Can Dropbox & Box Survive Commoditized Storage?

Microsoft and Google have turned up the heat on the cloud storage vendors. Time for them to respond.

Jonathan Feldman, CIO, City of Asheville, NC

November 7, 2014

4 Min Read
(Source: <a href="http://pixabay.com/en/cloud-font-memory-storage-medium-116579/" target="_blank">Geralt</a>)

In announcing unlimited storage for Office 365 last week, Microsoft is following Google's lead: One way to win over enterprises is to treat the storage part as a loss leader while offering competitive pricing for basic productivity apps. So why aren't cloud competitors Dropbox and Box following suit?

Don't get me wrong. I'm a fan of both. Dropbox was the first to make the fiendishly complex problem of file sync look easy to the customer, and the company makes it easy and attractive for developers to integrate support into any app. Box has done a great job serving business customers with its enterprise-grade security and management, and its new "platform" strategy is interesting.

[Make cloud storage work for you. See Our Cloud Disaster Recovery Story.]

But Dropbox and Box aren't courting enterprises in the right ways. Cloud storage is now a commodity, and because enterprise security and management must be a given, new sales must come from one or two places:

  1. From customers who use existing budget line-items to replace existing software with something better and/or less expensive.

  2. From customers who can make the case that there's compelling enough innovation in Dropbox's or Box's products to justify a new budget line-item for their products.

Both vendors are doing well with No. 2 but not so much with No. 1, which is the more important factor for enterprise adoption. Dropbox and Box need to be able to answer this question: Why would CIOs need to buy your products, with no bundled Office work-alike, given all of the following Office 365 and Google Apps benefits?

• Regular updates. Everybody is running the same version of Office or Google Apps without IT having to push complicated updates every few years.

• Better collaboration. Multi-author simultaneous editing, pioneered by Google but copied by Microsoft in its cloud suite, has changed how the people in my organization collaborate. We no longer have the dreaded "file conflict" problems, when two or more people using conventional editing tools try to save files at the same time.

• Free storage. With Office 365 or Google Apps, companies get secure and manageable cloud storage included with their software at no extra charge.

• Mobile support. It used to be that only Dropbox integrated well with mobile applications -- it led the way in courting third-party developers. Box has caught up. But so did Google with its Drive product, available on many third-party apps, and Microsoft with OneDrive, available on fewer but still enough. (Of course, Google and Microsoft offer their own apps as well.)

• API Support. Dropbox and Box make it easy to write apps to interact with cloud documents, but so do Google and Microsoft. Google goes a step beyond by letting developers write code that digs into the contents of the Office files, so if someone is using a spreadsheet as a database, for instance, developers can access it through Google's Fusion Tables.

Dropbox and Box offer similar capabilities, but if an organization buys one of their products, it still must buy Office licenses. Dropbox's and Box's strategy of integrating with Office 365 (Dropbox announced its integration Nov. 4) is a case of the lamb lying down with the lion. It makes for a great photo op, but how does that help the two vendors compete for scarce IT dollars?

Folks who disagree with me point to the "post-PC era," one in which smartphones, tablets, and other mobile devices take precedence over PCs and notebooks when it comes to personal productivity and number crunching. But before you drink too much of that Kool-Aid, you need to spend some time actually managing IT at a typical organization. We're not going to mobile devices overnight for a host of reasons. Most enterprise applications require Windows components. Finance folks can't load their Excel spreadsheets with complicated functions on most mobile devices. Call centers with expensive peripherals (card readers, phone interfaces) require a serial port or other PC-centric interface. And so on.

For now, if Dropbox and Box want my money, and my colleagues' money, they'd better start appealing to the cash-flow/replacement-value proposition. That means they'll need to bundle an Office replacement with their cloud software. Whether they build such an application suite, buy another vendor, or partner with one is up to them.

If you just look at vendor financials, the enterprise storage business seems stuck in neutral. However, flat revenue numbers mask a scorching pace of technical innovation, ongoing double-digit capacity growth in enterprises, and dramatic changes in how and where businesses store data. Get the 2014 State of Storage report today. (Free registration required.)

About the Author

Jonathan Feldman

CIO, City of Asheville, NC

Jonathan Feldman is Chief Information Officer for the City of Asheville, North Carolina, where his business background and work as an InformationWeek columnist have helped him to innovate in government through better practices in business technology, process, and human resources management. Asheville is a rapidly growing and popular city; it has been named a Fodor top travel destination, and is the site of many new breweries, including New Belgium's east coast expansion. During Jonathan's leadership, the City has been recognized nationally and internationally (including the International Economic Development Council New Media, Government Innovation Grant, and the GMIS Best Practices awards) for improving services to citizens and reducing expenses through new practices and technology.  He is active in the IT, startup and open data communities, was named a "Top 100 CIO to follow" by the Huffington Post, and is a co-author of Code For America's book, Beyond Transparency. Learn more about Jonathan at Feldman.org.

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