Tableau Software held its seventh annual customer and partner conference in Seattle last week. The company, whose data visualization software continues to disrupt the traditional business intelligence market, is growing rapidly on all fronts. For the quarter finished June 30, 2014, the company posted a year-over-year revenue increase of 82% with just over $90 million in revenue. It added 2,200 new customers during the quarter, putting total customer count at 21,000 plus. Headcount was up 62% year-over-year to 1,532 employees worldwide.
Tableau’s continued growth prospects are extremely good, and the company continues to invest heavily in research & development, sales, and administration to capitalize on strong demand, particularly internationally. As a result, the company’s net operating income for the quarter was -$4 million. Investors should expect more of the same for the foreseeable future. During his keynote address to conference attendees at Tableau Conference, Tableau CEO Christian Chabot pledged to invest more in R&D over the next two years than the company has invested in the last 10 years (Tableau was founded in 2003.) For context, since going public in May 2013, the company has spent nearly $96 million on R&D on total revenue of $358 million.
The main areas of focus for R&D investment, as outlined by Chabot at the conference, are:
- Visual analytics: This refers to the core visualization capabilities the company is known for.
- Performance: To enable truly real-time, interactive visualization capabilities for end-users, Tableau will invest in improving its core index as well as connections to underlying database engines.
- Data preparation: Data preparation – the hard work required just to get data into shape so it can be analyzed and visualized – is a major bugaboo for business users and data scientists alike. Tableau is building capabilities to help simplify this process.
- Storytelling: Tableau introduced a feature called Story Points earlier in 2014 that aims to help users organize data visualizations in ways to maximize their effectiveness at communicating key insights. The company plans to continue investing in this area.
- Enterprise: Like all enterprise software, business intelligence and data visualization software must meet minimum requirements for resiliency, high availability and security.
- Cloud: More and more enterprises don’t want to install on-premise software, but want to access enterprise applications, including business intelligence, from the cloud. Expect continued investment in Tableau Online, Tableau’s cloud offering.
- Mobile: Today’s workforce is mobile and must be able to access data and visualizations on mobile devices such as smart phones and tablets. Tableau announced Project Elastic at Tableau Conference, an initiative to reimagine the data visualization experience on mobile devices for both enterprise users and consumers.
Focus on Product and Customers
Tableau Software’s success is due to two main factors. One is the product itself. Tableau’s suite of data visualization tools eschews the traditional approach to business intelligence, which requires developers and IT to build reports and dashboards based on user requirements, in favor of a self-service model. Business users can import and visualize data with drag-and-drop tools that require little to no coding. The resulting visualizations are recognized as tops in the industry thanks largely to the company’s product team that includes not just application developers but researchers and human psychology experts who understand the intricacies of how humans interpret visual images and data (see this theCUBE interview with Tableau’s Jock Mackinlay.) As a result, the product offers a level of intuitiveness not seen in competing data visualization and business intelligence products.
The other factor is the company’s near fanatical focus on its customers. Customer events such as Tableau Conference better resemble revivals than enterprise software events. Attendees are passionate about the company and the product precisely because Tableau gives them a voice and listens to their feedback. Speaking with attendees, it is clear that many new features in Tableau’s software are the direct result of customer requests. Tableau has also done a good job of fostering a sense of community among its customers/users through events, such as the annual Tableau Conference, as well as online collaboration capabilities built into its cloud product.
Growth Prospects
While already growing at a significant clip, Tableau Software is at the start of what could be an enormous period of growth. Several factors are at play.
First, the company has tapped into real discontent with conventional business intelligence software. These packages often require business users to rely on central IT to format and publish reports and are often tied to rigid data models associated with underlying data warehouse systems. This is also a time-consuming process, significantly increasing time to insight (TTI). The result is that, despite overwhelming demand for data-driven insights, business users are often left with little in the way of actionable information.
Tableau’s approach, in contrast, is to provide self-service data visualization software that business users can largely deploy and configure on their own. Users can bypass IT and report writers altogether resulting in fast TTI. Tableau’s software employs a drag-and-drop user interface that allows users to quickly experiment with various visualizations of their data as well as publish and share data visualizations with colleagues. To spur adoption, the company offers a free version of its software, called Tableau Public, that users can download and use to analyze up to one gigabyte of data.
Second, Tableau is the beneficiary of interest in all things Big Data. Companies of all sizes and across verticals are increasingly looking to tap into data sources, both inside and outside the corporate firewall, to discover insights that will lead to new business opportunities, increased profitability and improved operational efficiencies. There are numerous layers to the Big Data stack, which itself is still evolving rapidly. Data visualization sits atop that stack and serves as the last mile to business decision makers. Tableau is well positioned to win a large percentage of the Big Data visualization market, which Wikibon expects to grow substantially over the next two-to-five years. Wikibon forecasts the Big Data application market segment, which includes data visualization, to reach $7.75 billion by 2017.
