Dropbox is making a new push to win over business customers to its cloud-storage business. But its checkered history of security breaches may make it a tough sell in the enterprise.

Dropbox said Wednesday that it has added single sign-on (SSO) capabilities to its storage service, matching a capability that its chief rival, Box.net, has offered for some time. Dropbox also decided to rename its "Dropbox for Teams" business service "Dropbox for Business." The added feature and a name change may not seem like much to hang the new marketing push on, but Dropbox clearly has high hopes of making inroads in the enterprise.

With the SSO feature, companies can set up Dropbox so that employees who sign into their corporate account will also be signed into Dropbox, thus eliminating the need for a second login. The company said it's partnering with Ping Identity, Okta, OneLogin, Centrify, and Symplified. Ping Identity and Okta also provide SSO solutions to Box, which signed up with Ping Identity in 2011 to provide SSO capabilities via its PingFederate technology.

Dropbox doesn't just compete with Box.net, but SugarSync, Google Drive, Apple's iCloud, Microsoft's SkyDrive, and a host of smaller services. But it was Dropbox that Box CEO Aaron Levie skewered with an April Fool's Day prank. Why? Because Levie can see Dropbox in the rear-view mirror.

Dropbox's vast scale — it boasts 100 million users, with 600 million "work files" stored every work week, according to a spokeswoman — represents a threat. Dropbox counts users in 95 percent of Fortune 500 companies, according to Kevin Egan, the vice president of sales that Dropbox hired away from Salesforce.

Someone's Gotta Pay For All This

It's not clear how many of those people actually use Dropbox for business purposes — though it might not matter. Egan said that Dropbox's legacy in the consumer space — it has signed partnership agreements with both HTC and Samsung for free storage when customers buy the Samsung Galaxy S3 or HTC One, plus deals with Yahoo Mail and its purchase of Mailbox — means that consumers turn into evangelists when they enter the workplace.

"Millions of people have signed up using their work email address at Fortune 500 companies," Egan said. "And I think what we want to do is allow them to maintain the level of enthusiasm that they have, but embrace IT more, so they have 100 percent confidence that they have control and visibility."

The opportunity, of course, is that consumers are hooked on free; businesses aren't. Dropbox users can get up to 2 GB of storage for free, with up to 18 GB after various referrals and promotions. For Dropbox for Business/Teams, the price remains $125 per user, per year.

In 2012, however, co-founder Arash Ferdowsi told The Economist that only 4 percent of its users base were paying customers. That makes Dropbox look like the "we'll make it up on volume" strategy writ large — eventually someone's gotta pay, right? Attracting corporate customers helps make up for that.

Right now, Dropbox is asking what those corporate customers want. Tido Carriero, the lead engineer at Dropbox for Business, said future improvements could include things like making the Dropbox interface easier to use for large teams. "But for now, SSO is what they're shouting in our ear," he said.

Security Breaches Still Hurt

Unfortunately, what may be lurking in the back of some minds may be a pair of security lapses. In 2011, Dropbox accidentally pushed a code update that introduced a bug into the company's authentication mechanism, allowing third parties to log into user accounts and access files. Last year, hacks at other Web sites allowed attackers to penetrate accounts used by Dropbox employees, including a document from which they may have been able to harvest email addresses. In August, those email addresses were apparently used to send Dropbox users spam.

Since then, Dropbox has added two-factor authentication, as well as a recent administration console that can require two-factor authentication and monitor employee use, including restricting shared folders and links within the company. But Dropbox has been hurt by the lingering effects on its reputation.

"We haven't won deals — there have been deals that we have not won because of it," Egan said. "Sometimes it's just a matter of timing — explaining our security protocols better, sometimes it's a question of comfort with the business, and sometimes they're a couple of years away from embracing us. It's certainly hard to know what happened, but it's certainly top of mind for a lot of IT admins."

If Dropbox's strategy works, then its next target is government. Carriero said that the company is not FIPS certified. It's probably unlikely that the Pentagon would agree to use a cloud storage solution like Dropbox. A smaller county or town might end up using the service, though.

Storage has become a commodity. Box.net is attempting, through partnerships, to allow as many companies as possible to do stuff with that data. That adds value. Dropbox's purchase of Mailbox is headed in the right direction, but it still appears to be chasing Box, at least in the business space.

