Item 1. Business
ITEM 1. BUSINESS
Overview
We build
software platforms for large institutions whose work is essential to our way of life. Those institutions must be able to function in times of stability as well as crisis and uncertainty. To do so, they need software that works.
We were founded in 2003 and started building software for the intelligence community in the United States to assist in counterterrorism
investigations and operations. We later began working with commercial enterprises.
We have built two principal software platforms,
Palantir Gotham (Gotham) and Palantir Foundry (Foundry). Gotham, our first software platform, was constructed for analysts at defense and intelligence agencies. They were hunting for needles not in one, but in thousands of
haystacks. And they did not have the software they needed to do their jobs. In Afghanistan and Iraq, soldiers were mapping networks of insurgents and makers of roadside bombs by hand. Gotham enables users to identify patterns hidden deep within
datasets, ranging from signals intelligence sources to reports from confidential informants, and helps U.S. and allied military personnel find what they are looking for.
We later found that the challenges faced by commercial institutions when it came to working with data were fundamentally similar. An Airbus
A350, for example, has five million parts and is built by hundreds of teams that are spread across four countries and more than eight factories. Companies routinely struggle to manage let alone make sense of the data involved in large projects.
Foundry was built for them. The platform transforms the ways in which organizations interact with information by creating a central operating system for their data.
Our software is on the front lines, sometimes literally, and that means so are we. Gothams use has now extended beyond intelligence
analysis into defense operations and mission planning. And Foundry is becoming the central operating system not only for individual institutions but for entire industries.
The stakes are high. The challenges our platforms address are a matter of survival, both for the institutions we serve and the individuals who
depend on them. We have the privilege of partnering with some of the worlds most important government and commercial organizations. And we believe that the work of those organizations is essential to our security and the lives that we lead.
We are committed to ensuring that our software is as effective as possible without ever compromising our values. Our platforms were built
from the start to protect individual privacy and prevent the misuse of information. We are not in the business of collecting, mining, or selling data. We build software platforms that enable our customers to integrate their own data data that
they already have.
The same technology that makes our software so analytically powerful its ability to construct a model of the
real world from countless data points is what allows our customers to monitor, properly secure, and control access to that data and its use. It is also why customers, including governments around the world, trust our platforms to safeguard
their data, including their most sensitive information.
As of December 31, 2020, our platforms were used by 139 customers, including
some of the largest and most significant institutions in the world. For example, the U.S. Army uses our software to ensure the readiness of more than one million military personnel and to make decisions across dozens of command structures.
Similarly, our software is deployed by one of the worlds leading auto manufacturers across its factories in North America to help ensure quality control on the production line.
Gotham and Foundry enable these institutions to transform massive amounts of information into an integrated data asset that reflects their
operations. Users can build on top of this asset to make data accessible and
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actionable. Our platforms enable people, whether they are workers on an assembly line or soldiers in the field, to work with data, even if they have never written a line of code.
We have also invested heavily in developing Apollo, our continuous delivery and product infrastructure platform, which is used to deliver
software updates to our customers and enables our software to run in any environment. The investments in our software platforms have yielded a significant decrease in the time and number of engineers required to install and deploy our software. For
instance, the time required to install our software and begin working with a customer has decreased more than five-fold from 2019 to 2020. In some cases, our customers can now be up and running in mere hours.
Our software is used by customers across 40 industries and in more than 150 countries. Our government work is central to defense and
intelligence operations in the United States and its allies abroad. On the commercial front, we work with some of the worlds most durable and important companies across industries, including in the consumer, energy, financial services,
healthcare, industrials, telecommunications, and transportation sectors.
We generated $1.1 billion in revenue in 2020, reflecting an
increase of 47% from our revenue in 2019, which was $742.6 million.
The scale of our partnerships with customers, in revenue terms,
has also grown over time. In 2020, our average revenue per customer was $7.9 million, and the average revenue for our top twenty customers, by revenue generated in 2020, was $33.2 million. This is up from 2019, when our average revenue per
customer was $5.6 million, and the average revenue from our top 20 customers, by revenue generated in 2019, was $24.8 million.
The broader momentum of our business is the result of the strength of our software platforms. And the need for software that works has never
been greater.
The systemic failures of government institutions to provide for the public fractured healthcare systems, erosion of
data privacy, strained criminal justice systems, and outmoded ways of fighting wars will continue to require both the public and private sectors to transform themselves. We believe that the underperformance and loss of legitimacy of many of
these institutions will only increase the speed with which they are required to change.
