Weekly Update

Why Dropbox shouldn’t move to the enterprise space

Consumer-focused cloud storage company Dropbox announced a new Series B round worth $250 million this week, valuing the startup at around $4 billion. Claiming more than 45 million users and expecting to triple its user base this year, the company continues to grow, despite recent security concerns and competition from Google, Apple and startups like SugarSync. Enterprise users value the same device independence and ease of use that Dropbox delivers to consumers, and Dropbox for Teams partially addresses this market. But Dropbox’s enterprise offerings still lag behind competitors, and the company should stick to the consumer market rather than aggressively pursue new enterprise orders.

The proposition behind Dropbox and its competitors is simple. A client application integrates with the native file management on a user’s device, and changes to files are replicated via the cloud, making it feasible for an individual to keep them synchronized across devices. Crucially, the entire process is seamless and invisible to the user.

The use case for individuals within the enterprise is similar. Here, too, there is a need to easily transfer documents between office and home and back again. The individual’s employer may be less enamored of the idea. Data is not only moving outside the firewall onto employee devices but is also being stored on third-party servers in the cloud, beyond the enterprise’s ability to audit or recover.

Despite these concerns, Dropbox (and services like it) are already in widespread use by individual employees, who see them as easier to use and more functional than enterprise-endorsed file sharing solutions such as Microsoft SharePoint. Sometimes this use will directly contravene the policies of their employer, but often employers haven’t given the issue sufficient attention to devise an explicit policy or procedure.

Dropbox itself recognizes the opportunity presented by group use; the sharing capabilities of Dropbox for Teams “make it perfect for businesses, organizations, and groups,” according to its website. Although the product offers unified billing and a number of other team-friendly enhancements, the absence of robust audit controls leaves this product lacking when considered for enterprise use. With sensitive data, administrators typically decide who may open it, where and when. Further, they can see when, where and by whom various files have been modified. Once these files move off enterprise systems via Dropbox, many of these controls disappear.

Other startups have recognized that enterprise decision makers require a layer of additional functionality. Egnyte, for example, aims to deliver a Dropbox-like experience to the user, plus a set of auditing, file permission and security features that enable the enterprise to track and manage assets across devices.

Although the user experience is similar in both Dropbox and Egnyte, the back-end infrastructure is radically different. Egnyte offers a variety of management capabilities that Dropbox does not have, and Egnyte is also capable of being installed and run completely inside the enterprise firewall. Dropbox relies on servers in the public cloud. Egnyte was created to serve enterprise needs, while Dropbox was created with the consumer market in mind. Nevertheless, Dropbox has visibility and a large installed base among consumers. These consumers are also employees, and they are likely to import practices and tools from home to the workplace, especially if employers don’t implement their own systems.

Dropbox for Teams may meet some of the requirements for sharing within small groups, but it seems unlikely that Dropbox would invest the effort required to reengineer its entire product to deliver capabilities that competitors such as Egnyte already have. Without this effort, Dropbox (and equivalent products) are unlikely to be endorsed by cautious enterprise CIOs for widespread use within their organizations. Despite the size of the enterprise market and the doubtless frequent requests for enterprise features, Dropbox may well be better devoting its attention to growing even larger within the consumer space. The enterprise market, in this context, is more trouble than it’s worth.

Question of the week

Would you use a solution like Dropbox for corporate data?