Taking the Measure of Box


A few weeks ago, Box held their first conference, Boxworks, in San Francisco. I was originally planning to attend but events conspired to keep me away. Still, I feel it is a good time to step back and look at where Box is, ask where they are going, and generally see where things stand.

Simply put, Box is doing well. Some felt that the conference served as their coming-out party. Since the conference, Box announced the finalization of a round of funding worth $81 million that they mentioned during the conference and are looking at expansion of their capacity. Box is taking a lot of mindshare and some market share as well.

But is it deserved?

Show me the Money!

Box is quick to share investment information because it shows momentum, growth, and excitement. Other financial information is harder to come by and all of it can be misleading without the full set of numbers. Privately held companies only release numbers that make them look good so you never know how much they reflect the current state of things. One thing that is definite, $81 million is a lot.

One concern expressed by some is the volume of funding versus revenue. Not having all the numbers, I can say that there are two things that makes Box different from traditional Content Management companies when looking at the numbers:

First, revenue is recognized monthly. Box is a subscription service, so you don’t get the big license revenue bubble. What you get instead is a steadily increasing stream of money. Oracle does this with maintenance funds and Box is doing it will all funding. In theory, each month will be better than the previous month. It is that current vector that really matters, not historical figures from 3-5 years ago. Of course, maybe people companies are paying up-front for set time-periods, but without more detail, it is impossible to really throw stones.

Secondly, services, cloud-based or otherwise, are expensive up-front. To be successful, Box is going to need at least 2 major data centers in the US, one in Canada, and one in most major European countries. Each country has its own laws about data and privacy protection. Many companies want to keep their data outside of the US to avoid the Patriot Act while other countries require companies to keep data within the country.

I haven’t even talked about the advanced needs of governments.

If Box is going to win the Enterprise, they have to go global. If they are going to do that, they need to build.

All these data centers cost money in power, equipment and people. What they don’t cost is software as that is already developed.

Of course, lots of good companies have money that aren’t in Content Management. Future revenue will be driven by what Box actually delivers. Let’s look at the state of the product.

They Have Bells, How About Whistles?

I reviewed Ron Miller’s overview of Boxworks and decided I needed more details on the features that were announced, so I broke down and went to the Box blog.

As with any company blog, you are going to have to shift through hype, and Box excels at cooking-up hype. After looking at it, here is what matters to the business customer:

  • Improved Synch. This really boils down to having Mac synchs. Very sexy, very important for some markets, but not critical in most. It will make it easier for Box people to use their own software though.
  • Trusted Access is actually interesting. It tracks all the applications and browsers accessing the content and let’s you manage it. What that means and how that feels, remains to be seen. It is a basis for detecting and preventing unauthorized access, critical for cloud-based software.

That’s it. Both good features that will help broaden the appeal in companies. Yes, Box improved the SalesForce integration and a few other items, but those are the things that I see that are “real” and relevant to companies I talk to regularly. There is talk of improved workflow over the basic tasking that exists, but without more details, it is just trivia.

So What’s Missing?

Heard this on multiple fronts…Custom METADATA!!! This is a entry level feature. I’m not talking 50 fields with integrated business rules, but 5-7 fields with a simple default would be nice. Dates, text, and lookups would be a nice, simple, start. Tags are great for personal use, but it fails for the larger organization.

To put this in perspective for my regular readers, even WordPress gives me metadata.

To be honest, almost every other gap (CMIS!) is just trivia until the metadata feature appears. Box needs to read about what makes a Content Management System and go from there. Box has a lot of great features and I wouldn’t remove any of them, but they have a while to go until they are a real Content Management system.

That matters. After all, they are targeting SharePoint….

Big Game Hunting

A lot of the twitter debates about Box is their targeting SharePoint and the Enterprise when they are missing key features. Peter Monks clearly laid the baseline argument for the opposition:

To justify the claim that “Box is like Sharepoint” you need to have some minimum set of Sharepoint features (or equiv).

In theory, he is correct. What he neglects is that a lot of SharePoint installation use SharePoint as a glorified file store. While this is changing as people realized that they are doing something wrong, others want something simpler. Box is simpler.

Of course, Office 365 is simpler than on-premise SharePoint.

For those that want more than a glorified file share or basic collaboration, SharePoint works. If you start to scale up and want even more features, right now you turn to the established Content Management solutions like Documentum, FileNet, Oracle, Nuxeo, Open Text, and Alfresco (there are more).

Here is the situation. Box is going to snipe at the bottom of the SharePoint market and get dissatisfied customers and those with no solution. Meanwhile, SharePoint is going to keep sniping customers from the established vendors.

Where will this lead? Nobody knows for sure. Given the history of disruptive technologies, Box and other cloud-based vendors will dominate the market while SharePoint and a couple traditional vendors own the on-premise market.

