Tableau Software reported stronger than expected quarterly results last week, its first earnings period as a public company. The Seattle-based company reported Q2 revenues of $49.9 million, up 71% on a year-over-year basis. During the quarter, the company signed more than 1,500 new customers, bringing total customers to 13,500 in more than 100 countries, according to CEO Christian Chabot. Tableau said it expects full year 2013 revenue to come in between $198 and $202 million, up 57% over 2012.
Tableau makes data visualization software that is largely aimed at non-expert business users. It allows users to create their own interactive dashboards, reports, and other types of visualizations via a largely drag-and-drop graphical user interface (GUI). This contrasts with the more rigid approach taken by legacy business intelligence vendors, such as Business Objects (now part of SAP) and Cognos (acquired by IBM), which traditionally require administrators to model, create, and deploy dashboards and reports for end-users, a sometimes lengthy and inefficient process.
Tableau employs a land-and-expand approach to grow its business. That is, most of its revenue comes from existing customers who increase their use of Tableau’s software. A team of marketers may begin using Tableau to visualize campaign data, for example. Soon other marketing colleagues see the software’s capabilities and begin using Tableau for other use cases, followed by other departments, and so on.
Tableau offers a number of low-barrier entry points for new users, including Tableau Public, a free version of its visualization software that allows users to visualize up to 1 million rows of data, which can then be embedded and published online. During Q2, Tableau also unveiled Tableau Online, an on-demand cloud version of its core visualization software.
To this point, the average deal size for a new Tableau customer sale is less than $10,000. In Q2, Tableau generated net new revenue via its land-and-expand strategy from a number of large existing customers, including Google, Deloitte, Dell, and Intel. That said, in order to continue its torrid growth rate, Tableau will need to increase the number of initial large deals (it closed 80 deals of $100,000 or more in Q2), likely the impetus behind the company’s hiring of Scott Jones as Vice President of Americas Sales. Jones previously worked at SAP, where he focused on go-to-market strategy for BI and database, including SAP HANA.
The company’s success is largely (and rightly) attributed to its self-service data visualization software that has developed a passionate and loyal user base, but Tableau is now and will likely continue benefitting from the wave of interest in Big Data. For Tableau, it doesn’t matter who wins the Hadoop market, which NoSQL databases break through to the mainstream, or which mega-vendors best adapt to the Big Data Era. Regardless of the underlying data source, business users will always have a need to create and share dramatic visualizations to make sense of their data. Tableau has even been embraced, however reluctantly, by SAP, whose HANA users want to visualize HANA data with Tableau rather than SAP’s own visualization tools and Business Objects business intelligence applications.
Tableau’s challenges vis-à-vis Big Data are largely technical. Only a small percentage – 10% - of Tableau’s revenue is associated with Big Data, according to Wikibon’s analysis. Currently, those Tableau users who are working with data in Hadoop connect to the Big Data framework either bring a smaller sample set of data into Tableau’s in-memory engine, or they connect via Hive. The first method has obvious data volume limitations, while the second sacrifices performance in order to hit larger data sets.
To increase its share of the fast-growing Big Data market, Tableau needs new ways to work with data in Hadoop (and NoSQL and NewSQL databases), but making the platform scalable to allow native visualization against all data in HDFS is probably not on the short-term horizon.
The good news for Tableau is that all the major Hadoop distribution vendors are working to improve the performance of analytic queries on Hadoop by bringing SQL-like capabilities to the Big Data framework. Cloudera’s Impala project and Hortonworks’ Stinger initiative are two such efforts. Neither is ready for primetime yet, however. Tableau should also expect increasing competition from data visualization start-ups in the Hadoop ecosystem, including Datameer and Platfora. Still, Tableau is extremely well-positioned to capitalize on the increasing focus on data and data-driven decision-making in the enterprise.
A more immediate challenge for Tableau is related to hiring. The company is well-known for its selective hiring, bringing on board only those employees that are fervent about its products and culture. This has gained Tableau a reputation for being a great place to work, and many current employees are former customers who were so enamored with Tableau that they decided to join the company. Such selective hiring is yet another reason for the company’s success, but maintaining these standards while growing as fast as it is will be a challenge. The company added 96 employees in Q2, increasing total headcount to 930, a year-over-year increase of 86%. CFO Tom Walker acknowledged in a call with analysts that hiring was slightly slower than planned in Q2 due to the company’s selectivity, an issue that will only be exacerbated as Tableau continues to grow.
Looking ahead, Tableau’s annual user conference takes place in early September. The company expects as many as 3,000 customers, partners, and employees at the show, which in past years seemed more a revival than a vendor show. It is not known if Tableau will announce any major product news, but it should serve as a gauge of the interest level and enthusiasm of Tableau’s customers.
Action Item: Enterprise CIOs are under increasing pressure from multiple angles. Among those is responding to end-user requests for new ways to visualize and report data. Tableau Software’s application suite allows end-users to develop such visualizations themselves, potentially reducing the burden on over-taxed IT staff. CIOs should consider Tableau’s data visualization tools to both replace existing legacy BI deployments where possible and to expand data visualization capabilities to new users. They should also consider competing offerings from vendors such as QlikTech, as well as legacy vendors such as SAP Business Objects, which have begun introducing more self-service capabilities into their product suites. That said, typical initial pricing for legacy business intelligence vendors is often orders-of-magnitude higher than that of Tableau. Careful consideration should also be given to the volume and type of data to be visualized, pairing the right visualization tools with the right data.
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