Lead image via Shutterstock

Dropbox

Let’s start with the one maybe even your mother knows about: Dropbox. Founded in 2007 by Drew Houston, Dropbox got its early footing through startup incubator Y Combinator, launching a year later at TechCrunch50. It’s safe to say that while it certainly wasn’t first to the tech table in terms of using "box" in its name, it's come to represent the consumer file repository that many people think of as their personal flash drive in the cloud. After all, Houston came up with the idea one day when he forgot his USB thumbstick for a class at MIT. Following a number of acquisitions and steady growth - and a current valuation of around $4 billion - many in the industry speculate that Dropbox might go public this year.

Mailbox

Box

You can't any more "box"-y than Box. Founded in 2005 by Aaron Levie and longtime friend Dylan Smith, Box (originally Box.net) is often seen as the Dropbox for enterprises. In true startup fashion, it was incorporated while the two ran the whole thing out of Smith's parent's garage. The company now sits at a valuation between $1.2 and 1.5 billion. What does Box do that differentiates it from Dropbox? The companies seem to naturally cater to different bases: Box focuses on the corporate sector and its need for huge amounts of storage, while Dropbox puts its emphasis on raking in a huge pool of regular customers. Box is also planning an IPO in the near future, though early speculations are betting Dropbox will take the first-to-go-public crown. 

Outbox

Just last month, Outbox made its debut in San Francisco after a 6-month beta period in Austin, Texas. Another company trying to cash in on snailmail-meets-email, Outbox is the digital answer to the problem of junk mail, traveling and physical mailboxes. Basically, Outbox customers have their mail picked and scanned for them. But can Outbox truly disrupt the U.S. Postal Service? Is this a solution in search of a problem, and does anyone really want to pay someone to stand between them and their mail? Despite Outbox's best efforts to outline its insurance policy, many people still worry about the security issues of someone else opening their mail.

FuzeBox

But wait, there’s more! In the field of business-oriented voice and video conferencing, there’s Fuzebox. Founded way back in 1998 as CallWave, the Web- and mobile-based communication platform didn't begin calling itself Fuzebox until 2009 - after years of declining sales and falling stock. The rebranding seems to have helped, as the company now has a whole suite of video conferencing products - Fuze Meeting, Messenger, and Telepresence Connect. One positive sign: last week FuzeBox nabbed Skype's former director of product management. 

Xobni

Turns out there's more than one way to spell "box." Xobni is Inbox spelled backward. This Y Combinator-funded startup was launched out of a dorm room in Cambridge, Mass. in 2006 by Adam Smith and Matt Brezina. Xobni began as a plugin for Microsoft Outlook, giving users fast contact-based email search. After launching a public beta in 2008 and adding Yahoo! VP Jeff Bonforte as CEO, Xobni tried to overcome what many critics saw as performance issues with large inboxes and investors concerns of monetization. After Microsoft rejected a $20 million acquisition deal, Xobni was forced to revamp its applications under a new suite called Smartr. 

Boxee

Last but not least, we have Boxee, a company that has nothing to do with email, snail mail or cloud storage. In fact, Boxee's name is a take on the set-top box, and the company is a bundle of streaming devices, social-network software applications and a slew of other TV-based services that aim to help users rate, share and recommend all kinds of media. Launched into beta in 2008, Boxee didn't get its own hardware until 2010, when the Linux-based Boxee Box (wow!) was developed in conjunction with D-Link and released as an all-in-one media center equipped with a browser and a rather impressive app collection. Just last fall, Boxee stripped that down to Boxee TV, a more Roku-esque take on the simple streaming device. 

Last week, ReadWrite Editor-in-in-Chief Dan Lyons sat down with 27-year-old Box CEO Aaron Levie to discuss the complex market of enterprise cloud technology in the third ReadWrite Mix event in San Francisco.

(See also Aaron Levie On The Uncertain Landscape Of Enterprise Software, Aaron Levie On Finding Mentors & Mixing Enterprise/Consumer Cultures and Aaron Levie On Growing Up During The '90s Tech Boom)

When not discussing his hilariously-named teenage startups or early ambitions to join the MLB, the one-hour sit-down saw Levie and Lyons discussing nearly every facet of the enterprise software business, from how it started and what is now to how Box aims to lead the way into its uncertain future.

This 2:19 clip illustrates Levie's uncanny ability to make even the most seemingly mundane topics - the growth of data storage - sound fascinating  As storage costs go down, Levie sees Box's opportunity to give away more space at a lower price. "Probably in the future, you will use us for infinite storage," he says, because "the amount of capacity we have is increasing at a faster rate than our ability to use it." 

