Select your localized edition:

Close ×

More Ways to Connect

Discover one of our 28 local entrepreneurial communities »

Be the first to know as we launch in new countries and markets around the globe.

Interested in bringing MIT Technology Review to your local market?

MIT Technology ReviewMIT Technology Review - logo

 

Unsupported browser: Your browser does not meet modern web standards. See how it scores »

In the 1990s, Microsoft became identified with the Death Star partly by enticing developers to build applications (such as WordPerfect and Lotus 1-2-3) on its platform and then releasing copycat versions that ran more smoothly, thanks to proprietary access to the underlying code. Now it’s Amazon’s turn to try on the Darth Vader helmet. 

Amazon is rolling out Zocalo, a service that lets people store and synchronize files and is built on S3, the erstwhile bookseller’s own-cloud-storage-as-a-service infrastructure. Zocalo (Spanish for “base” or “town square”) is geared toward businesses and has features favored by IT managers, such as encrypted connections and fine-grained access controls. No doubt, the folks at Dropbox took notice; its service, which offers similar features increasingly tailored to corporate customers, is one of S3’s most visible success stories. 

Even louder alarm bells may be ringing at Dropbox’s arch competitor, Box. Whereas Dropbox built its business serving consumers and only recently shifted to businesses, Box has been focused on the enterprise market virtually since it was founded in 2005 (see “The Continuous Productivity of Aaron Levie”). It boasts blue-chip customers including General Electric, Procter & Gamble, and Schneider Electric, but it faces blistering competition from EMC Syncplicity and Citrix ShareFile, as well as Microsoft OneDrive, Google Drive, and a host of others. The last thing it needs is another deep-pocketed rival gunning for the Fortune 500.

“It feels immediately threatening to see Amazon enter our business,” admits Chris Yeh, Box’s senior vice president of product and platform. “But there’s more nuance than appears on the surface. There’s nothing easy about this business.”

Indeed, it has been a tough year for Box. The company filed for an IPO in late January, raising expectations of an offering as early as April. In March, though, the company disclosed that, despite extraordinarily rapid revenue growth, costs far outpaced receipts ($168 million out, $124 million in for the year ending January 31, 2014). The stock market chose the same moment to pound cloud-software companies, giving rise to reports that Box would postpone its public offering. Box issued a statement that it was proceeding according to plan—nonetheless without setting a date—and in late June accepted a $150 million investment, making it one of only a handful of companies in recent years to have raised funds privately after filing to go public. The cash infusion extends the company’s runway for another year at least, buying time to sign up more prestigious customers, boost revenue, and cut expenses. Box still hasn’t set an IPO date.

Box’s extraordinary burn rate reflects the brutal economics of storage-as-a-service. The price of hard disk capacity per megabyte plummeted from $700 in 1981 to two-tenths of a cent in 2010. The cloud offers a plethora of free options: 50 gigabytes at Mega, one terabyte at Flickr. This week, in fact, Box announced that it would offer unlimited storage to customers of its business product. Companies hoping to grow have little choice but to add value to the documents they store. That pressure has spurred Microsoft, Google, and now Amazon to evolve from providing generic file storage to specialized services aimed at large organizations that have real problems and real money to spend on solving them. It has also sparked a price war that so far has seen Google drop prices and Microsoft boost per-customer storage allotments. Box, for its part, can’t afford to be drawn into a race to the bottom. It must continue to move up the value chain while making itself indispensable to customers and unobtrusively making it harder for them to switch to a rival cloud-storage provider.

CEO Aaron Levie mapped out the basic features that enterprises require of a cloud storage service early on. In the past year, Box has been implementing a broad vision of frictionless international collaboration. It offers a programming interface for integrating custom and third-party code, metadata tagging to keep document archives organized, and high-fidelity file previews to make specific documents easy to identify without having to open them. At the same time, it has focused on serving vertical markets. For the health-care industry, it complies with medical privacy laws. For legal and financial clients, it integrates with electronic signature services. The company has built server farms in Europe, Asia, and South America to deal with local regulations and provide a responsive experience to international customers and deal with local regulations. Levie is betting that competitors won’t be able to offer such depth of service any time soon.

But Zocalo may not need to. Given that Amazon Web Services has become the go-to source of computing power for new-breed online businesses, the company may well threaten Google, Microsoft, and Salesforce more than Box, hooking customers on an increasing array of basic services such as e-mail, customer relations management, and enterprise resource management, all sharing Zocalo as a basic resource.

Hear more from Aaron Levie at EmTech 2014.

Register today

1 comment. Share your thoughts »

Tagged: Computing, Web, EmTech2014, Amazon, Dropbox, Aaron Levie

Reprints and Permissions | Send feedback to the editor

From the Archives

Close

Introducing MIT Technology Review Insider.

Already a Magazine subscriber?

You're automatically an Insider. It's easy to activate or upgrade your account.

Activate Your Account

Become an Insider

It's the new way to subscribe. Get even more of the tech news, research, and discoveries you crave.

Sign Up

Learn More

Find out why MIT Technology Review Insider is for you and explore your options.

Show Me