Other software companies have incorrectly assumed
that the future will look like the past, forming their strategies based on assumptions about a world that no longer exists. A focus on targeted analytical tools and optimizing specific functions within complex organizations is insufficient. We
believe that software must connect the entire enterprise. Our most critical institutions cannot wait a year or longer for a promised application or bespoke solution to be developed. Those options are often obsolete before they are even delivered.
Our partners need solutions now. And we have built them.
Our Approach
We do not
sell features, tools, or one-off custom applications. When it comes to working with data, those approaches generally work only briefly, if at all.
Some companies throw people at the problem. Others build dashboards. We build software platforms that become part of the institutions we
serve. And we believe that every large institution in the world has a problem that our platforms were designed to address.
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Our Software Creates a Central Operating System for Data
Our platforms, Gotham and Foundry, allow organizations to recast their siloed systems as contributors to a unified data asset.
Our software enables our customers to transform massive amounts of information into knowledge that reflects their world. Data is represented
not as cells in a spreadsheet, or exports from a single system, but as entities, events, relationships, consequences, and decisions in context.
Building flexible applications on this data asset allows the data to be made accessible and understandable to the people who need it. We bring
real-time operational data to decision makers at the worlds leading institutions.
Our Software Does Not Displace Existing
Systems, It Augments Them
Flexibility and openness are core tenets of our software. By integrating their existing solutions into
our central operating system, organizations can choose to maintain key historic investments without having to rebuild their entire data infrastructure.
As the world changes and technology evolves, institutions can adjust their data model and integrate new systems instead of rebuilding
everything from scratch. Today, our platforms are fully modular, meaning a customer can take what they want of our offering and build on what they have, helping our customers get the unique capability and rapid delivery of value they have come to
expect even faster.
Problems come in radically different shapes and sizes, so we have built software that becomes part of each of our
customers environments, whether theyre operating in a Humvee, on an oil rig, or at 30,000 feet.
Our Approach to
Security Enables Collaboration Instead of Inhibiting It
Our early days with the U.S. intelligence community informed our
development approach. Security is always our first priority.
We designed our software to embrace the complexity of security clearances,
institutional boundaries, and varying data sensitivity levels. The same technology that allows our platforms to construct a model of the real world from individual data points allows our customers to secure each of those pieces of information.
Security need not come at the expense of collaboration. Our software enables both, and we have a reputation for enabling secure collaboration
in the most stringent data environments in the world.
Our Platforms
We have built two principal software platforms: Palantir Gotham and Palantir Foundry. Our software platforms provide the critical
infrastructure needed to integrate our customers data and operations.
The vertically integrated nature of Gotham and Foundry allows
users of varying technical abilities to collaborate effectively in our platforms. Data engineers can integrate new data sources, analysts can clean and transform data, data scientists can write models, business users can conduct daily workflows, and
senior leaders can make critical decisions. The two platforms can either be used separately or bundled together as a single ecosystem.
Data, analyses, decisions, and the metadata around each are secured with fine-grained access controls that propagate from source data to
shared analyses. Each platform is comprised of user-facing applications that are targeted to the specific industries and sectors in which they are used. Images contained in this section are illustrative of our user interface and reflect notional
data only.
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Despite their differences, Gotham and Foundry both serve as central operating systems for
our customers. Where they vary in specific functionality, they align in approach. Both platforms can be deployed in almost any environment.
Gotham
We built
Gotham, our first platform, for government operatives in the defense and intelligence sectors. Analysts working on the front lines of counterterrorism operations were hunting for needles not in one haystack but in hundreds and thousands of them.
Gotham enables them to find what they are looking for.
The platform enables users to identify patterns hidden deep within datasets,
ranging from signals intelligence sources to reports from confidential informants. It also facilitates the hand-off between analysts and operational users, helping operators plan and execute real-world
responses to threats that have been identified within the platform. Gotham is now used broadly across government functions.
We also offer
Gotham to our commercial customers, including to those in the financial services industry in connection with fraud investigations.
Foundry
As we
expanded from our government work into the commercial sector, we saw that private enterprises had similar problems to those that affected organizations in the public sector.
We also learned that big data isnt valuable just because its big. We believe that the integration and joining of different
datasets is what matters most. Data integration also happens to be among the hardest problems to solve.
We spent years investing in the
development of a platform that makes the task of integrating new datasets routine so that users can focus on taking action on information. The result of that investment is Foundry. All of our commercial customers now use it, as do several of our
government customers.
Foundry transforms the ways organizations operate by creating a central operating system for their data. Individual
users can integrate and analyze the data they need in one place. The speed with which users can experiment and test new ideas is what makes the software stick.
