Note: for the purpose of this piece, I’m focusing on Palantir Gotham, the firm’s government-facing arm.
In J.R.R. Tolkien’s Lord of the Rings, a palantir is a magic crystal ball that enables its owner to communicate over great distances and perceive current or past events. In Tolkien’s universe, the palantiri made what would ordinarily take weeks or months instantaneous and conferred great advantages onto those who held one. In that regard, Palantir Technologies is aptly named.
Palantir sells software that digs through massive data sets to generate meaningful, actionable information served up in intuitive ways. In addition to providing services for private sector clients like hedge funds, Palantir services a veritable alphabet soup of government agencies – CIA, DHS, NSA, FBI, and DOD, to name a few (in fact, an early investor was the CIA’s venture arm, In-Q-Tel). This is no easy task. Selling to defense and security agencies is an extraordinarily difficult, often relationship-driven process that is dominated by players like Lockheed Martin and Raytheon.
Dealing with the raw data is another monumental challenge. First, there is too much of it. A single UAV can collect several terabytes of data every minute. Second, the data sets are messy, a product of inconsistent reporting, disparate reporting systems, and constantly changing technologies. Finally, the data are organized by clearance level, ranging from unclassified to top secret, which further obfuscates things. Despite these challenges, Palantir is thriving, having secured $1.2B in federal contracts since 2009.
The firm’s products fill a critical need for defense and security customers. Consider the following anecdote. During the conflicts in Afghanistan and Iraq, service members collected volumes of information from detonated and undetonated improvised explosive devices (IEDs), sensitive site exploitation, surveillance activities, and biometric analyses. For example, if an IED were found, an exploitation team could pull fingerprints and record serial numbers of electronics or munitions with the hope of tracking down the responsible party. Unfortunately, that data was not stored centrally, and any attempt to produce actionable intelligence had to be done manually. Palantir partnered with the US Marine Corps in 2011 to develop an advanced analytic capability that enabled intelligence analysts to access and manipulate data in an intuitive, easy-to-visualize manner. The results were stunning: analysts mapped out bomb-making networks, linked devices to individuals, and detected correlations between variables like weather and IED-type. Watch the video below for a demonstration of the software (note that it’s from 2011).
Palantir continues to face challenges as it looks to generate new business with the government. As a Silicon Valley startup, competing with entrenched defense firms remains an obstacle, since government procurement processes tend to favor incumbents. Palantir recently sued the US Army for fair consideration in bidding for a $200M contract related to an intelligence-gathering system. The firm may have been dismissed by the Army in part because of a cultural divide: Palo Alto executives rocking slacks and semi-unbuttoned dress shirts didn’t make a great impression in a 2009 meeting with generals and high-level government bureaucrats. Moreover, Palantir has had a tough time hanging onto employees impatient for an IPO, and in the wake of Edward Snowden’s NSA revelations, it has taken considerable flack over its involvement with the agency’s spy program. Regardless, the company has compellingly demonstrated the way in which data and analytics can create huge value for government and defense.