Does Palantir have a sustainable competitive advantage?
In the consumer-oriented internet arena, winners are known to take all thanks to a number of traits, including the economies of scale and scope, network effects, the advantage of big data and machine learning, brand power, switching costs, the attraction of talents, the charisma of hard-driving founders, and benefits of geographical clustering, as has been summarized here.
The same may not be said about the B2B platform race, where peers compete mainly on products, services, and customer experience (see here). The outcome of the competition may not be binary (the winner takes all, and the losers die) due to the lack of viral growth.
The technological edge
As I stated above, B2B platform rivals compete primarily on products, services, and customer experience. Palantir follows the approach of bundling superior technology with top-notch forward-deployed field service representatives.
• In its home industry - intelligence and defense, Gotham was created with native attention to security rules, access privilege, and user action logging. No other systems allow users to draw associations between disparate data sets and to visualize the connections as easily and quickly. Palantir has maintained a laser-sharp focus on developing the world's best platform for data, while its primary competitors such as Booz Allen or Raytheon are widely diversified. From competition outcome to reputation among end-users, Palantir not only has a clear technological edge but also is more cost-effective than competitors (see here and here). That's why Palantir is confident it only needs to be placed in front of the right people to prove its worth.
• But then, what makes Gotham shine are the forward-deployed field service representatives. Palantir field service representatives proved to be not only some of the brightest engineers known to government agencies but also extremely responsive to the needs of end-users. These forwarded-deployed engineers examine customer needs, resolve all data source and complexity issues, and build out applications on top of Gotham. Once the applications are built, they train users on site until the customers are ready to use the product on their own. The forwarded-deployed engineers also bring their experience acquired in the reality of deployment back to Palantir development centers as they rotate assignments.
Although its technology and approach are by no means cannot be replicated, Palantir makes the smart decision of focusing on a narrow scope in the sprawling B2B data landscape and, in that niche, it excels at helping customers solving complex data problems at relatively low costs, which actually takes a lot to accomplish, from well-written software, via responsive backend support, to knowledgeable forward-deployed field service representatives. It is no wonder Palantir has earned a sterling reputation for effectiveness and ease of use in the intelligence and defense circle, which I believe it can parlay into the commercial market