Last week, ReadWrite Editor-in-in-Chief Dan Lyons sat down with 27-year-old Box CEO Aaron Levie to discuss the complex market of enterprise cloud technology in the third ReadWrite Mix event in San Francisco.

(See also Aaron Levie On The Uncertain Landscape Of Enterprise Software and Aaron Levie On Finding Mentors & Mixing Enterprise/Consumer Cultures)

In their wide-ranging, hour-long conversation, Lyons and Levie touched on just about every topic of interest in the enterprise startup space. But perhaps the most interesting aspects concerned Levie's own unique story. This 1:53 clip touches on how growing up in Seattle helped inspire Levie to begin starting companies as a teenager (publishing HTML webpages to the Internet was all it took, he says), and how he had to try his hand at countless projects on the way to his dream of starting a successful company. Levie did acknowledge an alternate dream that included playing professional sports: "It's either MLB, or start an Internet company," he joked. 

Last Wednesday, ReadWrite Editor-in-in-Chief Dan Lyons sat down with 27-year-old Box CEO Aaron Levie to discuss the complex market of enterprise cloud technology in the third ReadWrite Mix event in San Francisco.

(See also Box CEO Aaron Levie On The Uncertain Landscape Of Enterprise Software [Video])

In the one-hour sit-down, Lyons and Levie covered surprisingly diverse topics, from Levie's personal life as a notorious workaholic to what it means to sit in the middle of the enterprise and consumer software landscape that has steadily begun to merge. Levie also showcased his sense of humor with descriptions of the companies he started as a teenager (Zazap, the fastest search engine on the Internet - except for Google), and spot-on caricatures of stuffy enterprise types to illustrate how he keeps his company loose and fast-moving. 

This 2:28 video touches on Levie's thoughts on having grown up in the startup landscape with his high school friends, the laughable stereotype of enterprise software culture and seeking out mentors in Silicon Valley (Hint: There's no risk to to sending an email. So what if you don't get a response, he says). 

Last Wednesday, ReadWrite Editor-in-in-Chief Dan Lyons sat down with 27-year-old Box CEO Aaron Levie to discuss the complex market of enterprise cloud technology in the third ReadWrite Mix event in San Francisco.

Lyons and Levie touched on a wide array of subjects, from sly stabs at Microsoft to how Box grew from a dorm room project to the forefront of cloud storage and collaboration. Levie also shared some of his wisdom on how to outmaneuver the competition, understand the early mover conundrum and keep delivering better technology. 

This 2:48 video touches on the uncertainties facing enterprise software companies like Box, as well as the opportunities that lay ahead in a market where, as Levie says, it's not clear where one service starts and another service stops. 

Box CEO Aaron Levie has been on a one-man crusade to make the enterprise sexy again. Based on the 2012 Crunchie Award winners, it worked. While a number of nominees and winners were consumer-facing startups that will likely be passé by next year, the enterprise startups on the ballot sheet have already proved their staying power.

Take GitHub, winner of Best Overall Startup. Back in 2011 the distributed version control company launched its enterprise product, with questions raised as to whether it could thrive in a market that saw peers like Sourceforge falter. But it didn't. GitHub co-founder PJ Hyett tells me that the company's "enterprise offering has been [his] primary focus for the last three years," and it shows. GitHub has done what consumer startups blanch at doing: embrace Microsoft. It's not sexy, but it's what gets business done in the enterprise.

Then there's the 2012 "Sexiest Enterprise Startup," Box. While at one time that distinction may have been synonymous with "Sexiest Nun in the Convent," Box's contenders for the Crunchies were Cloudera, Zendesk, Asana (Lower revenues but with big aspirations), and Plexxi. All companies that are hell-bent on revenue while significantly changing how the enterprise operates. 

It's a big task, which is perhaps why Box has raised $312 million as it guns for a 2014 IPO. Cloudera, Zendesk, and the other enterprise startups have been less voluble about their IPO plans, perhaps taking a page out of Workday's book, which let its S-1 do the talking. But from private conversations I've had with executives at these companies, I can say that these companies are churning out impressive revenues, and most of them are turning a profit.

Profit? That's sexy.

Back To Business

It's very different from the consumer startup euphoria that ReadWrite's own Dan Lyons pilloried:

This is what the Valley has become these past few years:

It’s wannabe journalists writing about wannabe investors giving money to wannabe entrepreneurs and everyone [in this seriously conflicted crowd] believing that the whole thing makes perfect sense because, trust us. This. Will. Be. Huge.