Data projects often fail because the steps and methods used to build data pipelines are difficult to understand and recreate. We built
Foundrys backend to solve the root of this problem. The platforms graphical interface does the rest, allowing users to track and trace their pipelines so they know what the rows and columns in their tables represent and why they are
there.
Competitive Strengths
A number of our most significant competitive strengths, which we believe set us apart from the rest of the industry, follow below.
We built privacy controls into our platforms from the start.
We embrace the complexity of working in the real world.
Where other companies cant or wont go, we step in to make sure that critical institutions can do their jobs. We offer software to
help a maintenance engineer decide what maintenance fix to deploy, to help a researcher interpret the results of a clinical trial, and to help a soldier decide when to hold fire and when to shoot.
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At the same time, we treat the protection of rights to privacy and civil liberties as
essential requirements for our software. From the start, we built key capabilities for data protection and governance into our platforms. Every capability we ship supports
end-to-end data legibility, audit logs, granular access controls, data quality checks, and purpose specification requirements that can be adapted to any environment.
Skeptics may ask how an American software company with roots in the intelligence sector can credibly claim to support the most sensitive,
regulated, and privacy-conscious institutions in the world. It is because, not in spite, of the fact that we take privacy so seriously for all our customers that we have won the trust of institutions whose work relies on safekeeping
information and protecting the data of their constituents.
Our software engineers are on the front lines.
Our software is on the front lines, sometimes literally, and that means so are we.
Our forward deployed engineers (FDEs) have travelled to bases in Afghanistan and factories in the industrial Midwest to deploy our
platforms. Time in the field adds to the continuous improvement of our platforms. As FDEs help customers make the most of our software, they observe users challenges firsthand.
We partner with bedrock institutions that are central to the societies we live in, and we help empower them with critical software to carry
out their essential mandates and missions.
Time and time again, in wartime and in peace, we have proven our ability to ensure that our
software addresses these challenges. We learn, we build software, and we deploy that software against problems that other companies are unwilling or unable to address.
Our software brings government-grade security to industry, and the breadth of private sector experience to government.
Our roots in the intelligence community and defense sector introduced us to a set of unique challenges when it comes to building software that
other companies in Silicon Valley and elsewhere either did not or could not address.
Our software had to be secure enough to handle
national secrets, stable enough to support soldiers wartime decisions, and transparent enough to ensure that all data and usage in the system could be monitored and traced. By building these requirements directly into our platforms, we provide
the private sector with government-quality security standards out of the box.
To the public sector, we offer software that incorporates and reflects our
experience of working across 40 industries and years spent in the field. We incorporate what we have learned into our two platforms, which automatically ship new features to our customers across the business. The breadth of our work provides
governments around the world with something that industry-specific players cannot: automated access to field-driven research and development as well as features built based on the operational needs of nearly every major industry.
For example, capabilities of our platforms that were originally developed to help the oil and gas industry optimize production of crude oil
have been adapted by manufacturers of medical equipment to optimize their supply chains in the wake of the onset of the pandemic and by national health agencies in their efforts to allocate personal protective equipment to hospital staff and
patients.
Similarly, features of our software platforms originally designed to handle streaming time-series data from oil and gas wells
around the world where a single well can generate more data per day than Twitter have been applied by other customers to improve the speed of Formula One race cars, maximize usage of airline fleets, and improve quality control on
automotive assembly lines.
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Our software platforms deliver multi-tenant cloud economics, even for air-gapped or disconnected customers.
Apollo, our continuous delivery platform, helps to ensure
that our software works wherever our users are and under a variety of conditions: on oil rigs and submarines, on disconnected laptops in Humvees in theater, and on more than 9,000 aircraft around the world.
Our software is environment-agnostic and is deployed to public and private cloud networks, on-premises
data centers, air-gapped and classified systems, and on laptops and specialized hardware. This includes AWS Public Cloud, AWS GovCloud, Microsoft Azure, and a variety of classified cloud systems.
Instead of dedicating a team to manage each installation, a small group of engineers manages almost our entire software footprint, ensuring
that the latest features and security patches are deployed across all installations at effectively the same time, independent of the underlying technical infrastructure on which our software operates. This means that we can deploy to air-gapped or on-premises networks at effectively the same rate as we can in the cloud, thereby allowing our customers and us to benefit from multi-tenant cloud economics even
with single-tenant disconnected customers.
Our business is built to expand within organizations and across sectors.
We move quickly to scale our partnerships with customers. Our software can support the full range of users in an organization across divisions
or functions. It also provides a common analytical platform for users across industries and sectors.
