VENDOR PROFILE Box Private Vendor Watchlist Profile: Cloud-Based Content Collaboration Services Enabling Enterprises to Move Toward

Next-Generation Collaboration
Laura DuBois Bharath Regula Ryan Patterson

www.idc.com

IDC OPINION
Box is a cloud-based content management and collaboration service provider that enables businesses to securely share, manage, and access content online across multiple devices such as PCs, tablets, and smartphones. The company, headquartered in Palo Alto, California, has over 7 million users and is growing quickly in the file synchronization and collaboration market. Box provides a simple, easy-touse interface to manage content online, focusing on common business needs such as file share, content-centric collaboration, and secured access to data with detailed reporting. Box's partnerships with various enterprise systems and content management providers as well as supportability on all major platforms makes Box an attractive option for enterprise and small and medium-sized businesses to meet nextgeneration collaboration and file management needs. We believe Box is a company to watch because of the company's: Fast-growing customer base with focus on business professionals and meeting the enterprise requirements for security and scale Extensive content management features that eliminate the necessity of multiple IT tools, simplifying the job of IT administrators in providing the support Participation in several market categories where public cloud services are disrupting traditional on-premise offerings from file management (e.g., managed file transfers and FTPs) and storage to content and collaborative applications Growing partnership ecosystem bringing Box's cloud capabilities to many commonly used enterprise applications such as salesforce.com, NetSuite, Jive, Yammer, Google Apps, and SharePoint

Global Headquarters: 5 Speen Street Framingham, MA 01701 USA

P.508.872.8200

F.508.935.4015

IN THIS VENDOR PROFILE

This IDC Vendor Profile analyzes Box, a company playing in the public cloud advanced storage services market and the content management and collaboration market, and reviews key success factors: market potential, technology/solution, corporate strategy, force multipliers, and customers. Leveraging IDC's expert understanding of the competitive landscape and future outlook, this document highlights company and market information tailored to the investment professional's needs.

Filing Information: October 2011, IDC #230624 Private Vendor Watch Service: Vendor Profile

SITUATION OVERVIEW
Company Overview
Box, based in Palo Alto, California, was founded in 2005 based upon a simple idea to securely access, share, and manage content easily across multiple devices. The company has now reached over 7 million registered users serving consumers, small and medium-sized businesses, and enterprise companies. With 100,000 business customers, Box is one of the popular content management solution providers for companies looking for lightweight content management and collaboration. The company competes in the public cloud advanced storage services market as well as content and collaborative applications market. Company details are provided in Table 1.

TABLE 1
Box Company Snapshot
Category Functional and secondary markets Details Public cloud advanced storage services Content and collaborative applications Founding year Number of employees Number of customers Company location Web site Funding initiatives Investors 2005 Approximately 300 Over 7 million Palo Alto, California www.box.net or www.box.com Not currently seeking Salesforce.com, SAP Ventures, Bessemer Venture Partners, NEA, Meritech Capital Partners, Andreessen Horowitz, Emergence Capital Partners, Draper Fisher Jurvetson, U.S. Venture Partners Both direct and indirect Box does not disclose, but IDC estimates annual revenue of under $50 million

Sales channels Revenue estimate

Source: IDC, 2011

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IDC Watch Factor Scores

IDC Watch Factor scores measure private companies based on a set of five defined success factors. Each of the five key success factors is made up of detailed subquestions, which are assigned a value from 1 (weak) to 4 (strong). The average of the subcategories is then applied as the overall score for each category: Market potential: Market growth potential, strength of competition, and current stage of market (early adopters versus late majority) Technology/solution: Level of differentiation, disruptive capability, scalability and

Corporate strategy: Go-to-market strategy, management pedigree, and financial status (running on venture capital with insignificant revenue versus selfsustaining and not seeking additional rounds of funding) Force multipliers: Current partnerships/certifications, additional partnerships likely within the next two years, and channel/sales strategy Customers: Number of existing customers, quality of existing customer base, geographic reach, and size of addressable market in the coming years given the vendor's current capabilities Figure 1 shows the Watch Factor scores for Box versus the Watch Factor average scores for all companies ranked by the Private Vendor Watch Service in the applicable market at the time of publication. The sections that follow detail the reasons for those scores.

