(Updated with additional CEO commentary after 9th paragraph)
NEW YORK (TheStreet) -- Just a little more three months away from its one-year anniversary as a publicly traded big-data pure-play, Tableau Software (DATA) may be relatively young for its space, but it's proving to have the answers to questions of how to exploit the billions of databases around the world for valuable businesses intelligence.
Fortune 500 corporations, small- and medium-sized businesses, government agencies, universities, research institutions and non-profits make up Seattle, Wash.-based Tableau's more than 17,000 and growing domestic and international customer accounts. That roster is the result of the company's aggressive research and development programs. At their core, those programs help customers see and understand data quickly. But if the foundation of the company's mission seems simple, execution is not.
"Tableau's stated goal is to build one of the most research- and development-intensive companies in the history of this industry," Tableau CEO Christian Chabot told TheStreet during an interview last week.
Tableau's non-GAAP R&D investments have amounted to 24% of revenue for both 2013 and 2012. For the nine months ended Sept. 30, R&D investments jumped more than 87% year-over-year to $42.5 million, with total R&D headcount increasing by over 76% to 297 employees.
Nearly a third of all the company's 1,039 employees consisted of R&D staff as of Sept. 30.
The research and development team has been heavily focused on developing technology that's free of skillset constraints, utilizable by everyone. This direction has been driven by the broad, corporate cultural shift to employee-centric, online-accessible data analytics, from the more traditional, hierarchical or top-down approach toward data analysis and dissemination.
Tableau 9 and Tableau 10 that are in the product pipeline and soon-to-be-shipped Tableau 8.2 are designed to highlight "storytelling" or visually striking data presentation.
Well-positioned to ride the big data wave, Tableau shares, as of Tuesday's intraday high of $95, are now trading over 206% above its initial public offering price of $31 set on May 16. The company closed with a market cap of $5.76 billion on Tuesday.
The company said last week it expects revenue to grow about 58% year-over-year to up to $63 million in the first quarter, and that it added over 1,800 new customer accounts in the fourth quarter.
Chabot commented that Tableau's listing on the New York Stock Exchange increased the credibility and awareness of the company to a level that it hadn't experienced before. And the debut of its Tableau 8 line of fast analytics and visualization software launched last Spring was a major upgrade to the company's product suite, helping Tableau close more business deals.
"The investments that we have been making for a number of years have begun to produce extraordinary results," Chabot told TheStreet.
What follows is an excerpt of the conversation:
Tse: What's the "Tableau formula" that's gotten your company into the top emerging tech pick lists for 2014?
Chabot: Here's the way we look at it. There are billions of databases on our planet. Billions. And the data is stored in relational databases and OLAP cubes. It's in the cloud, and it's on the Web, and it's in spreadsheets, and it's even in Amazon (AMZN) AWS and Amazon Redshift, and Google (GOOG) BigQuery, and Google Analytics, and salesforce.com (CRM).
There are billions and billions and billions of databases. And those databases are too hard for people to use -- there is widespread agreement on this. I can go into the hallway of any organization of the world and ask "do you find your corporate databases easy to use?" Or "do you find that spreadsheet filled with data easy to use?" And in response, people tear their hair out to communicate how they feel about that. And Tableau in that sense is trying to create what you might call the "Google for data." Just a powerful software program people can use to access data, make decisions with it, share it, and make it useful.
We have a business formula that's a combination of disruptive technology and disruptive business practices. We join those together into what you might call the Tableau formula. That formula as you can see in the financial statements is succeeding.
Overall we don't anticipate a major change in the constitution of Tableau's customers. We believe there's an opportunity to build one of the most important business intelligence companies ever formed. We're in the process of doing that.
Tse: The financial press has been keeping a very close eye on Tableau's sales and marketing initiatives while dissecting the drivers behind your rising-star status. There's also been heavy interest in your R&D program, given that behind every great product, of course, is an effective R&D structure. What can you tell TheStreet readers about your R&D approach?
Chabot: I can make a few comments. I think at the first level, Tableau's stated goal is to build one of the most research- and development-intensive companies in the history of this industry. We make no secret about that.
We believe that business intelligence and business analytics companies, the traditional leaders, have underinvested in R&D and have brought very little real innovation to the marketplace over the last 15 years, and we are frustrated by that. And the founding principle of our vision of building this company, Tableau Software, is to invest aggressively in research and development and to invent and commercialize cutting edge advances in analytics.
Andrea, you can see that we are one of the most R&D-intensive companies in all of software, not just within our industry. And that's a tradition we plan on maintaining.
Now to get down a level, so that's the 30,000 foot view, to come down to 15,000 feet, Tableau recently shipped Tableau 8 and Tableau 8.1 and shortly we will be shipping Tableau 8.2 that is currently scheduled for June. And Tableau .2 will include Tableau for the Mac. It will include a new feature we call storytelling, which is the ability to tell better stories with data to communicate to an audience, including online audiences. It will include improved data integration, so that you can combine data from different sources easier than you can today.
And going forward, out to Tableau 9 and Tableau 10, major areas we're interested in are further advancements in storytelling, we're interested in further advancements in data integration, we want to make more advanced analytical features available, and of course, we are investing aggressively in mobile platforms. Increasingly, knowledge workers are using tablets for their mainstream business tasks and we believe there's an opportunity to build wonderfully easy-to-use, multi-touch-enabled analytics products that people of all skill levels can use. We have one on the market today, and we're investing aggressively in taking it to the next level.