Not that Silicon Valley has had some big epiphany and wants to grow up to be IBM all of a sudden. But something is changing. Startup founders are realizing that the best way to make money is to sell to customers that actually have money, and are happy to give it to you for fair value in return. Yes, there are consumer startups that grok this, but they are the exception, not the rule.

The Crunchies are just one indication that Silicon Valley, which for years has engrossed itself in mindless startups with silly names and sillier business plans, is getting serious again. Serious about revenue. Serious about profit. Serious about the enterprise. It's about time.

Image courtesy of Shutterstock.

There is perhaps no person less likely to start and run an enterprise software company than Box co-founder and CEO Aaron Levie.  Which is perhaps the reason he's so well-qualified to disrupt the traditional enterprise content management market.

He simply didn't know any better.

As Levie noted in a recent interview, Box has "benefited from our ignorance about the category."  Venture capitalists are often inclined to pour money into entrepreneurs who have been there, done that.  But in the case of Levie, who has now raised $284 million, they've been betting big on an entrepreneur who doesn't fit anyone's profile of an enterprise software executive, and who had no previous experience with enterprise content management.

But that, as Levie informs us, is precisely the point:

"Assume you've never seen a Magic Quadrant or Forrester Wave and you just built a tool that was explicitly trying to solve a particular problem which, in our case, was 'How do I share content with N number of people?'  Had we known the market we probably would have built something that conformed to existing models, but instead we built a product that prioritizes simplicity and ease-of-use.  This has turned into a classic 'innovator's dilemma': a simple approach is much easier to build upon than it is to add simplicity to the complex products already out there.  Along the way, the industry has turned around and redefined content management to include what we do."

Solving A Different Problem

Levie, in other words, wasn't trying to solve an "Enterprise Content Management" problem.  He and co-founder Dylan Smith were simply trying to make it easy to share content with each other, and any other number of others.  This is a sound approach.  Had Box set out to build a better Documentum, then the dominant vendor in the ECM market, it would have had to architect to solve the complex business processes that Documentum sets out to solve, and would have been much more complex as a result.  As Levie stresses, if you start from that complex but feature-rich baseline, "It's far harder to add in simple use cases after the fact.  Such solutions start hard and then can't do easy."

So is Box content to be a lightweight, as it were?  The simple-but-weak content collaboration tool that gets used for collaboration but not the "hard" ECM problems that meatier solutions tackle? 

This may be the wrong way to look at things, according to Levie.  He reveals that Box is constantly debating this, with former EMC Documentum CMO Whitney Tidmarsh ironically advocating that Box not go down the ECM feature-function path.  It seems, however, that Box is more focused on embracing a significantly changing market than chasing old markets and legacy definitions of necessary feature sets:

"We know that a deep drug application process, for example, is still going to be better served by a Documentum or Alfresco, although we are seeing a different slice of those same businesses move to Box. Fundamentally, driven by mobile devices, these brand-new use cases--regulated and unregulated--have arisen, driven by helping as many people as possible access content through mobile.  Investment banks, pharmas, etc. are some of our biggest, most recent customers."

Looking Ahead

These new use cases are driven by less-structured workflows, though they retain some structure.  Box, in sum, needn't replicate the functionality of yesterday when its aim is the applications and workflows of tomorrow.

Not that this is going to be easy.  As Box competitor and Alfresco evangelist Jeff Potts highlights, "As consumer-grade tools move to enterprise, deployment options become an issue. [They c]an't be all cloud right now."  It's a valid point but, again, may slightly miss the mark.  As ReadWrite has reported before, Box is driving 100% revenue growth, selling into 92% of the Fortune 500, with over 140,000 companies among its users.  Maybe all these companies are using Box for lightweight business requirements, but if so, I doubt Levie is complaining.  

Box has built a horizontal platform that hits a content collaboration nerve across disparate industries.  That's a great position to be in, especially as Box is now embracing industry-specific solutions, driven by specialized partnerships and go-to-market programs for 10 vertical industries.  The core product will remain the same, but through these add-ons Box will become  an even better solution for different verticals.  That's the goal for 2013: enter these industries in a big way.

If Levie has no clue what he's in for, that's for the best.  Ignorance of the ECM market and its challenges seems to have served him well up until now.  Hence, when he says that "This whole ecosystem is going to explode going into 2013.  The enterprise will be far more interesting than consumer in 2013," it's hard not to give him the benefit of the doubt. 

Image Courtesy of Shutterstock.

There’s a lot of talk in Silicon Valley about the decline of consumer Internet companies and the rising interest in companies that sell software to enterprises.

