Shares of analytics visualizer Tableau Software (NYSE:DATA) sank by 4% yesterday. The company is no stranger to volatility. After going public in 2013, shares proceeded to climb to more than $100, only to sink below $55 just months later. Tableau recovered and tapped fresh all-time highs of more than $125 during the summer, and broke below $80 yesterday.
The reason for the investor pessimism? Amazon.com (NASDAQ:AMZN).
Say hello to QuickSight
At the e-commerce giant's AWS re:Invent conference, the company announced a new offering called QuickSight, which is a brand new business intelligence service that allows employees to build visualizations and analyze their data on a deeper level. Analyzing and visualizing data through business intelligence is precisely Tableau's bread and butter, and the smaller company has carved out a comfortable niche.
The obvious fear is that Amazon will enter the enterprise data visualization market, and characteristically undercut its rivals into oblivion, while absorbing whatever losses it needs to in order to win. The most disruptive threats to pure-play companies always come from larger competitors that decide to embark on side projects that don't necessarily need to be profitable right away.
Much like Tableau, Amazon QuickSight will pull from a wide variety of data sources, naturally including any data stored on AWS, but also from other common enterprise databases. Amazon has created a Super-fast, Parallel, In-Memory Calculation Engine, or SPICE, to render visualizations and perform all the calculations, and it promises to do all of this for "one-tenth the cost of traditional solutions." Yup, that's the Amazon we all know and love.
The devil is in the details
Here's the rub. While Amazon QuickSight will integrate with third-party data sources, all of the processing and visualizing will occur within Amazon's own cloud. In contrast, Tableau will analyze the data regardless of where it "lives," and where that data "lives" is of utmost importance to enterprise customers due to the subsequent security concerns.
The vast majority of companies highly prefer to store mission-critical data locally for maximum security. Tableau caters to this preference by offering on-site integration.
QuickSight is less threatening than you think
It's also worth noting that Tableau and Amazon partner on various levels. Following the QuickSight announcement, Tableau quickly pointed out how the two companies work together in many ways. Ultimately, as Amazon helps the database market mature, the analytics market benefits. By extension, that means Tableau capitalizes, too.
Tableau is integrating with SPICE so that its users can tap into any data stored there, as well. Without a doubt, Tableau acknowledges that there is some "overlap" between what the two companies offer; but that shouldn't undermine the fact that Tableau still has some competitive advantages and areas of differentiation compared to QuickSight.
In addition, learning entirely new software is always a switching cost, and Tableau has a very intuitive interface. I even helped pilot a program for The Fool's editorial department so that we could analyze our data in a more efficient way, and I was undoubtedly impressed by how easy it was to create insightful visualizations.
For now, Amazon QuickSight's threat to Tableau is more theoretical than practical. But eventually, that mix might shift.