Hakkoda sets out to capture the Snowflake professional services market

Profile picture for user pwainewright By Phil Wainewright November 4, 2021 Audio mode
Summary:
Tercera leads a $5.6 million round in Hakkoda, which it has 'co-incubated' to create a pureplay data engineering services firm specializing in Snowflake projects, delivered in an XaaS business model

Erik Duffield, CEO, Hakkoda - screengrab from Zoom call
(screengrab from Zoom call)

As enterprises feel a growing urgency to realize value from sprawling data assets, many are turning to Snowflake, the fast-growing cloud data warehousing vendor. That in turn creates demand for specialist professional services to support these data projects. Enter Hakkoda, a Snowflake-focused consulting firm, which yesterday announced a $5.6 million funding round. Its founders have crafted the business in a different mold than traditional professional services firms, tailoring it to what they perceive as the specific needs of Snowflake customers and the emerging talent pool that serves the sector. In an exclusive interview with diginomica, its CEO Erik Duffield told us that the market around Snowflake offers a "once in a generation opportunity" to do things differently. He explains:

We're a new breed of data engineering services firm. We built a model that works the way the cloud works — scale it up, scale it down, based on your needs and backlogs ... We're bringing a different model to engage with customers, based on specifically changing from the old way of engaging with consulting firms, to interacting with talent in a new way.

Within months of forming and starting to acquire customers such as food distributor US Food, Hakkoda has raised a $5.6 million series A round led by Tercera, an investment firm that specializes in backing next-generation cloud integrators. The new company's approach to client relationships and talent acquisition reflects several of the principles that Tercera has outlined as characteristic of a new breed of consulting firms in what it calls the 'third wave' of cloud computing.

Frictionless consulting

One of the most distinctive aspects of Hakkoda's approach is a subscription-based, scalable teams model, which gives customers on-demand access to the skills they need, drawn from a bench of specialists in data migration, architecture, analytics, engineering, machine learning, governance and application development. This SaaS-like business model is more appropriate to the ongoing relationships that next-generation cloud consultancies must build with clients, according to Tercera and Hakkoda. Duffield believes it's a model that others will emulate. He explains:

We wanted to create high value, which is capable people at efficient costs, but in a way that was really easy to work with. So take all the friction out of typical consulting ...

I do think at the scale we're doing, with the intentionality that we're doing, it is unique. But I do think it's directional. We won't be the only one doing it for long ... because the buyers are going to demand it ... Customers want access to talent. They want a consulting partner to co-innovate with them, not just deliver a project, hand over the keys and walk away.

The approach is more collaborative than old-school professional services, too. Hakkoda sees its role as helping its clients build their internal skills, and therefore wants to share its learnings. "We're not afraid to share the knowledge. There's so much work out there," he says, adding:

The old way of thinking was, I need to maintain that tacit knowledge inside my people, inside my organization. If I share too much, they don't need me anymore. That's backward thinking.

The more I share, the more I empower, the more I enable, the more clients are attracted to that, the more that customer has there. Our client's needs in this space are endless. I will never run out of data projects inside our customers. If we drive success in, we enable and empower them.

One feature of Hakkoda's offering that illustrates this mindset is the concept of 'innovation credits'. These are the professional services equivalent of an airline's frequent flyer miles. Hakkoda clients earn these credits in proportion to their spend with Hakkoda, and can then cash them in to fund more speculative projects that they may have difficulty finding budget for. Duffield explains:

We recognize that it takes as much effort for a director of IT to run a $100,000 Statement of Work up through the funding approvals to do something that's innovative, as it does to take a $4 million project up through approvals. And so innovation generally doesn't happen, then, because it's too much effort ...

So we're de-risking innovation through this model. And it's another step in empowering our customers to be more innovative, drive more innovation, and navigate through a reality of their world, which is the procurement process, the approval process, getting stakeholder buy-in.