Executives may set sales targets for
data scientists to translate into forecasts. Supply chain managers take those forecasts to plan trade-offs between suppliers, and plant supervisors use their plans to execute production. We can power the entire spectrum of these interconnected
decisions, within individual institutions and across them.
Our software brings diverse decision makers within an organization together:
data engineers, data scientists, and machine learning experts, as well as senior executives, prime ministers, and four-star generals. All can, and do, collaborate using our software.
We have chosen sides.
Our software is used by the United States and its allies in Europe and around the world.
Some companies work with the United States as well its adversaries. We do not.
We believe that our government and commercial customers value this clarity.
Growth Strategies
We
are pursuing a number of strategies to continue to grow the company, in both our commercial and government business segments in the United States and abroad. Our principal strategies are described below.
Continue expansion into the commercial sector.
Our current and potential commercial customers are some of the largest enterprises in the world. And we plan to continue expanding beyond our
roots in the government sector.
The work of these commercial enterprises is vital to the lives we lead. We want to ensure that they have
the software they need to do their jobs. We also believe that there is significant growth potential for us in the commercial sector, both in the United States and abroad, including in Europe and Asia.
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Our focus in the near term will be to build partnerships with commercial enterprises that
have the leadership necessary to effect structural change within their organizations and of their operations to reconstitute themselves around data. Over the long term, we believe that every large company in the markets that we serve is a
potential customer.
Increase our reach within existing customers.
For commercial customers, in sectors such as industrials, energy, financial services, media, and healthcare, our software can generate
hundreds of millions of dollars, whether in the form of new sales or costs saved. For government customers, such as defense and intelligence agencies, the software promotes the safety and welfare of the constituents they serve.
The value that our software creates is what drives our expansion within individual organizations. Our platforms are designed to easily
accommodate new users, workflows, and use cases. This allows us to rapidly scale within an institution.
Become the default
operating system for data across the U.S. government.
The U.S. government is increasingly using alternative procurement methods
to test commercial solutions, such as the software platforms we have built.
Our software is well positioned for this new procurement
approach. Our platforms have been tested and improved over years of use across industries and can rapidly be deployed by the government with minor configurations. This gives us a significant edge over contractors selling custom tools.
Our lawsuit against the U.S. Army, brought in 2016 and discussed further below, has been a central reason for the federal governments
change in its approach to software procurement.
Expand our reach with U.S. allies abroad.
We intend to pursue significant expansion of our government work with U.S. allies abroad. Recent expansion with law enforcement agencies in
Europe demonstrates our ability to capture these opportunities.
When ISIS attacked hundreds of people in 2015 and 2016 in Paris,
Brussels, Barcelona, and Berlin our platforms became a key means of communication and information sharing between European intelligence agencies and the rest of the world.
Pursue new methods of customer acquisition and partnership.
We are pursuing specific channel-selling opportunities with leading cloud hosting providers that have existing relationships with prospective
customers.
As we consider entering and growing in new markets outside the United States, we may continue to enter into additional
partnerships, joint ventures, and alliances with strategic organizations that operate in our target markets.
For example, in Japan we
launched a joint partnership with SOMPO Holdings, Inc., one of the largest insurance companies in the country, to help grow our commercial and government business in the Japanese market.
Become the industry default.
We intend to broaden our reach through partnerships that establish our platforms as the central operating system for entire industries.
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This model has been successfully implemented in aviation, where Foundry now connects the
industrys in-flight, engineering, and operations data through our Skywise partnership with Airbus.
We anticipate opportunities to create similar industry-wide partnerships, such as for healthcare and financial services companies.
Continue to grow our direct sales force.
We are investing in an account-based sales force to identify new customers and opportunities.
Our decision to grow our sales force in recent years has resulted in a number of significant new customers, including companies in the Fortune
100 as well as a number of leading government agencies in the United States and other countries.
Our sales force remains relatively
small, at about 3% of our total headcount. We will continue to invest in growing our direct sales force, which we believe will advance our strategies above.
10 U.S.C. § 2377
Section 2377 of the Federal Acquisition Streamlining Act (FASA) is a little known yet path-breaking law.
FASA was passed with the original intent of addressing procurement waste. The act requires the U.S. federal government to acquire
commercial items for all of its procurements to the maximum extent practicable. 10 U.S.C. § 2377; 41 U.S.C. § 3307. That is, rather than pursue acquisition of custom developed items, the government must first
consider readily available and proven commercial alternatives on the market.
The software we have built is a commercial item within the
meaning of the law. A bespoke government solution, custom built by a consulting company, is not.
