Why Box.com is king of enterprise cloud storage

Dropbox and Google Drive may get the ink, but in enterprise cloud storage, no one may be more important than Box.com. CNET sat down with CEO Aaron Levie to talk about the future of the business.

LOS ALTOS, Calif.--It may be known to some as the Dropbox-for-the-enterprise, but Box.com could be forgiven for insisting on its own identity.

With more than 120,000 customers, including 82 percent of the Fortune 500, the company has made a name for itself as one of the leaders in the enterprise cloud storage and data management space. And though Box.com has Microsoft, and more recently, Google breathing down its neck, CEO Aaron Levie doesn't appear the least bit nervous.

Box.com CEO Aaron Levie. Box.com

That may be because the company has spent seven years building its business and solidifying a technology platform that gets more sophisticated -- and cost-effective -- every day. And as it has evolved into occupying a sizable Silicon Valley building, and employing more than 400 people, Box is now setting its sights on new businesses, including providing customers with the infrastructure on which to build cloud-based applications.

Last week, the 27-year-old Levie sat down with CNET in a conference room at Box.com headquarters for an interview about the state of his company, the competitive landscape in the cloud storage and service space, and even the value of wearing a hoodie in a meeting with potential investors.

Q: What's your take on the brouhaha over Facebook CEO Mark Zuckerberg wearing a hoodie to a meeting with investors?
Aaron Levie: I find it interesting that in a world where we're trying to improve corporate ethics, corporate transparency, and corporate accountability, there would be some concern with Zuckerberg showing up and representing the culture as exactly how it is. If I were an investor in Facebook, I would much rather have him show up representing what the culture's all about, and how they're going to run that business for the long run, than have a different kind of attitude and brand when he's working with investors. In many ways, Zuckerberg is saying, This is what Facebook is all about, and only invest if you feel comfortable with how we're going to run this. So why an investor would want him to show up in a different way than how he runs the business is beyond me.

How do you pitch Box.com to customers?
Levie: So many different kinds of businesses out there are all going through the exact same challenge and transition. It's almost counterintuitive how predictable everybody's situation is. Because whether you're in construction or finance or real estate or consumer or media tech, every CIO we talk with, and these are companies that are 5,000, or 10,000, or 50,000 employees, they're going through the same kind of transition and they're at the same junctures as organizations, where they have decades of legacy technologies that they're still managing. And it's, How am I going to build an IT and technology strategy for the next five to ten years. And often, if you look at how vast the change has been in the landscape, the technology strategy they're going to end up with is very different than the one they just came from.

So what is Box.com?
Levie: The vision of Box is to make it easy for customers to share, manage, and access information from anywhere. That means we need lots of different kinds of technologies to make that happen, including technology that will sit on your iPhone, your Mac, your Android device or your Blackberry. And we just announced something with Nokia with their Windows Phones and tablets. We're a 100 percent enterprise-focused company, and all the technology we're building goes towards asking how do we make it easier or more scalable, or simpler, and just a better way for businesses to share and manage and access this data.

Any regrets on being 100 percent enterprise?
Levie: God, no. Our thesis is basically that if you look at the cost of storage, it goes down roughly about 50 percent every 18 to 24 months. So our hard costs are about a tenth of what they were when we started the company seven years ago. And you can predict that in the next five to ten years, we'll have another 10x improvement in storage density and performance. Eventually you'll get to a point where storage is infinite and free, because companies like Google, and Microsoft, and Apple can essentially subsidize the cost of storage for their consumers because it's so cheap and the value of keeping people locked into their system is so great for them. But in the enterprise, storage is critically important, so we had to give people lots of space, but what you pay for is the security, the platform value, the collaboration, and the integration into your enterprise, and this is where we can build differentiated technology instead of just being measured on how much storage we give you and at what price.

Do you see Box competing with Amazon's S3 platform?
Levie: Our platform is a little different. But we launched Box OneCloud about six weeks ago, and we already have about 50 app partners. They could have gone and built their apps or stored their data on Amazon S3, but they chose to integrate with Box because we power everything from user permissions and user security to the back-end file system to collaboration, and we have an enterprise customer base that we can effectively distribute these applications to. Amazon doesn't do those things because it's just so focused on the big iron part of the problem, which is just storing the data.

What's an example of a OneCloud partner?
Levie: A good one is CloudOn, which lets you use Microsoft Office on the iPad. So you can actually get Office on your iPad. This is the kind of integration we're not going to go off and build ourselves. But there are lots of companies that have built really amazing apps for financial services, for construction, real estate, for pharmaceuticals, and we want to go work with every single one of those and have those apps get built or developed or integrated into Box.

How is the competitive landscape changing Box?
Levie: I would love a monopoly. But free markets and open marketplaces where people compete absolutely drives massive innovation. So we're being pushed much harder now, because of the landscape. But it's kind of exciting, because we're really, really energized as an organization to go build something for the enterprise that is so radically different than what's on the market, and what's causing that is the amount of attention in the space, the amount of interest in this category, and that will inherently come with more competition. We're happy that a lot of people are interested in the space. We've been doing this for seven years, and I promise you that for the first six-and-a-half, nobody cared. But now, Apple, Google, and Microsoft have made it more important, and we're thankful we have a lot of enterprise customers, including 82 percent of the Fortune 500.

How does Google Drive change the space?
Levie: For years, investors would ask, what if Google comes into the space? And we'd say, Google's already in the space, with Google Docs, and Gmail already letting you share and store data. All Google has done is effectively integrated it with your desktop, which is unquestionably an important feature change for this product area. But we think Google Drive is going to be an important player. The big three in the consumer space would inevitably be Apple, Microsoft, and Google. They all have operating systems, devices, and browsers. And they all want to fund this category and this vertical stack of technology where data moves between devices through proprietary platforms.

Ultimately, we think Google Drive is an important move. It's going to be very competitive in the consumer space, and it's going to change some of the storage economics, so we think the cost of storage for consumers is going to fundamentally continue to drop. I would be surprised if consumers are paying for storage in the cloud two years from now. As a consumer, you won't have to worry about where your photos, music, or documents are. But as an enterprise, you're going to care a lot more about security, manageability, and where that data's going.

Who poses the biggest threat to your business?
Levie: I would say Microsoft knows the most about the enterprise of any of these players. Google has a phenomenal brand, but it's getting to be a broader brand, because it's everything from your wallet to your car to your TV to your phone. The other thing that gets lost in the entire conversation because Google and Microsoft and Apple are so aggressive about this space, is the big transition companies are going to do from Oracle, IBM, EMC, and a lot of these traditional enterprise infrastructure players. Because as these dollars, and as your computing goes to the cloud, it moves away from implementing on-premise systems. It's not going to be that Dropbox or Apple or Google loses. It's going to be a lot of the legacy systems that we were spending lots of money on. As the $290 billion enterprise software market moves to the cloud, an entire new landscape of players and vendors are going to be the beneficiaries of that, unless these legacy vendors really get their act together.

What's the biggest technological challenge that Box still has to overcome?
Levie: Hiring more engineers. There's so many things that we want to build, and our No. 1 limiter right now is just that the market for engineers is so competitive. We want to build a much broader platform, and we have a long roadmap of enterprise technology, like how you can manage your business data much better and much more scalably be able to build completely new ways that you can work with your content, and work with your information on Box. That's a six-year road map that needs 50 engineers on it.

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