Investing in talent

Another of the principles set out by Tercera is the recruitment of a diverse, enthusiastic team that delivers services virtually, and therefore can work from anywhere. In Hakkoda's case, the company is competing for talent by offering the opportunity to make an impact — "looking to tap into their souls more than their wallets." Duffield elaborates:

Especially with data engineers, and machine learning talent, the top of the IT competitive marketplace, they're reprioritizing what's important to them, looking for meaningful purpose ... We're attracting amazing talent that says, 'Look, I've been doing this for a while I want to go someplace that inspires me. that's building a community, that's doing something meaningful in the world.'

At the same time, Hakkoda is investing in expanding its available talent pool in collaboration with the Costa Rican government. Over the next two years, it aims to recruit up to 300 employees at its delivery and customer innovation center in the Central American nation, working with universities and other agencies to develop the talent it needs. Duffield explains:

The talent doesn't exist at the scale the market needs it. So we're investing big in Costa Rica. They have great technical universities and they're producing talent that is learning Python, learning to work with cloud technologies. What we do is take it that next step. So we're collaborating with these universities, modernizing and adjusting their programs to produce the talent that we can then train up on Snowflake, on DataRobot, on Matillion, these modern cloud data stacks, and build our own talent. So we're adding to the market of talent, not just trading talent that exists in the market.

By putting all of these various elements together, Duffield believes Hakkoda combines the best of four different traditional professional services models — the specialization and flexibility of a boutique firm, the scale and reach of a global systems integrator, the lower labor costs of an offshore firm, and the pay-as-you-go convenience of a contractor. He explains:

It's our Goldilocks approach. We want to fit right in the middle [with] scale in capabilities — where we're investing in training programs and talent development and global locations — but have the depth that a boutique brings, because all we do is data engineering and data value chain.

While serving clients across all industries, Hakkoda will also build specific expertise in industries with particular data challenges, such as healthcare and financial services, he adds.

Building something special

Tercera's involvement in Hakkoda has come earlier than its other investments, where it has identified a suitable company from among a vendor's existing ecosystem partners. But when it did its research in Snowflake's ecosystem, it came up blank. That led to a decision to "co-incubate" Hakkoda, as Chris Barbin, Tercera's CEO, explains:

We went to Snowflake — we know some of the board members, we know some of the leadership team — and we had them point us to the ecosystem. Frankly, I couldn't find a pureplay that was really focused on building something special, next-gen. We had a number of discussions, but what we were finding were firms that were AWS plus Snowflake, or Microsoft plus Snowflake, or Salesforce plus they're adding on Snowflake.

We wanted to back someone who was 100% focused on building something special on the back of Snowflake. As we were doing our homework, we said, if it's not out there, is there a way we could create it and find some seeds?

Barbin therefore turned to Duffield, an ex-colleague at his former company Appirio, which grew into one of the leading pureplay integrators in the Salesforce ecosystem, to take forward the vision of a pureplay consultancy focused on Snowflake. Being involved from the start gives Tercera an opportunity to roadtest some of its beliefs about the defining characteristics of this next generation of cloud integrators. Barbin says:

It was a pre-revenue seed bet, which is definitely, for us, outside of our model. But frankly, we're really excited about what it means by way of creating something that ... because it's starting from scratch, we're able to really identify and capitalize on some of the bigger trends that we're seeing in this third wave, and how to create a services company in the third wave. The Costa Rica, Latin America trends, the seeding and developing of talent from the beginning, the way Eric's talking about collaborating with universities — these are models that will shape services companies for the coming decades. To do it without any, call it institutional baggage, is pretty cool.

My take

Right from the start, Snowflake was on the list of ISVs where Tercera wanted to find a consulting partner that it could invest in. That it could not find a suitable pick probably reflects the relative immaturity of Snowflake's ecosystem compared to the likes of more established ISVs such as Twilio and Okta, where Tercera has previously invested. Nevertheless, to bite the bullet and actually help to create the ideal choice where none exists is quite a surprising move and one that, as Barbin admits, goes beyond what Tercera saw as its mission when it first launched its fund.

All the same, it's a welcome opportunity to start with a clean sheet and test out some of the ideas Tercera has been promoting, and it will be interesting to see how it progresses. The idea of delivering professional services in more of a SaaS-like way — at diginomica, we would call that following an XaaS model — and making the whole experience more frictionless? Those are ideas that appeal to us.

[Updated a few hours after first publication with light editing for clarity and typos].