Introduction and enterprise battleground

Storing stuff in the cloud is big business for a lot of Companies and none more so than Dropbox and Box, two similarly named outfits currently battling it out for supremacy of a market that will, most likely, change how we store files forever.

Dropbox, the first of the pair, started out as a consumer-facing online storage company offering several gigabytes of space and a cute interface alongside some neat perks for signing friends up.

Box, on the other hand, is a purebred Enterprise company having never spent a day of its life catering to consumers. The firm went public last year and currently has a valuation of about $1.2 billion (around £920 million, AU$1.6 billion), which is slightly down from its initial pricing.

Enterprise battleground

The market that these companies are competing for is enterprise customers who want to safely and securely store stuff – files, documents, videos, photos, tax records, and so forth – in the cloud. According to analysts, the market is virtually unlimited for this kind of thing because, well, eventually every company will want to do it.

The economies of scale are the driving force behind the rise of cloud storage as the price per gigabyte drops rapidly. In other words, storage that would have cost a company a lot of money in 2006 now costs a fraction of that in 2016.

Box has managed these trends well, focusing more on adding elements to its offering beyond storage, which is known as a Software-as-a-Service (SaaS) model. Dropbox, on the other hand, is currently juggling two markets – enterprise and consumer – while debating the pros and cons of going public.

Dead unicorn

In a widely read piece from last year, Alex Danco, a Silicon Valley venture capitalist, speculated that Dropbox would become the "first dead unicorn," the name given to private companies worth more than a billion.

"Dropbox does two things that matter: storing your stuff, and sharing your stuff. It’s great at both," Danco wrote. "But storage on its own isn’t a great business to be in anymore [because] we just don’t care about files that much anymore."

This argument – that Dropbox does something good that not many people want – resonated with many. The service is good to have around for the odd file share, but the engagement stops there.

Box, on the other hand, has a different set of problems that are closely associated with being an enterprise company: Customers (all of whom pay a recurring fee) are incentivised by a cheaper, multi-year deal, to use Box products that depress revenue in the short-term. However, over a longer period, the deals expire and more favourable terms (for Box) are agreed.

This, by and large, is what is happening now with Box – but it’s taking a very long time. The company went public last year and its stock price has declined since then precisely because the market for SaaS works this way.

Thinking inside the Box

Encouragement for Dropbox

That said, there are encouraging signs for Box but, as luck would have it, there are also encouraging signs for Dropbox, too.

According to the company’s chief executive, Drew Houston, Dropbox is now "free cash-flow positive," meaning the company is bringing in more money than it spends on ongoing operations. Houston claimed that the world was entering the "post-unicorn era" – an idea many in Silicon Valley agree with – and that this was a significant milestone for the company.

"In these boom times, you get really disconnected from the fundamentals," he said. "Cash is oxygen, and if you keep having to go to investors to fill up your scuba tank, you can run out."

The reason for the resurgence of Dropbox is enterprise, which is why Box is its direct competitor. According to Dropbox, more than 150,000 other firms use its services.

"One thing that always cracks me up is – it’s kind of funny when people are like oh… Dropbox isn’t serious about business or we’re only about consumers when it’s really all the consumers that have brought us into all those businesses," said Houston, in an interview with Bloomberg.

Thinking inside the Box

Box, for its part, argued that while Dropbox may have a large client base, "serving millions of free consumer users is profoundly different from powering the world’s largest enterprises." On its website, Box boasts that big companies like O2, P&G, Pandora, and Nationwide all use its services in the UK.

It’s also worth noting that above and beyond the squabbling of Box and Dropbox is a bigger problem: Both Microsoft and Amazon do pretty much the same thing, in the same market, but with a much bigger budget.

Microsoft, for example, is a direct threat to Box because it has the best relationships with the kind of big companies the latter wants to attract. A survey by Gartner found that Microsoft dominates with organisations that have over 100,000 employees (or $10 billion – around £7.7 billion, AU$13.5 billion – in revenue), which is the ideal market for SaaS.

Amazon meanwhile is taking a devil may care approach to the market by driving prices of its software and services – which mainly revolve around hosting files and applications – down to levels smaller companies just can’t match.

The future of both Dropbox, which has yet to go public, and Box, which is improving its results quarter-by-quarter, will likely not be decided for at least a few years. The enterprise cloud storage market is just so big that even with Microsoft and Amazon competing, there is so much space for expansion that everyone can post good results. For now…

Box-ing clever?

In the end, however, the good times will be over and the cold light of day will be cast on these two companies. It’s more than likely that Box, ultimately, will be the survivor precisely because it has been doing what made Microsoft so successful – forming relationships with clients who have massive employee numbers and will come back again and again.

Dropbox way be making some headway with consumers and (smaller) businesses but those markets are most likely to be the first out the door, making it a risky proposition at best. And, of course, Dropbox has yet to go public, an endeavour which comes with another set of problems as investors look to weather any future economic storms.

• Best cloud services compared: Google Drive vs OneDrive vs Amazon vs iCloud vs Dropbox

from Techradar – All the latest technology news http://ift.tt/29Mozvk

We Just Love Sharing Content. We Sourced This From Techradar. Enjoy and share! Leave comments too.