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FIGURE 1
Box Watch Factor Score Versus Watch Factor Average Score

Notes: The Watch Factor average score reflects the average score for all private companies scored by the Private Vendor Watch Service at the time of publication. Scores are based on a scale of 1 to 4, where 1 = weak and 4 = strong.
Source: IDC, 2011

Market Potential
Market
Box competes in the public cloud advanced storage services market segment and specifically the file sharing, file synchronization, and backup services segment, which IDC has sized to be a $724 million market in 2009. IDC expects the segment to grow to $2.5 billion by 2014, representing a 28.2% CAGR. This market is still in an early and nascent state and is predominantly being capitalized on by small innovative startups. The company does not disclose revenue, but IDC estimates Box has an annual run rate of under $50 million in revenue. By providing simple to use yet secure cloud content and collaboration services, Box also disrupts the established markets in the content and collaborative applications market segment. IDC has sized this segment to be about $30.3 billion in 2009, growing to $41.5 billion by 2014. Box's easy-to-use file management and collaboration solutions fit the needs of enterprises that are looking for a lightweight solution that is quick to deploy and brings faster time to value. Box is growing on an average of 200300% per year and has seen a 75% increase in average deal size within the last year. The enterprise business segment has been one of the fastest-growing segments for Box. IDC estimates 80% of Box's revenue is derived from business customers while 20% of revenue is derived from consumers. Box's solutions are well positioned for both consumers and business segments that are looking for innovative and easy-to-use file management solutions.

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Market Disruption
Advanced public cloud storage services (e.g., backup, file sharing, file synchronization, and archiving and replication services) are all cannibalizing or impacting traditional storage software license sales. IDC research suggests firms will continue to shift spending to public and private cloud offerings over the next five years. Box's cloud-based file management solution consolidates various business needs such as file sharing, next-generation collaboration, and enterprise mobility, bringing in a comprehensive solution that is highly disruptive to adjacent markets in content and collaboration. Box's easy-to-use interface, wide variety of content management features, and partnership with various enterprise applications make it a unique product that is particularly attractive to enterprise business as well as consumers and small and medium-sized businesses.

Competitive Landscape
Box competes with various companies depending upon the use case it is serving. Two of the biggest use cases for Box are file sharing and next-generation collaboration. While Dropbox, Egnyte, Syncplicity, and MobileMe compete with Box in file sharing and mobility space for consumers, on-premise solutions such as SharePoint compete with Box for advanced collaboration services. Presently Dropbox owns the largest mindshare in the market as a popular consumer choice for file management. Potential development and offerings by EMC Mozy and Symantec would shake up this market.

M&A
This market space is still very nascent, and there has not been any material M&A activity in the core market although adjacent markets of SaaS-based backup and collaboration have seen M&A activity. However, traditional technology suppliers are likely to make, build, or buy decisions that could drive future M&A activity, in particular, those with material user adoption. Table 2 displays recent M&A deals in the SaaS market.

TABLE 2
SaaS M&A Deals
Date September 2007 May 2011 April 2010 May 2010
Source: IDC, 2011

Acquirer EMC Limelight Networks Salesforce.com SuccessFactors

Target Company Mozy Clickability Jigsaw CubeTree

Deal Value ($M) 76 Unknown 142 2030

Specific Market/Solution Type SaaS backup SaaS Web content management SaaS sales SaaS collaboration

