[Corrected 1/23/15, 10:20 am. See below] The Bay Area is ground zero for the hotly contested market in Web-based data storage and file sharing for businesses, and local competitors have been closely watching Los Altos, CA-based Box’s long run-up to its IPO.
Box made its trading debut today on the New York Stock Exchange, where its shares were rising by mid-day from an opening price of $20.20. [An earlier version of this paragraph misstated the percentage rise of the share price. We regret the error.]
Box (NYSE: [[ticker:BOX]]) priced the 12,500,000 shares in its initial public offering at $14, above the range of $11 to $13 estimated by the company in its SEC filing on Jan 9, when it revived a campaign to go public that began last spring. Box delayed the IPO as investor interest in tech startups flagged and amid questions about its spending. Instead, the company raised $150 million in a private equity round in July.
Box plans to use its new capital to continue its fast pace of growth, vying for market share with other contenders that include Microsoft and big Bay Area tech firms Google and Citrix, as well as San Francisco-based Dropbox and an array of startups.
The data storage sector has been maturing as companies have expanded their missions to serve the needs of business customers. The new services include collaboration and communication tools, mobile apps, storage options such as private servers, and cybersecurity measures. Competitors now square off against each other based on those features, and larger companies have been acquiring startups to bring in new capabilities.
In 2012, Hopkinton MA-based company EMC (NYSE: EMC) acquired Bay Area cloud-based file management startup Syncplicity to better position itself to compete with Dropbox. The resulting EMC unit, EMC Syncplicity, is based in Santa Clara, CA. Its general manager Jeetu Patel took time to talk to us about the significance of the Box IPO and the competitive race over the next few years.
Xconomy: What does Box’s public debut tell you about the market for these services?
Jeetu Patel: It’s a hot market. They’ve enjoyed good growth, we’ve enjoyed great growth. There’s a tremendous demand among customers who are saying, “Protect my information, make me more productive.”
X: Who do you see as the top competitors in this market?
JP: We see this as a five-horse race, and Box is definitely one of those five. In our eyes, the five major players are EMC Syncplicity, Microsoft, Google, Box, and Dropbox.
X: How do you see this sector advancing in the next few years?
JP: The market is still in its very early days. I think 2015 and 2016 will be years of consequence as companies compete in getting to a scale of adoption. Very few enterprises now have every user using the same system. Large companies are seeking to replace consumer systems like Dropbox with services that are more robust for businesses.
X: Box, in the amended registration statement it filed in early January, named the top risks for the data storage and management sector. Among these was the possibility that a provider may fail to keep customer data safe. How can EMC Syncplicity and its competitors prevent this from happening?
JP: It’s important to make sure the users love it. If it’s rather hard to use, they’ll go out and use a consumer-grade system like the one their kid uses in college. It’s not enough for us to be as good as a consumer-grade system. We need to be far better than those when it comes to the user experience. The security risk for companies goes down materially when users use enterprise-grade systems versus consumer tools.
X: How do you protect all that data as company employees use their mobile devices to connect to the Web through external Wi-Fi networks in, say, airports and cafes?
JP: All data is encrypted while the device is in motion and also at rest. If an employee leaves a device behind in a cafe while they’re still logged in, we have the ability to lock the application after a certain amount of inactivity. If that employee fell ill and went to the hospital, I’m sure the employer’s IT group would be notified. Immediately all the employee’s systems would get locked, and IT would remote-wipe them.
When companies share a confidential report such as a bid for a work contract, they can set a time when access to that report will expire. If you didn’t win the bid, you don’t want the potential client to pass along your proposal to the competitor that did win the bid.
X: What are some of the major differences in the services offered by data storage and sharing systems?
JP: EMC Syncplicity gives customers the choice to store their data in different locations. This is a hybrid cloud solution. Some customers may love using a software as a service application that runs in the cloud, but they don’t feel comfortable putting other information such as data on legal issues or mergers and acquisitions in the public cloud. We allow them to store that information in their private data center.
