Both Box and Dropbox began as consumer services for file sync and sharing, and are now focused on moving into the business of selling their services to enterprise organizations. With their nearly identical names, it is not surprising that many customers confuse the two companies.
To clear up that confusion, Alan Pelz-Sharpe of 451 Research recently issued a new report pointing out some stark differences between the two companies. Here’s a summary of how the companies differ:
Dropbox runs on the public cloud, specifically on the Amazon Cloud (AWS-S3), meaning that customers do not necessarily know the physical location of their files. Consumers might trust their files to public cloud services, but businesses, especially those in regulated industries, do not. To appeal to the enterprise market, Box runs their production services in the own dedicated data centers and relies on Amazon only for non-production services. (Neither company offers a private cloud solution, despite clear interest in this option from enterprises.)
Dropbox has acquired 11 companies in the past three years. Most of them provide features for the consumer market, such as couponing, music streaming, and ad creation. Box has acquired only two companies, one for mobile file management and another for document rendering. The report notes that if Box had not been spending so much of its cash on operations and R&D, it might have made other acquisitions.
Box considers its solution a platform, which will eventually support other applications. Dropbox is clearly a product—an application for file sharing and collaboration.
Both companies are expected to IPO sometime in the next 12 months. The report notes that Box “has been burning through cash at a rapid rate, and is a long way off from profitability.” Both companies face challenges with their “freemium” model, as offering free services to customers and hoping that they will upgrade. The report notes: “The ‘freemium’ model seldom works in the long term, and the most successful freemium products are not, in fact, free—for example, Google mines your data and sells the results to advertisers.” Both companies will have to convince customers to pay for more than their basic services.
The report notes that both startups are heavily leveraged and that “success is far from guaranteed.” Box will eventually have to rein in its expenses, and Dropbox will have to find a way to compete against Google apps and Microsoft Office 365. Dropbox may find it increasingly difficult to compete against companies like Google who can always give away more for “free”.
At the end of the day, both Box and Dropbox have solid solutions, but neither have the security features such as a three-tier architecture, data segregation or ownership of encryption keys that many enterprise companies require. It will be interesting to see how both companies evolve their solutions over the coming 12 months as they continue to try and gain ground in the enterprise, in the meantime Accellion offers a solution designed for enterprise organizations that want to increase business productivity while ensuring security and compliance.
The full 451 Report, "Box and Dropbox: squaring off (sort of) in the enterprise", is available here.