Platform and Ecosystem
One sign of a successful software company is the evolution of its software from point applications to a comprehensive platform with an active and deep ecosystem of partners. This is the case with Tableau. As the company establishes itself as the de facto data visualization layer for many enterprise data warehouse and Big Data workloads, a plethora of Big Data, data warehouse and professional services companies have established formal partnerships to support Tableau in its customer environments. Among these partners are:
- Hadoop: All major Hadoop vendors – Hortonworks, MapR, IBM, Pivotal, and Cloudera – support Tableau Software for visualization of Hadoop-based data. In addition, Actian has established a reference architecture offering that packages its SQL-in-Hadoop analytics engine in the Hortonworks Data Platform with Tableau Software sitting on top for ad hoc queries and data visualization.
- NoSQL: Similarly, most NoSQL vendors support Tableau Software for data visualization. Among them is MarkLogic, whose NoSQL database is widely used in the media and financial services industries to support operational, document-oriented applications. DataStax and Basho Technologies are also official Tableau partners.
- Database: Teradata works with Tableau to provide visualization on top of its enterprise data warehouse. IBM similarly partners with Tableau to provide interactive data visualization capabilities on top of its PureData data warehouse appliance. Another interesting partner is Treasure Data, which provides a fully managed Big-Data-as-a-Service offering and enables users to visualize output from its AWS-based service in Tableau.
- Professional Services: While Tableau positions its software as self-service data visualization, there are none-the-less a number of features and capabilities that require more advanced skills. This has spawned a cottage industry of professional services firms specializing in helping Tableau customers make the most of their investment in the software. These include Interworks, which helps its clients develop use-case focused data visualization applications and administer/manage/secure larger Tableau deployments, and USEReady, which focuses on governance and compliance of Tableau in the enterprise. The large professional services firms, including Deloitte and Ernst & Young, have also established Tableau-related practices.
Another indicator of how entrenched Tableau is becoming in the enterprise is the rise of the Tableau specialist. Numerous individuals, recognizing the value provided by Tableau Software, have transformed themselves into Tableau specialists and are basing their careers on their skills with data visualization (much in the way that many DBAs became Oracle DBAs in the 1990’s.) Some of these specialists are starting new Tableau-focused consulting businesses, while others remain in the enterprise to serve as in-house Tableau experts.
Challenges
Tableau was founded as a modern, user-friendly alternative to stodgy, traditional business intelligence software. But that was over ten years ago, and in recent years a crop of new data visualization vendors have cropped up, some with a mobile-first strategy (such as RoamBI), or at least put mobile capabilities at the center of its value proposition (such as Birst). Tableau introduced its own mobile capabilities several years ago, but risks falling behind its younger, more mobile-savvy competitors who came of age after the introduction of the iPhone.
Mobile data visualization capabilities are particularly important to front-line workers, who spend their day in the field or on the road rather than in the office. They have different data visualization needs than their desk-bound colleagues. They require data visualization applications that provide real-time views of operational systems with the ability to quickly and easily drill-down into data to identify issues in real-time using the native features of the device they are using (such as pinch and swipe gestures.) Fuel pipeline workers, for example, need a real-time view of pipeline health and the ability to easily identify where pipeline flow problems are occurring and need immediate repairs.
Tableau appears to recognize the importance of mobile to its users and the threat posed by mobile-focused competitors. At the Tableau conference, the company announced Project Elastic. The company is rewriting its entire data visualization suite for mobile devices with a particular focus on the iPad and tablets. The initiative is still in early days, however, with completion of the project expected in 2015. Presumably a large percentage of R&D spending will flow to Project Elastic. This is one of the company’s most important initiatives and its success is crucial for the company’s future. Early results are positive, with Vice President of Mobile and Strategic Growth Dave Story presenting a compelling – and live – demo during the conference keynote. It will be important to hear directly from customers over the next months and years to better judge the progress of Project Elastic.
Another challenge facing Tableau relates to its rapid (current and future) growth. As mentioned earlier, credit for much of Tableau’s success goes to the company’s focus on customers. As the company adds customers at a rapid clip, maintaining such close contact with customers and providing the level of support services customers have come to expect becomes more difficult.
To maintain customer loyalty, Tableau is increasingly being forced to rely on partners and resellers to serve as the first line of customer support. It is critical that Tableau select partners wisely and choose only those vendors that share its customer focus and responsiveness to customer requests/complaints. This also requires Tableau to educate partners on its customer service approach and architect a responsive, tiered support operation with partners.
The other area to keep in mind is the level of investment Tableau makes in R&D, sales and services. As discussed above, Tableau continues to lose money despite significant revenue growth. How long Tableau keeps its foot on the gas, aggressively investing in scaling the company, will have significant implications for the company. Let up on investment too soon and Tableau’s growth could slow. But the longer it continues to lose money, the more likely investors will start clamoring for Tableau to rein in spending and start turning a profit. The good news for Tableau is that most investors seem to understand the long-term growth prospects for the company and are happy to support continued investment in R&D to capitalize on the huge Big Data market opportunity.
Action Item: Tableau Software is positioned for significant growth due to its user-friendly data visualization software and its reputation for being highly customer-focused. The company must continue investing in its software, particularly in mobile capabilities, to maintain its status as the top modern data visualization platform. But it must do so while also satisfying Wall Street. Users and customers should continue to play an active role in the Tableau user community, where best practices and tips often emerge first. Also continue to provide feedback to Tableau Software, both positive and negative, and push the company to remain focused on user-driven initiatives.