After all, Zynga and Groupon, the darlings of the consumer wave, have tanked. Facebook's stock collapse robbed the company of some of its sparkle. And suddenly all those boring companies that have been toiling away down on the San Francisco Bay peninsula selling boring software to boring enterprises don’t seem quite so boring anymore — especially after we saw Workday, which sells cloud-based human-resources software to the enterprise, pull off a phenomenal IPO, and when we have investment bankers talking about a trillion-dollar wealth transfer that’s about to take place in the enterprise market.

Yes, suddenly the enterprise is cool again. And nobody is loving this more than Aaron Levie, the 27-year-old co-founder and CEO of Box, which sells cloud-based data storage and collaboration software to enterprises. “We’re feeling fortunate,” Levie said when we sat down for a chat at Box’s offices in Los Altos, Calif.

A Smart Bet On The Enterprise

Five years ago, Levie figured out that the enterprise ultimately would be a better market than consumer products. He focused Box entirely on the enterprise. Back in 2007, that might have seemed like a crazy thing to do. Facebook and Twitter were the hot new things. All the so-called smart money in the valley was chasing consumer stuff.

Just two years ago, in 2010, John Doerr of Kleiner Perkins was raving about Zynga, citing it's fast growth and profits. This was right after he launched the $250 million sFund to try to create even more Zyngas. A few months later he made a huge late-stage bet in Groupon -- at about twice the price that the stock carries today. 

Meanwhile the guy who created the Flip camera is raising new VC money to make melted cheese sandiwches. Color Labs raised $41 million for God only knows what. We had Airbnb, then a bunch of Airbnb clones, and then another generation of clones that were the Airbnb of cars, scooters, bikes, whatever. We had Sean Parker raising $33 million to make a clone of Chatroulette.

Meanwhile, Levie and everyone else in the enterprise arena were building real businesses and not getting a lot of attention. 

For the past five years, Levie watched the consumer companies boom and bust while Box took a slower, more difficult path, creating a sales force and learning how to sell to big companies.

Now, of course, everyone is hot for enterprise, and look who's sitting pretty.

Box's War Chest

Box has raised $285 million in venture funding, including a huge $125 million round in July that valued the company at $1.2 billion. Levie won’t disclose revenue figures, but allows that Box has 650 employees, roughly double the level from a year ago. He says revenue growth is tracking with head-count growth, meaning sales are up roughly 100% year over year.

Box’s software is used by 14 million people inside 140,000 companies, including 92% of the Fortune 500.

And this is just the beginning. Pretty soon that trillion-dollar transfer in the valley will begin in earnest, draining out of the legacy vendors and into Box and other cloud-based vendors.

“The dam has broken,” says Levie, who often speaks so quickly that it’s impossible to keep up with him. “We’re seeing all this innovation. There’s more opportunity than ever before. We’re going to see, over the next decade, a huge changing of IT architecture.”

A New Cloud Architecture Emerges

Every day, Levie says, he’s on the phone with CIOs who are building what he calls “the new cloud architecture.” Essentially this means replacing a list of on-premises software with cloud-based alternatives that do more and cost less.

A new lineup is emerging that includes software from NetSuite for ERP, Salesforce.com for CRM, Zendesk for help-desk management, Workday for human resources, Domo and GoodData for business intelligence, Okta and Ping Identity for identity management, AirWatch and MobileIron for mobile device management — and Box for cloud-based storage and sharing.

The Next Market Will Be Bigger

Levie agrees with the premise that massive amounts of revenue and market capitalization will swing over to upstarts. But he says this shift is about more than that.

As he sees it, this is not just a matter of moving the same dollars from one bucket into another. Levie believes that the proliferation of low-cost tablets is creating a much bigger addressable market.

The fact that cloud-based programs cost far less than legacy programs means that even tiny companies can afford them, not just the medium- and large-scale enterprises that can pay for top-dollar products made by companies like Oracle and SAP.

“The one thing that people don’t seem to realize yet is that there’s a good chance that the market will be far larger at the end of all this,” Levie says. “It’s going to be massive.”

Forget Those Fickle Consumers

Enterprise customers do tend to choose products with a great deal of caution, but they stick with them for a long time. Consumers go crazy over a new app or game and quickly move on.

The pain is already being felt in the consumer sector. The Wall Street Journal reports that funding for consumer Web companies dropped 42% in the first nine months of this year. Venture capitalist Fred Wilson, whose firm, Union Square Ventures, mostly invests in consumer Internet companies, says things have changed.

“We are still in the early innings of this more challenging environment,” Wilson said.