These developments tie into future deals. Every release of Tableau has enabled companies to scale our platform for larger and larger user audiences. And today companies are routinely putting thousands and tens of thousands of users on Tableau's platform to enable self-service, agile visual analytics for their people. And so the more our platform is able to achieve that, the more likely we are likely to close larger size deals.
Tse: What else can you reveal about the big data trends that are driving your R&D plans for 2014?
Chabot: The first thing that comes to mind is that boy, has corporate culture changed over the last 30 years. Leading companies competing for the top talent. Find me a company that doesn't say we compete for top talent. Everyone is trying to get the best talent they can as a formative part of their business plan. And companies competing for the best talent have found over the last several decades starting with casual Friday that they need to become more empowering, more open, more transparent, more democratic, than say, the 1950s corporation was, to give you an example.
And every year we have seen the leading companies go in this direction. Well part and parcel with that is a company's business analytics strategy. Traditionally, companies, large companies in particular, Fortune 5,000 companies, have adopted a very paternalistic stance towards their people with regards to business intelligence technology. They wonder whether their people can be trusted with data. They have wondered whether their people can be trusted to make sure they're using the right data.
They have put control of the business intelligence strategy into the hands of a small priesthood of people who basically become a report factory processing reports and questions for the rest of the company.
And what we are leading here with Tableau, with our research and development investments to your question, is inventing a new kind of business intelligence platform that is focused on people. It's self-service, it's visual, it's fun to use, it's for people of all skill levels. You do it yourself, and that's sitting well into the major trends in corporate culture and corporate strategy, which is to create informed, democratic, empowering, data-driven workplaces. And I would argue that Tableau is the only business analytics product on the market today that enables that cultural transformation and that orientation of empowerment towards the people.
Tse: Christian, what's getting Tableau investors excited about 2014? What are you hearing from them?
Chabot: In Q4, we grew the international revenue contribution of Tableau for the first time above 20%. Being an American, Silcon Valley-born technology company, we have had most of our sales historically in the United States. But our plan is to invest much more internationally over the coming years.
Those investments have started to bear fruit, but I think 2014 will be a banner year for our international investment and growth. Secondly, Tableau is launching this year Tableau for the Mac. And as you know, there is a large and passionate Mac user community, and we have not to date had a product for Macintosh users.
So we have had the product under development for some time, and are very excited to bring it to the marketplace. And the third is, just last summer, not too long ago, just a number of months ago, we launched Tableau online, which is our first software as a service product. An SaaS product. And so now customers can benefit from Tableau's technology either on premise or in the cloud, and Tableau online will be a big push for us in 2014.
Tse: Tell me about the large, $100,000- to multimillion-dollar deals moving through the pipeline for Tableau right now. Who's been signing on with you?
Chabot: Tableau is witnessing in the business intelligence market a broad, market shift towards Tableau's way of doing things. If you look at our financial results, I hope by now this is self-evident, but I just want to make sure it is spoken -- Tableau is bringing easy, visual, affordable, analytics products to the business intelligence market in a way that has never before been achieved.
The business intelligence market today, if you just look at the products customers can go buy, the business intelligence products that currently dominate the industry are complicated and difficult to use, and slow-moving, and inflexible, and expensive. And I mean every one of those words. And into that frustrating customer landscape, Tableau is bringing an easy for everyone, affordable, fast-moving alternative. That is what we're doing.
And so to answer your question, the large deals that we are closing are happening with customers of all shapes and sizes. They're occurring with Fortune 500 companies, they're occurring with universities, they're occurring with nonprofits. They're occurring with government agencies, they're occurring with think tanks and consultancies. The world is thirsty for products that help them see and understand the data they have in their databases and spreadsheets, and Tableau is the first mass-market product available, and as a result, we're seeing large deal products in all of our segments.
Tse: What's helped seal the deal in many of these cases?
Chabot: Well let me tell you what they have in common. And then I'll tell you what I think are the reasons people buy, and how they differ from one to another. What they have in common is that most customers out there just picture a Fortune 500 division, or a regional manufacturer, or a university or a government agency or a nonprofit, or a small business for that matter.
Just picture an organization. It has some data stored in databases, and in spreadsheets, and in places like salesforce.com and NetSuite (N). And they typically want to answer questions using that data. They want to answer questions, they want to make better decisions, they want to roll out executive dashboards, and roll out faster and more interactive reports, and they want to produce visualizations that can be used to persuade and inform people of what's going on.
In short, they want to use facts to create data-driven informed decisions for their organization. That's what they all have in common.
Now I think to the spirit of your question, compared to the alternative products that have traditionally been available in this business analytics marketplace, some customers adopt Tableau primarily because it is 10 times faster than the traditional product. And that's just why they buy. They say, "hey look. I can complete my data dashboard project in six months using the alternative, or I can do it in six days using Tableau." It's literally that dramatic a difference between how fast you can do things, and that's why some customers buy.
There's another reason people buy. Which is a lot of these buyers that I describe also want to put data into the hands of more of their people, and these traditional systems, these traditional, enterprise business intelligence platforms that have been available in the market, they are so complicated to use and so expensive that only a small priesthood of people use them within the company. And yet most executives who lead these companies, going all the way to the presidents of companies and universities -- they're saying "look, I want data and business analytics in the hands of all of my people."
I want everyone consulting facts before they make decisions. Not a few. And so compared to these traditional alternatives, Tableau is a self-service business analytics product. It enables companies to take business analytics out of just the IT function and put it into the hands of all the decision makers in the company, and that's a second reason people buy, and of course some buyers are a combination of both.
-- Written by Andrea Tse in New York.
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