Box on Tuesday became the latest company to remove limitations on the amount of cloud storage it offers business customers.
The change affects users who previously paid $15 a month for 1 terabyte of storage. Box already offered unlimited storage to customers choosing a different plan that cost $35 a month.
At the same time, the company announced that it would more closely integrate its products to work with Microsoft's Office 365 and Outlook starting this fall.
The announcement further underscores an industry in transition. With cloud storage costs plummeting, Box and other providers can't afford to get caught in a breakneck race to the bottom and are keen to play up the ancillary products they offer beyond simply housing files on servers.
"Storage is at the core of what we do, but our real value is all of the collaboration features and security and administrative control and compliance and fine-grained permissions and things like that," said Heidi Williams, Box's senior director of platform engineering. "That's really the value Box has, above and beyond storage."
A scenario where Box's core product gets turned into a commodity hasn't fazed investors. The company received another $150 million in private investment recently from private-equity firm TPG and hedge fund Coatue Management after delaying plans to go public due to a weakening market for tech public offerings. That capital injection left the company with an estimated pre-IPO valuation of around $2.4 billion.
"We're just pleased to be at a place where we can take storage cost out of the conversation so we can focus on all the value we have beyond that," Williams said.
It was hardly coincidental that Box offered a canned quote from CEO Aaron Levie noting that the future battle for business customers would no longer be centered on the information a provider lets them store, "but rather, what it allows them to do with that information."
That's a likely signpost for what's a still-young business in the midst of rapid change.
Back to the future?
Microsoft and Google have different ideas about a lot of things, but when it comes to pricing cloud storage, they're nearly in lockstep.
Both companies are foregoing profits in one business in hopes of luring new customers to sign up for their other products and services. In recent months, both companies have increased storage caps, adding to the pressure on pure-play cloud storage companies.
In June, when Microsoft more than doubled its free cloud storage for OneDrive users and offered 1 terabyte for Office 365 users, Angus Logan, who heads product management and marketing for OneDrive, allowed that storage is not as interesting as "what we build on top of" it.
"We're not trying to just be in the storage game where we break even because storage is the only hammer we have to swing. But if we can say that we want to deliver productivity across all your devices -- and it also comes with cloud storage -- then it really changes the game from being focused only on storage," he said.
Although the circumstances are different, there's an echo here from an earlier tech era. When personal computers were still novelties, there was decent money to be made selling standalone spell checkers, TCP/IP connections, and paint programs -- that is, until the mid-1980s. That's when an alert Bill Gates saw an opportunity for a software land grab. Microsoft, which at the time was pushing hard to promote Windows, began to expand the girth of its operating system by adding functionality that people previously could only add to their computers if they bought shrink-wrapped software packages separately.
The "kitchen sink" strategy was a winner, and Windows went onto establish itself as the market's dominant PC operating system. Incumbent companies and entrepreneurs got the message: Get out of the line of fire -- fast. So it is that some cloud storage companies are already deciding that it's better investing elsewhere. For instance, SugarSync this year stopped offering free storage to customers, who now have to pay after a 90- or 30-day trial period.
Room for others
The bigger companies hope to use cloud storage as a launching pad to convince users to also subscribe to their productivity tools. When Microsoft earlier this summer cut prices on cloud storage, company executives explained that they saw this as another way to sign up more customers for other software services such as Office 365, one of the company's main money-makers.
"Building file, sync and share is not rocket science," said Gartner analyst Guy Creese. "It's not as complicated as building a CRM app, for instance."
But even though Microsoft and Google have enormous engineering resources, that's no guarantee they'll elbow aside smaller rivals.
When it entered the market seven years ago, Dropbox was just one of many companies marketing collaboration software. (Coincidentally, it debuted in the same month as Apple's iPhone.) Even though it has remained relatively stingy about giving away free space, Dropbox has accumulated some 300 million users, doubling the number of people who use its service in just the last 18 months. That's remarkable growth for any company, particularly a startup.
The company declined to officially comment for this story. But Dropbox executives resist suggestions that the company is simply a storage provider and argue that its customers will continue to pay for higher-valued services.
Indeed, both Dropbox and Box have expanded beyond cloud storage in different ways, touting features like enterprise file synchronization, security, or the elegance of their respective user interfaces.
For instance, Box Notes is a free Web-based note-taking tool that lets users collaborate on documents without leaving Box, while Dropbox now offers APIs so developers can more easily integrate its service with other applications.
"Box has always wanted to be more of an enterprise file sharing and file application system, so to the extent they can add more products and services on top of their base, I think they can do quite well. The same for Dropbox," said Peter Levine, a partner at venture firm Andreessen Horowitz. "It sounds simple, but a lot of Dropbox's core value is in its simplicity. Everyone knows how to use it. It's elegant. For consumer-oriented products, the fit and finish and simplicity of the finished product really do matter."