There is a shot that one of the traditional vendors will make the leap to the cloud successfully, but that is a long, hard road.

Summing Up the Summary

Box has money, drive, knowledge, and a platform. What they need is the features to move them further from Dropbox and closer to every other Content Management vendor. They have some clear market(ing) advantages but they need to hurry up and deliver before someone else does it and takes their momentum to win the market.

9 thoughts on “Taking the Measure of Box

  1. Good post Pie. I think your analysis is good especially when comparing Box against legacy ECM systems. However, Box seems to be banking on a huge tectonic shift in enterprise information management away from heavy all-in-one systems. If the “appification” of enterprise software hits the way it has mobile and tablet software then Box’s lightweight agility will let them leave the EMCs, Oracles and IBMs in the dust. Sharepoint arguably started this trend with their “good enough doc sharing” approach. Time will tell if this tectonic shift continues into a massive shake up of the ECM industry and practice or if it settles down with just a little dish-rattling.

    Like

    • I think Box is doing a lot of the right banking, but there is a difference between simplifying and crippling. Right now, their feature trajectory is aiming on the right path. If they stop before adding what is needed, even in simplified form, then there will be issues.

      There is a line between “good enough” and “not ready”. The question really is, how far across that line did SharePoint venture? Tags work great for small groups. Escalate to 18,000 people in a company, like their Proctor and Gamble deal, you are going to need a little more structure to make things workable.

      It is going to be interesting to see what happens, regardless.

      -Pie

      Like

  2. Very interesting view here mister Pie!
    I foresee another challenge, which has nothing to deal with features or products: growth of the organization. You said it, $81 million is a lot, not that easy to keep control and do the right things when you plan to do so much (as I hope they plan to do a lot with such a number…).

    Like

    • Roland, I agree about the challenges of spending the money, but I think it is controllable as their primary focus is to scale and build data centers. If they were going to expand their engineering team, then I would foresee massive issues.

      -Pie

      Like

  3. Interesting analysis – great to see someone go beyond the fluff dished out as press releases and dig deeper!
    That said, I think some of your conclusions/prescriptions merit a second look:
    For instance, your point about revenue recognition would be appropriate for a typical freemium SaaS model where customers sign up for the service on their accord and operate their accounts on a self-service basis. However, Box seems to be increasingly moving away from this model towards a more traditional enterprise-sales oriented approach driven by a top-heavy, high-touch sales team and I am pretty sure that their customer wins like the one with P & G are representative of this. And I severely doubt if P & G is paying $15 per month times 18k for using Box on a month-to-month basis.
    Also, I don’t think this is a war that Box will win by adding more features – try as they may, they will never equal what say a Sharepoint can do, much less a traditional ECM solution. The denouement is that in the space that they are playing in, features don’t matter as much as convenience (at the bottom end) and integration. Box already scores high in both these metrics – the former is obvious and the latter is where they are staking their claim to be an embedded/embeddable file store for all documents flowing through new-generation biz apps like Yammer and Chatter…one that is largely plug-and-play and optionally gives capabilities to be intimately embedded with activity streams and workflows within and across these applications. Their /bin initiative which has received surprisingly little attention in the face of the mega-funding announcement is one more step in this direction.
    Just my 2c!

    Like

    • Sumanth, thanks for the details. I did say that I didn’t know how they were approaching the revenue recognition for Enterprise companies. It is likely pay-up-front for a year. Thing is, we just don’t know. We do know it isn’t a big license payment followed by maintenance. Besides, even if paid up front, it may have to be recognized monthly on the books. As I said, lots of details so it is hard to analyze without them. If anything, I think my point was to tell people to not sweat it at this point unless you are an accountant and get to look at the actual books.

      As for the features, you are right, they won’t win a feature war. They shouldn’t try. When I talk about metadata, I am thinking a scaled-back version from what you see in the big-boys. To be a Content Management system, they need a minimum of features. They aren’t there, though they say they are working in that direction. I have no reason to doubt that it won’t eventually be there. As for the integrations, they do a great job. I was very excited with their efforts around Identity Management earlier this year.

      Thing is, if their stated goal is to take down SharePoint and become the Content Management choice for the Enterprise, then they need to do more. They need to support the standards of the industry and they need to add some baseline features, even in a streamlined fashioned. I didn’t even TOUCH the retention/ legal hold feature set because they are several steps from needing those features. I’m not talking DoD certification, just the ability to make sure that business critical documents are around for a while and protected from accidental or malicious removal.

      -Pie

      Like

      • Thanks for the response.
        In your opinion, what would the list of “minimum features” be to constitute a content management system and how far do you believe that Box is away from achieving that feature set?

        Like

Comments are closed.