Leveling the Playing Field
After its passage in 1994, the law was largely ignored. Government procurement offices paid preferred suppliers for years, if not
decades, to develop bespoke software. And commercial suppliers struggled to justify entering the federal market.
The regulations involved
seemed too esoteric, and the market too dominated by incumbents who knew how to maneuver within the system to their advantage. Inside-the-Beltway defense contractors
built entire businesses almost exclusively around selling custom technology solutions to the government, many of which we believe failed to achieve their intended purpose.
Palantir v. United States
For years, we struggled to make significant inroads in selling our software to large segments of the U.S. Army. This was despite consistent
demand from the soldiers on the front lines for the capabilities our platforms offer. Soldiers from more than half of the Armys brigades asked for our software, but their requests were often delayed or denied by the government.
In 2016, we won a lawsuit against the Army, challenging its decision to pursue a software development contract for the replacement of its
battlefield intelligence system. In 2018, the United States Court of Appeals for the Federal Circuit upheld the ruling and directed the U.S. Army to consider existing commercially available products, whether rifles or software, before trying to
build their own.
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As our litigation progressed, the Army changed course and began reviewing commercial options
to serve as part of its intelligence system. After testing real products, including our own, using real data, the Army selected our software to deploy to tactical units across the force.
Future Implications
The Army, as it works to ensure its service members have what they need to do their jobs, has begun evaluating commercially available
products, such as our software, before turning to custom-built alternatives. Other government agencies have begun to follow suit.
Our
victory in federal court is transforming the procurement of goods and services across the U.S. federal government.
For us, this shift in
government acquisition represents a significant expansion of our potential opportunities with the U.S. federal government. We are working towards becoming the central operating system for all U.S. defense programs.
Our Customers
We work
with many of the worlds leading government and commercial institutions. As of December 31, 2020, we had 139 customers.
An
overview of those customers and the ways in which they use our software follows below.
Overview
Our software is currently used across 40 industries around the world.
Of the $1.1 billion in revenue that we generated in 2020, 56% came from customers in the government segment, and 44% came from customers
in the commercial segment.
Our business continues to have a global presence. In 2020, we earned 52% of our revenue from customers in the
United States, and 48% from those abroad. The expansion of our business outside of the United States has continued in recent years, particularly in Europe and Asia.
Our Software at Work
Our platforms are used by individuals spread across more than 150 countries.
Our software is in the hands of factory workers, soldiers, clinicians, prosecutors, investigators, claims adjusters, technicians, intelligence
analysts, and social workers around the world. It is used by assembly workers in France, pharmaceutical researchers in Germany, public health administrators in the United Kingdom, and special forces personnel and senior military officials in the
United States.
Industries and Sectors
In addition to supporting individual institutions, our platforms have become central operating systems for entire industries and sectors.
Our work with Airbus, for example, was initially focused on the production of the A350 aircraft. The deployment of our software soon grew into
Skywise, our aviation platform that has become the central operating system of the airline industry.
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Skywise connects more than 9,000 aircraft across more than 100 airlines. Decision makers at
each of these institutions use Skywise to more efficiently design, manufacture, service, operate, and maintain their global fleets.
Similarly, when it comes to our work with defense and intelligence agencies, our software is not only used by individual organizations but is
also used to enable sharing of information and collaboration across agencies and countries. This is made possible by our softwares access controls, which enable agencies to work on the same platform simultaneously and securely.
Sales and Marketing
Our
approach to sales and marketing is built around the first two phases of our business model, as described in the section titled Managements Discussion and Analysis of Financial Condition and Results of Operation Our Business
Model : customer acquisition (in the Acquire phase) and account growth (in the Expand phase).
Customer Acquisition
Our customer acquisition strategy targets large-scale,
hard-to-execute opportunities at large government and commercial institutions. The high installation costs, high failure risks, complexity of data environments, and the
long sales cycles associated with these opportunities raise the barriers to entry for competition. The larger, more complex, and more technologically demanding the problem, the more likely we are to succeed.
Across both the public and private sectors, there is a history of failures when investing in new technologies. One U.S. military department
spent more than $1 billion building an enterprise resource planning system from scratch. The system was never delivered, and the project was terminated.
Many of our customers have had similar experiences investing millions even billions of dollars in digital transformation
projects, enterprise data warehouses, and digital twin initiatives that never really worked.
These failures have made both software
buyers and vendors highly risk-averse. Institutions often doubt that any vendor can implement a working solution and are unwilling to invest. On the other hand, smaller technology companies are often unable to compete for complex, large-scale
opportunities because installation costs and the risks of failure are too high, and the sales cycles too long.
These are precisely the
opportunities we target. Rather than reject projects with risky and resource intensive installation requirements, we actively seek them out.
