A Cloud Based Blue Box.

The commoditization of storage is happening now.

Storage Wars

Gone are the days of Outlook users being prompted to empty out their inboxes since they’ve reached their 100MB limit. Box is now offering Unlimited Storage to business customers. Large enterprise customers have long been uncapped, but now, every Box business customer (paying $15 per user per month) can experience the joy — or lack of pain — of not having to think about running out of space ever again. The announcement was made in a blog post called The End of the Storage Wars — suggesting that unlimited storage is the way the industry is heading. Is it just a matter of time until the rest of the industry follows?

In an interview with Dan Primack at Fortune’s Brainstorm Tech Conference, Levie said that yes, unlimited storage is inevitable from some of the other players: Google, Microsoft, Amazon, Apple (notable exclusion of Dropbox), but for the enterprise-focused Box; unlimited storage was always the plan. While this may seem like the escalation of a storage war — which is good for the customer — and great for ratings of reality TV; we’re actually approaching the end of one. When it comes to the enterprise, storage pricing is just one battle. Collaboration, security, device management, compliance, and usability are required to win the war.

Unlimited refills from the fountain of coke.

Consumers like freemium. Price elasticity is high. The low-percentage of users considering an upgrade are not mini-CIOs with slightly less demanding requirements. Usability consists of: does the desktop folder sync? Meaning, the only way to market consumer storage is pricing by the GB. Size and quantity. It’s how to differentiate when storage is a commodity.

Levie went on to say:

“I’d actually argue that storage has always been a commodity. When we got into this business people asked how are you going to differentiate when storage is a commodity? We said, we are not really building a storage company. We are building a company that lets you do new and different things with your information (mobile access, collaboration tools). It’s not particularly news to us; it’s just that the amount of storage today that we can give customers is far larger and much more significant than we could previously.”

Innovators innovate. It’s the law.

We talk quite a bit about Moore’s Law in the technology industry, the observation that over the history of computing hardware, the number of transistors in a dense integrated circuit doubles approximately every two years. The technology we use in our everyday lives — the supercomputer in our pocket — are possible because of Moore’s Law. Without it there would be no smartphone, only a privileged few will have car phones, and the mainstream will experience the hardships of finding a bitcoin that fits in the payphone slot.

What we don’t talk about as much, is that the same efficiency trend is happening in storage technology. This is the reason why YouTube can store all of the world’s videos. Why Wikipedia has no limits to amount of encyclopedia content contributors create. It is why Gmail effectively gives you unlimited email storage. The same trend has led to a 22,000x improvement in the cost of storage over the past two decades.

This 22,000x improvement in storage costs is the reason Box can offer uncapped storage. The Storage Wars were short lived and are now over.

If Moore’s Law is commoditizing storage, what are the industry prospects for a cloud-based blue Box?

Levie is bullish.

“I think we’re at a point of transformation and transition where hundreds of billions of dollars of spend in software, hardware, infrastructure, technology — from the enterprise side — is migrating to the cloud. It’s migrating to companies like WorkDay, SalesForce, Google Apps, to Office 365, and we’re at this transition period where the IT model of large enterprises is changing pretty radically. Our job is to go build the platform for how businesses are going to use their content in those enterprise environments.”

In healthcare that’s going to mean how do you collaborate around medical images, in media & entertainment it will be how do you collaborate around video, and in law firms it’s going to be how to do contract management in the cloud. Larger enterprises are making this change and it’s beginning to re-work entire business models and entire business processes in these enterprises. Box wants to be the platform for how businesses work with their content.

Is the Enterprise Winner Take All?

When it comes to paying enterprise customers the market dynamics are winner take most. Levie describes some of the core horizontal use cases that are universal across all large enterprises (accessing files from anywhere, sharing with anyone, etc.) and how there will be a range of solutions that go deeper into problems that a specific department or even an entire industry may have. For example, the software needs of a financial services firm differ from that of a healthcare provider. Employers in charge of Social Media use different tools than HR, which is different than Sales. By predicting that software providers in the enterprise are winner take most, Levie is saying that the majority of IT spend will go towards the main software providers — the data backbone of the organization. This is not entirely different than the current distribution of IT spend, except that today’s platforms are inherently open and are hosted off-premise.

“We are very much moving into a heterogeneous world even when it comes to cloud, file sharing, and content management platforms, but CIOs and enterprises are probably only going to sanction one solution as the corporate standard for that broad set of horizontal capabilities, but you’re still going to see enterprises use different solutions in that mix as well.”

Bring your own Box?

On July 7th, 2014 Box was recognized as a leader in Gartner’s first ever Enterprise File Synchronization and Sharing Magic Quadrant. We are the only cloud provider in the leader quadrant — Levie proudly remarked; referring to Citrix, EMC, and Accellion that together with Box accompany the (sought-after) top-right quadrant. The report lists some notable absentees, and it’s a testament to the quality of these enterprise companies that have made the inaugural cut. Although a company like Dropbox (that was included) is a consumer company that just happens to be good at enterprise, Google happens to be good at everything, and BitTorrent “provides synchronization mostly for consumers” (the reason given in the section Noticeable Absences).

The transformation of the enterprise is only beginning. Bring your own device signifies that consumers have a clear preference for consumer quality enterprise software. Enterprise file synchronization and sharing is the name of Gartner’s list (although that’s only a subset of what they do). The iPad is the tablet of choice for sharing files in the enterprise — yet Apple is nowhere to be found. Companies are overstepping previously drawn boundaries, and it’s harder than ever find the distinction between “just a feature” and an enterprise focused product offering such as Box.

A version of this post was first posted on the DataFox Blog.