Deconstructing Palantir’s Business Model

Currently, data is more precious than oil. However, sifting through petabytes (1,024 terabytes) or exabytes (1,024 petabytes) of information, or trillions of records, to find actionable data is akin to finding a sleek needle in millions of haystacks. Moreover, organizations often violate data privacy regulations.

This is where responsible software platforms come into play. Companies like Palantir use artificial intelligence (AI), machine learning (ML), and data science to transform organizations’ operations.

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What is Palantir?

Founded in 2003 by Alex Karp, Peter Thiel (co-founder of PayPal), Stephen Cohen, Nathan Gettings, and Joe Lonsdale, Palantir is the leading vendor in AI, ML, and data science. Headquartered in Denver, Colorado, the software company specializes in AI-powered operating systems and empowers informed decision-making.

The cloud platform’s multi-layered security approach with a commitment for dedication to respecting the data privacy regulations sets it apart from its competitors.

Palantir Customer Segmentation

Palantir primarily caters to three types of customer segments:

Public sector: Various US government agencies, like the CIA and the Army, use Palantir to derive actionable insights from vast data in real time. The platform also supports secure data sharing, making it incredibly more manageable for the agencies to collaborate and make decisions.
Private sector: Private organizations, like Ferrari and Sonnedix, use Palantir’s solutions to monitor assets, run through complex scenarios, drive digital transformation, improve security, and build better products and solutions.
Non-profit sector: Palantir is also a favorite of non-profit organizations, like the World Food Programme (WFP) and CDC, for identifying areas that require help and efficiently offering it.

Palantir is a leading software platform in the US that prides itself on tailoring solutions based on its clients’ issues. It has customers in over 60 countries. But why do diverse organizations trust this platform? Let’s find out.

Palantir’s Value Propositions

Palantir’s unique value propositions for its clients include the following:

1. Tailored solutions

Palantir’s USP is that it doesn’t offer a pre-packaged solution for any and all problems. It provides bespoke solutions for each of its clients. For instance, the Ukraine government has been using Palantir to wage an algorithm-based war against Russia. Generative AI has helped the proud company beat Russia’s armed forces with far fewer resources.

Similarly, the CDC used Palantir to combat COVID-19. Alternatively, Ferrari has been using the software since 2017 to improve its F1 performance. The company shifted its focus in 2023 and is now using the solution to test and develop road cars.

2. Easy deployment and data integration

Palantir’s operating systems can be easily deployed by organizations of any type. Moreover, the systems are interoperable with existing solutions, boost security and compliance, and promote data sharing.

Additionally, the platform allows organizations to integrate structured and unstructured data from multiple sources.

3. Different platforms to fulfill varied needs

Palantir offers four solutions to help its customers with their varied needs: Gotham, Apollo, Foundry, and AIP. For instance, Gotham is specifically designed to help agencies uncover patterns within datasets, such as signals intelligence sources.

On the other hand, Foundry is for organizations that want a central operating system for their data repository. Apollo offers a secure environment for businesses to deploy their software. Similarly, AIP is all about driving enterprise operations through AI.

4. Consultation and support

Palantir offers extensive consultation and support to its clients. This helps them implement and use the solution efficiently.

Who are the Key Partners of Palantir?

Palantir’s partners have helped propel the company to success. Its key partners include:

Government organizations: Palantir is the go-to for multiple US government agencies, including the Army and CIA. They’ve been critical to the solution’s development and success. International government agencies, like Ukraine, trust the software company, which allows Palantir access to classified data and challenges.
Non-profit organizations: Humanitarian organizations and charitable foundations help the company develop solutions for non-commercial or security purposes.
Commercial organizations: Diverse commercial organizations use Palantir to gain an advantage over their competitors. In turn, the software solution can acquire customers in the private sector and expand its business.
Investors: The public company is dependent on investors to tackle complex problems and innovate solutions.
Channel sales and cloud partnerships: The company partners with major private, public, and hybrid cloud providers. These cloud partners, like IBM, command a significant chunk of the market and enjoy large sales teams. Basically, the company gets access to the partner’s existing clients and increases its distribution abilities.
Joint ventures: Palantir continues to explore and form joint ventures to better promote its offerings. Examples include Japan’s SOMPO Holdings Inc.

What are Palantir’s Key Resources?

Palantir’s key resources include:

Palantir’s bespoke operating systems are its most significant resource.
Profitable partnerships with private, public, and non-profit sectors.
Palantir’s ecosystem of 3,838 employees includes lawyers, engineers, and social scientists.
Physical office locations in North America, Europe, the Middle East, and Asia and the Pacific.
Intellectual property rights, like patents, trademarks, copyrights, contractual provisions, know-how, and trade secrets.
Excellent brand image in the big data analytics and innovative solutions sector.

What are Palantir Channels?

Interested clients can fill out the form on Palantir’s website to receive dedicated solutions to their problems. They can also request a free trial and access Apollo for 30 days.

Additionally, the software company is active on multiple social channels—X (formerly Twitter), YouTube, and LinkedIn—and leverages it to promote its operating systems.

How does Palantir Maintain Customer Relationships?

Palantir customers, potential and existing, can go to the Contact Us page to get help. Interested organizations can fill out the form to inquire about using Palantir for business problems.

Customers can get in touch with the customer success team for product training and support. Interested organizations can also check out Palantir Learning to understand the software business better.

What is Palantir’s Cost Structure?

As of the fiscal year ending December 31, 2022, Palantir’s cost of revenue was approximately $431.1 million. It also incurred operating expenses of over $1.67 billion: $744.9 million for sales and marketing, $404.6 million for research and development, and $524.3 million for general and administrative.

How Does Palantir Generate Revenue?

Palantir’s total revenue was around $2.23 billion for the fiscal year ended December 31, 2022. Government organizations accounted for 56% of the amount and the commercial sector contributed the remaining 44%.

Despite operating in over 60 countries, most customers are US-based and were responsible for 61% of the company’s revenue in 2022. Historically, the business drums up more sales in the third and fourth quarters (September 30 and December 31, respectively) of the year.

But how does Palantir make money? Let’s find out.

Palantir’s revenue streams can be categorized into three sections:

1. Palantir Cloud

Being a SaaS (software-as-a-service) model, Palantir offers a subscription-based hosted environment to customers who want to use the solution without going through the hassle of installing and maintaining it on their native servers.

Additionally, the software company provides operating and maintenance services during the subscription period. The contract period varies from organization to organization, and so do the charges.

2. On-premise solutions

Palantir also provides on-premise subscription models for customers who want to install and maintain the software on their native servers or cloud infrastructure. In this model, the client receives access to software licenses and gets maintenance services during the contract term.

3. Professional services

If customers need help installing, training, and using the solutions, Palantir offers customized professional services. While this is an alternate revenue source for the company, it helps the solution generate incremental revenue.

The Bottom Line: Palantir is transforming the generative AI landscape

Palantir is a disruptive solution that aims to empower its customers with generative AI-based operating systems. Its expert solutions make it easy for clients to make sense of their big data and gain a competitive edge over their competitors.

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