and groups leaning towards another party have taken a strong stand against the company. The company's work with ICE also came under scrutiny – IMO in this case the work conducted by federal institutes has been blamed on the company for political and competitive reasons. But with the narrative above, it's absolutely clear that Palantir Stand and its mission will always have detractors and at this time these people are sitting at the helm of a major powerhouse that drives the narrative. In my view, Palantir's role is far bigger than the political debate in the USA and should be seen in the larger context, but this is difficult as countries are divided over the lines of politics more often than any other. So as an investor this will always be the biggest risk for Palantir.

From internal risk, companies ability to exponentially scale is yet to be proven. There is enough evidence on the quality of the product but how fast Palantir can turn it’s into a self-serving product to take a life on its own is a ticking time clock. It is present in several customer categories but still its brand awareness with the industrial sector at the middle management level is low and these are the guys who sway opinions for buying and selling. $PLTR has made several steps to improve on it recently and results can only be seen in years to come.

The above two in my view, are the focused risks for Palantir and if you are a Palantir investor, you should be aware of it and it should be part of your DD in addition to GTM and financial DD.

The good part is that it has a proven product, low to zero debt, increasing revenues, and extending the list of successful clients’ testimonials.

Will Palantir be a company that goes 10x – 20x from here OR it ends up appreciating as a reasonable business only -- it is a question for time to answer only. People like me who have spent nearly two decades working in large industries and in trenches believe that it could be a game-changer.

The FUD and rhetoric around the company related that it is a Black Box company OR an Evil company is largely driven by people belonging to the club against Thiel and its stand against Silicon Valley. There is enough evidence to see that none of these two are correct.



Disclaimer: I am LONG Palantir; All views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee, clients, or other group or individual.