There are a number of sales and marketing strategies that have accelerated our ability to acquire customers in recent years:
Direct Sales Force
We have invested and
continue to invest in an account-based sales force to identify new customers and opportunities.
We believe that our decision to grow our
sales force in recent years has resulted in multiple new customers that are in the Fortune 100 and include leading government agencies around the world. We will continue to expand headcount in our direct sales force.
Sector and Industry Platforms
We are
developing industry operating systems to help companies and government agencies manage operations across their entire organizations. These operating systems allow our software to be distributed at scale to institutions within given industries.
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For example, Skywise is our aviation platform that we have developed in partnership with
Airbus. Our approach with Airbus involves a collaborative go-to-market strategy to distribute the Foundry platform across the aviation industry. The adoption of our
software has been swift. Since June 2017, Skywise has expanded from zero to more than one hundred airlines on the platform. Each one is now an existing or potential customer.
We are working on similar partnerships in the insurance, healthcare, automotive, and government sectors, which we anticipate will have a
significant impact on our business moving forward.
U.S. Government
We intend to capture an even greater share of U.S. federal government spending on software systems, following our legal victory in federal
court. The ruling requires the government to consider commercially available products, such as our software, before attempting to build its own.
We generated a total of $51.9 million in revenue from our U.S. Army accounts from 2008 through September 2018, when the federal court
ruled in our favor. Since the ruling, we generated $231.8 million in revenue from those accounts as of December 31, 2020.
See the
section titled Managements Discussion and Analysis of Financial Condition and Results of Operation Our Business Model Government Contracts for a discussion of the terms of our government contracts.
Channel Sales & Cloud Partnerships
We are exploring the development of channel sales partnerships for specific industries and sectors by partnering closely with leading
providers of public, private, and hybrid cloud services, which have relationships with essentially every major enterprise in the world and have large, existing sales forces.
This channel emerged as an extension of the large computing requirements for our platforms and the migration towards the cloud as the hosting
environment of choice for many customers. The existing footprint of these providers provides us with access to their large customer base and expands our distribution capabilities.
Joint Ventures & New Business Partnerships
We intend to continue to form joint ventures and new business partnerships, where we believe specific industries or sectors require a local
partner and additional investment in order to realize the full potential of our platforms.
In 2019, we announced the formation of
Palantir Technologies Japan K.K., or Palantir Japan, a Japanese technology company co-founded by SOMPO Holdings, Inc. and Palantir. We formed Palantir Japan to deploy our platforms across commercial and
governmental institutions in the Japanese market.
In 2020, EMD Digital Inc., an affiliate of Merck KGaA, Darmstadt, Germany, and Palantir
launched a joint partnership called Syntropy to accelerate cancer research through secure collaboration within the global scientific community.
Account Growth
There are a number of
sales and marketing strategies that we use to drive revenue growth at an account.
These strategies include (1) creating new
ecosystem partnerships to extend the platform beyond the customers four walls into the operations of its partners and suppliers, (2) selling additional productized cross-industry software capabilities, and (3) selling strategic
implementations of our software against specific use cases, which deliver competitive differentiation.
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Our sales and marketing strategies allow us to scale existing customer contracts
horizontally to include additional divisions or functions within a single institution and vertically to include additional users and user groups. In tackling the customers most pressing and challenging problems first, we establish the trust
needed to expand platform usage across the full enterprise.
For each customer, we evaluate our revenue growth and margin potential on a
continuous basis and seek to allocate our personnel, including our FDEs, to the highest revenue growth opportunities. As long as we continue to see opportunities to scale our revenue base at an existing customer, internal resources may continue to
be allocated to that customer even if those allocations reduce contribution margin in the short term.
Research and Development
Palantir was founded on the premise that the most critical challenges cannot be solved from the comforts of Silicon Valley. They can
only be solved by working directly with customers.
An industrys problems and strengths are not uniform across institutions. As a
result, traditional software solutions can rarely resolve them. Custom code and consulting teams are unsustainable alternatives.
We
believe that in order to fully address the most complex and valuable challenges that our customers face, we must experience and understand their problems firsthand. To do so, we embed with our users, from the special forces personnel in forward
operating bases to oil rig engineers in the field.
Our FDEs are our first line in identifying research and development opportunities for
our platforms. By working alongside users, whether on site or remotely, FDEs have a deep understanding of what our customers need, how and why they make decisions, and how they calculate trade-offs.
Instead of hard-wiring those observations into bespoke applications, our developers incorporate them into flexible platforms that adapt to the
realities that our customers face. Our software incorporates what we have learned from tens of thousands of front-line hours across the 40 industries in which we work.
