Box – A Mobile Cloud Leader Breaking Out

Box has been very vocal in proclaiming that the convergence of cloud and mobile will dominate the future. COO Dan Levin stated in July 2013 that this convergence (the mobile cloud) will create over “1 billion new IT workers” and change virtually every existing precept and practice in the IT industry. We recently spoke with Jamie Perlman, Senior Director of Business Development – Mobile at Box. Jamie leads Box’s partnership strategy with carriers, mobile platforms and device manufacturers, and other mobile solution providers.

Perlman states that mobile and cloud computing convergence “is pivotal to Box’s success.” With smart devices, he notes, “our offices are anywhere” and the ability to access critical work makes us more efficient.

On the technical side, Perlman observes that mobile and cloud change the relationship of the user to the OS and to equipment. These used to be all Wintel. However, now there is a shift of emphasis off of the OS and equipment – to applications. These are not part of the legacy Wintel stack – now that legacy has become a disadvantage.

For its part, Box is focused on best of breed solutions. It is not married to any hardware or OS.

The press commonly labels Box as a “storage” company. But Perlman is quick to point out that “our service is not storage,” a view of Box that might have applied early in the company’s history.

Box, he explains, defines itself as a provider of “Unstructured Content as a Service.” He asserts that the company creates value through offering a superior user experience focused on collaborative work involving content that is not organized into formal databases.

Thus storage is only one feature of their offerings. Even for basic SMB entry level service, the company offers 1T (terabyte) of storage. For enterprise customers, unlimited storage is provided. Perlman points out that with many of Box’s carrier partners Box offers users 50 GB (gigabytes) of storage for life.

Perlman does not believe that social networking will necessarily be a standalone app for businesses. He states that Box is “inherently social.” Its service is based largely around collaboration. He cites the “news feed” feature of Box, which keeps users informed about what is happening with content that they are collaborating with. They also have integration with other business social tools, such as Jive, Yammer, Salesforce Chatter and Tibber.

While Box has gotten an identification with the enterprise market, Perlman points out that they address the SMB area as well. He cites a partnership with a large mobile carrier that is distributing Box to business users and has found that the customers are pretty evenly divided between enterprise and SMB. Box maintains three sales teams that divide the customer base by employee count: a) up to 1000; b) 1000 to 5000; c) above 5000.

Regarding enterprises, while Box has been not focused around verticals to date, it is considering some more effort in this direction in 2014. The company’s CEO recently revealed that healthcare is the largest vertical, with public administration, retail and finance and insurance, next in size of revenues.

Perlman’s immediate responsibility is the area of partnership development for Box’s mobile effort. He cites his broad objective as creating a customer environment such that “no matter where you are as an enterprise – Box is available. We don’t want them relying on a content solution from another provider.” To this end Box has partnered with a number of leading SaaS (software as a service) and other apps providers, such as Salesforce and NetSuite and supports a wide array of developers who build apps on Box.

Box may not appear to the customer as the front end of their apps, however, Box can be built in, as what Perlman describes as a sort of “content pipe” – the underlying means by which content gets to the people who need it, including all their updates and the ability to collaborate. The company wants organizations to standardize on Box as their content solution.

Regarding security, Perlman notes that the company has treated the subject as a key area of focus. He regards security as one of their two primary jobs, the other to provide a high quality user experience. He points out that Box manages their own data centers.

With regard to mobile apps, they use a “two-pronged approach.” End point security is provided on the user device. He notes that most of their users, particularly in the U.S. are iOS users. And the company also builds in security features into their apps. He refers to these as “table stakes” security features, pointing out the Box works with a number of partners, such as MDM providers MobileIron and AirWatch, with which it must have compatibility. (There are over 200 MDM providers, but compatibility is offered with only the major ones.)

In September 2012 Box announced Box Accelerator its enterprise-grade global data transfer network claiming speeds of up to 10X then prevalent data transfer speeds. The company has used Equinix data centers in Chicago, Ashburn, VA (Washington, DC area), Amsterdam, Sydney, Hong Kong and Tokyo to support its international client base. In late 2012 it was reported that over half of the company’s then 14 million users were outside the U.S. (The use of Equinix, a multi-billion dollar (revenue) carrier-agnostic data center firm, appears to us a modest compromise to Box’s history of using their own data centers. Equinix is a global advanced co-location service provider and is not similar to an IaaS type of business such as Terremark.) Box has filed for patents with respect to Box Accelerator.

In late 2013 Box claimed 20 million users worldwide at more than 180,000 businesses. There have been confirmed reports that it has filed a “secret” registration statement for an IPO. (This process was authorized under the JOBs Act (Jumpstart Our Business Startups) for companies with under $1 billion in revenue and is being widely used, most notably by Twitter.) The company has not commented on the reports of the filing.

Our takeaway is that Box is currently in an excellent position. It is a darling of venture (and some strategic) investors, having gained a reported $2 billion valuation on its last round of private financing. It undoubtedly can raise a huge amount of additional capital when its IPO occurs, as long as the current market climate prevails.

This does raise the question of where the capital will be applied, which in turn leads to the question of how the company expands from its current strategy. That strategy is based on the perception that at this stage of development of the mobile cloud, enterprises and other companies, will rely on a provider that specializes in content storage, sharing, synching and such.

Having recently interviewed SAP, it is hard not to see obvious differences in approach between the two companies. SAP, a leader in the legacy enterprise data management area, is embarked on a major platform transition to cloud-based services. Its platform incorporates a wide array of mobile (and also non-mobile) capabilities, MADP (mobile applications development platform), MDM (mobile device management) as well as content management.

The two obvious alternatives for Box, as it contemplates a major capital infusion (speculation has run to about a $500 million offering) are: Will it a) try to broaden out, through internal developments or acquisitions, into a broader enterprise mobile management platform, or b) simply try to drive the current strategy of being a leading content management company further, faster, with the likely eventual exit through being acquired by one of the broader platform companies.

* Photo by William Warby (Email) [CC-BY-CC-2.0], via Flickr
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