Dropbox’s fundamental business model.
About 10 million new people start using
the free consumer product every month.
An increasing percentage of those users
sign up for the $100-a-year Pro version,
which offers more storage and sharing
features. Many of those Pro customers
use Dropbox at work, and once their
employers realize how popular it is, they
are more likely to step up to Dropbox
Business, which is designed for use by
teams rather than individuals. So far
more than 200,000 companies have
signed up for Dropbox Business, up from
50,000 in 2014. While most are small and
medium-sized companies, a few big companies such as Expedia and News Corp.
have more than 10,000 seats.
A successful push into productivity
and collaboration software could give
corporate customers much more to buy
from Dropbox. The first example is Paper,
which provides a kind of virtual white
space where employees and contractors
can share Excel spreadsheets, Google
Docs, and other digital assets regardless of
what device they are using. The idea is to
tie together scores of different productivity tools and fold in management tools to
help teams keep projects on track. Paper
has been in beta since late 2015 and officially launched in January. “In five years,
you could start a business on Dropbox:
that is something we aspire to,” says chief
operating officer Dennis Woodside, who
declined to comment on IPO plans.
Dropbox is far from the only com-
pany looking to change the way work is
done. Google offers G Suite, which con-
tains business versions of apps such as
Google Docs and Gmail. Facebook has a
collaboration service called Workplace.
Microsoft is improving its cloud offerings
as it seeks to defend the massive mar-
ket share earned with its Windows and
Office monopolies. Box has strong trac-
tion with companies in highly regulated
industries like health care and financial
services, while younger providers such as
Asana, Atlassian, and Slack already han-
dle elements of what Dropbox aims to
do. According to Gartner analyst Karen
Hobert, there are 130 companies just
in the electronic file storage and sync
Yet even rivals see Dropbox as a likely
survivor of the inevitable consolidation.
The overall market opportunity for productivity and collaboration tools is $30
billion, if you replace all those PC disk
drives and traditional Windows or Mac
programs with cloud-based alternatives.
“That’s an order of magnitude more than
the combined revenue of all the players
today,” says Box chief executive officer
Aaron Levie. “As everything moves to
the cloud, there’s going to be plenty of
Dropbox has been bulking up for this
opportunity since 2014, when Houston
hired Woodside. A former McKinsey con-
sultant, Woodside joined Google in 2003
as an operations expert before running
U.S. sales and then the Motorola Mobil-
ity cell-phone division. At Dropbox, he’s
hired more than 200 salespeople, up from
zero when the company relied solely on
Internet clicks. The engineering team has
more than doubled to more than 1,000
members, large by any measure. And he
has overseen a massive, risky IT overhaul.
While most companies are moving more
of their business onto public cloud plat-
forms like the one run by Amazon Web
Services, Dropbox has shifted billions of
its U.S. customers’ files away from Ama-
zon’s platform to three of its own data
centers. That way, Dropbox can tweak its
network to cut the time it takes to store
and sync traffic.
The result is more of a traditional
enterprise software company than the
hyper-efficient app maker Houston
founded in 2007. The idea for the company came when Houston realized during a long bus ride that he’d forgotten the
USB drive with his work files at home.
The resulting cloud-storage app was a
sensation with people who felt his pain.
By 2012, Dropbox had 100 million registered users.
Then things got difficult. Giants such
as Amazon, Apple, Microsoft, and Google
began giving away cloud storage capacity
as a way to sweeten other offerings. As
prices collapsed, cloud storage specialists
faced an existential threat.
A successful move by Dropbox into
the huge market for productivity and collaboration software could brighten the
outlook, but it will require the company
to pull off two tough transformations at
once. Dropbox is still evolving from a
maker of a free consumer app to a corporate IT infrastructure company. Now
it must also move from selling technology that’s designed to be as invisible as
possible to making products people use
throughout much of their day. Its competitor Box provides a cautionary tale.
It introduced a Paper-like product three
years ago called Box Notes. But Levie
admits that its reception has been less
than overwhelming. Box relaunched
Notes with new features earlier this year.
Woodside responds that few companies have the scale, the technical
expertise, and the brand to pull off its
ambitious plans. “There’s close to two
billion knowledge workers in the world,
and I know this much: the tools they’ll be
using in five years are not the ones they’re
using today,” he says. “Is the number 500
million? A billion? I don’t know. But we
have a shot.” —Peter Burrows
The tools workers will use
in five years will be very
different from today’s.