Our direct research and development expenses were $560.7 million and $305.6 million for the years ended December 31, 2020 and
2019, respectively. We have invested a total of $2.0 billion in research and development since 2008.
Privacy and Civil Liberties
We are committed to ensuring that our software is as effective as possible while preserving individuals fundamental rights to
privacy and civil liberties. We have made deep investments to ensure that safeguarding privacy and civil liberties protections remains central to our software and business practices.
Our platforms were built from the start to protect individual privacy and prevent the misuse of information. We are not in the business of
collecting, mining, or selling data. We build software platforms that enable our customers to integrate their own data data that they already have.
The same technology that makes Palantir so analytically powerful its ability to construct a model of the real world from countless data
points is what allows our customers to monitor and control access to that data and its use.
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Principles
As we build software to answer questions of increasing significance and complexity, we apply a set of principles at all stages of the
development of our software and its deployment.
Systems must incorporate privacy from the beginning of the design process . Our goal has always been to
eliminate the perceived trade-offs between privacy and utility. To do this, we treat privacy as a fundamental concern at every stage of the engineering process.
Decisions that can affect individuals rights and liberties cannot be left solely to computers .
Our customers are using data to inform decisions with significant implications for individuals. Rather than relying on algorithms that inhibit accountability, our software empowers humans to make informed decisions.
Technology is not the answer to every problem . Some decisions carry implications that are too complex
or significant to be automated. We strive to understand major world problems and think critically about whether its possible to build complementary solutions in an ethically responsible way.
Customer Impact
Some examples of the ways in which our software facilitates data protection at our customers follow below.
Our platforms serve as the central analytics system of a major law enforcement agency in northern Europe.
Scandinavia has long been at the forefront of data protection, and our software facilitates effective implementation of its rigorous privacy policies.
A customer in Europe needed to adhere to rigorous purpose specification and proportionality requirements
during sensitive analytical workflows. We worked with the customer to implement technical measures requiring analysts to provide reviewable justifications for access. Those controls were further supported by auditing capabilities to ensure that data
processing satisfied legitimate purposes under the relevant regulations.
A multinational insurer sought to build and apply machine-learning models to surface fraudulent insurance
claims, while ensuring that processing was sufficiently transparent, interpretable, and accountable to decision makers and oversight authorities. We helped to configure and implement a number of supporting privacy-enhancing features, including
pseudonymization processes to minimize data exposure, rigorous documentation of machine learning model features and parameters, and auditing tools for users and regulators.
Our Team
We
employ a team of engineers, lawyers, and social scientists to ensure that our company remains a leader in the field when it comes to privacy practices and software development.
The Privacy and Civil Liberties Engineering team is responsible for ensuring a culture of responsibility around the development and use of our
technology by leading the development of privacy-enhancing technologies, publishing research, consulting with policymakers, helping our customers implement data governance best practices, and facilitating company-wide dialogue on ethical issues. The
team is supported by the Palantir Council of Advisors on Privacy and Civil Liberties, a group of independent experts in privacy law, policy, and ethics who help us to understand and address the implications of our work.
Privacy-Enhancing Technologies
Access Controls . Our platforms provide highly granular access restrictions with subtle and flexible
access permissions, such as temporal and purpose-based limitations. This allows for precision data
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management even, at times, across multiple, independent databases that closely aligns access with customer specifications. For example, a user sees only the specific information
necessary for a defined task (e.g., investigating a specific crime or determining whether to extend credit to an individual).
Sensitive Data Inference . Institutions managing sprawling collections of data often struggle to keep
track of which data assets include sensitive fields such as personal identifiers or health records. Our software provides inference tools to assist institutions in detecting the presence of such data so that they can flag and handle the data
appropriately.
Federation . Federation allows users to search and analyze data from multiple, independent databases
without duplicating and centralizing data in a single place. Our platforms provide intelligent query interfaces that reduce the complexity of federation so that users can access the information they need without directly integrating the source into
the platform.
Audit Logging and Analysis . User actions including searches, data use justifications, access
requests, analyst collaborations, and report generation within a system must be recorded to ensure that authorized oversight entities, both internal to an institution and external, can confirm appropriate and lawful data usage. Our platforms
maintain audit logs and make them accessible to (and readable by) authorized users to help them both retroactively investigate and proactively identify misuse of systems.
Data Integrity and Redress . Our platforms track the provenance and version history of all data in the
system so that users can assess the reliability of the data and review and correct inaccuracies. Providing users with well-curated, up-to-date data reduces the risks of
erroneous conclusions.
Data Retention and Deletion . Institutions must be able to implement flexible and auditable retention
policies and verify that data flagged for deletion has truly been purged from the system. Our platforms enable institutions to schedule and manage the removal of old or irrelevant information as required by data management best practices or
applicable regulations.
Competition
We are fundamentally competing with the internal software development efforts of our potential customers.
Organizations frequently attempt to build their own data platforms before turning to buy ours. In trying to build something on their own, they
generally rely on a patchwork of custom solutions, outside consultants, IT services companies, packaged enterprise and open source software, and significant internal IT resources.
In addition, our competitors include large enterprise software companies, government contractors, and system integrators. We also face
competition from emerging companies as well as established companies that are only now beginning to enter this market.
The principal
competitive factors in the markets in which we operate include:
platform capabilities and product functionality;
data security and privacy;
ease and speed of adoption, use, and deployment;
product innovation;
pricing and cost structures;
customer experience, including support; and
brand awareness and reputation.
While we believe we generally compete favorably with our competitors, as well as with software developed by customers internally, based on
these competitive factors, some of our competitors have greater name recognition,
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longer operating histories, and larger customer bases; larger sales and marketing budgets and resources and the capacity to leverage their sales efforts and marketing expenditures across a
broader portfolio of products; broader, deeper, or otherwise more established relationships with technology, channel, and distribution partners and customers; wider geographic presence or greater access to larger potential customer bases; greater
focus in specific geographies; lower labor and research and development costs; larger and more mature intellectual property portfolios; and substantially greater financial, technical, and other resources to provide support, to make acquisitions, and
to develop and introduce new products.
Intellectual Property
We believe that our intellectual property rights are valuable and important to our business. We rely on a combination of patents, copyrights,
trademarks, trade secrets, know-how, contractual provisions, and confidentiality procedures to protect our intellectual property rights.
We seek to protect our proprietary inventions relevant to our business through patent protection in the United States and abroad; however, we
are not dependent on any particular patent or application for the operation of our business.
In addition, we have registered
Palantir as a trademark in the United States and other jurisdictions. We also have registered trademarks for Gotham, Palantir Foundry, and our corporate logo, and are the registered holder of a variety of domestic
and international domain names that include Palantir, including, most importantly, Palantir.com.
In addition to
the protection provided by our intellectual property rights, we enter into proprietary information and invention assignment agreements or similar agreements with our employees, consultants, and contractors. We further control the use of our
proprietary technology and intellectual property rights through provisions in our agreements with customers.
Seasonality
We generally experience seasonality in the timing of recognition of revenue as a result of the timing of the execution of our contracts, as we
have historically executed many of our contracts in the third and fourth quarters due to the fiscal year ends and procurement cycles of our customers. See Risk FactorsSeasonality may cause fluctuations in our results of operations and
position.
Employees and Human Capital
Our employees are critical to the success of our business. As of December 31, 2020, we had 2,439 full-time employees, including 901
employees employed outside of the United States. We also engage part-time employees, independent contractors, and third-party personnel to supplement our workforce.
Other than our employees in France, who are represented by a works council, none of our employees is represented by a labor union. We have not
experienced any work stoppages due to employee disputes, and we believe that our employee relations are strong.
Our human capital
resources objectives include recruiting, retaining, training, and motivating our personnel. The principal purposes of our incentive compensation policies are to attract, retain, and reward personnel through the granting of equity-based and
cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives. We strive to foster a diverse and inclusive
culture and environment which encourages active dialogue and robust engagement on the issues most salient to employee satisfaction and believe our employees are empowered to play a significant role in shaping the direction and success of the
company.
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Available Information
Our website is https://www.palantir.com, our investor relations website is https://investors.palantir.com, and our Twitter account is
@PalantirTech. We have used, and intend to continue to use, our website, investor relations website, LinkedIn, and Twitter accounts as a means of disclosing material non-public information and for complying
with our disclosure obligations under Regulation FD. The following filings are available through our investor relations website after we file them with the Securities and Exchange Commission (SEC): Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and our Proxy Statement for our annual meeting of stockholders.
These filings are also available for download free of charge on our investor relations website. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically
with the SEC. The address of that website is www.sec.gov.
We webcast our earnings calls and certain events we participate in or host with
members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and
blogs as part of our investor relations website. Further corporate governance information, including our corporate governance guidelines, code of business conduct and ethics, and committee charters is also available on our investor relations website
under the heading Governance. The contents of the websites provided above are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we
file with the SEC. Further, our references to the URLs for these websites are intended to be inactive textual references only.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.