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Technology/Solution
Box is a cloud-based content management and collaboration platform that offers a simple, easy-to-use interface for its users to securely share, access, and manage data across multiple devices. Its key services include content management services, collaboration and sharing services, enterprise mobility, and secure deal rooms. Box's cloud-based content sharing services eliminate the need to use different file sharing solutions that a company typically employs, such as FTP, NFS, or MFT. To enable users that prefer to work on the files directly on the desktop, Box provides a desktop client that automatically synchronizes the content in the cloud. Content placed in Box is encrypted and indexed for full-text search. Other important features surrounding content management include full library services, including version control (check in/out) and controlled access (document-level and folder-level security). Collaboration in conjunction with file sharing has become very important to the current generation workforce. Box provides a content platform that is rich in collaborative features. Its robust content preview technology allows users to preview all types of documents and rich media files directly in the browser. Users can discuss, comment, and see activities, creating a social experience. For more secure and confidential collaboration, Box provides secure workspaces that facilitate confidential deals such as mergers and acquisitions, client engagements, and other highly secure documentcentric transactions. Today's workforce is increasingly mobile. Sales forces and field workers are increasingly finding the need for mobility, as are users in the regular workforce who prefer to have access to the data and work on it from anywhere. Box's solution is supported in more than 10 mobile platforms and works on different devices such as tablets, laptops, and smartphones. To provide a rich user experience, Box built its mobile applications using the native API of the platform. Box is integrated with over 150 enterprise applications, extending the value of those applications by providing mobile access and sharing features. Some of the prominent enterprise applications that Box has partnered with are: salesforce.com, NetSuite, Jive, Yammer, VMware, Ping, Okta, MS Office, EMC Documentum, IBM FileNet, and MS SharePoint. Box provides comprehensive administrative capabilities and strong security features to securely manage activities. Box's administrative console allows an administrator at the customer organization to manage users, monitor activities, and customize and set security policies for the account. Security is one of the biggest concerns in using cloud services. Box addresses those concerns by facilitating secure file transfer, using 256-bit SSL encryption. Box's cloud data is managed in two different colocation datacenters where the servers used are managed and owned by Box. Customers using Box are charged based upon the subscription plan they subscribe to. A free subscription is available for anyone with 5GB of storage and basic file sharing capabilities. The free subscription is mainly targeted toward consumers for promotion of the Box solution. The business and enterprise subscription plans unlock the full potential of Box's capabilities and cost $15 per month and $2535 per month, respectively, depending on needs and volume.

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Corporate Strategy
Leadership
Box's cofounders, CEO Aaron Levie and CFO Dylan Smith, transformed Box from a college project to a successful online collaborative platform. Dan Levin, the chief operating officer, came to Box from Intuit where he was responsible for QuickBooks-branded small business products and services. Prior to Intuit, he spent nine years as a senior executive leading various venture-backed startups. Enterprise General Manager, Whitney Tidmarsh Bouck, and Jen Grant, vice president of marketing, bring marketing and sales experience from large-scale enterprise companies. Bouck and Grant help Box to promote its products to enterprise and small and medium-sized businesses. Jon Herstein, head of customer success, recently joined Box from NetSuite, and Chris Yeh joined as a vice president of Box platform. Yeh most recently ran the Yahoo! Developer Network. Overall, Box has well-rounded leadership experience to drive the company toward its goal to become a leader in the cloud-based content and collaboration platform and the advanced storage market.

Go-to-Market Strategy
Box has a three-pronged strategy to attract consumers, small and medium-sized businesses, and enterprise businesses. The company provides free subscription for 5GB of storage mainly targeted toward consumers and relies strongly on viral marketing and word-of-mouth communication to attract more consumers. To reach various medium-sized companies, Box is partnering with various value-added resellers. Box launched its new Certified Reseller and Solution Providers programs with over 30 new partners including Appirio, WEB'R, Board Tools, HEDLOC, and PCMall. In addition, Box has developed a number of technology partnerships with vendors including Citrix, DocuSign, EMC Documentum, Google, HP, Intuit, Jive, MobileIron, NetSuite, Ping Identity, RIM, salesforce.com, Samsung, SugarCRM, VMware, Yammer, and Zoho. Box Apps Marketplace currently has 150+ applications that are integrated with Box including Google Apps and Google Docs, DocuSign, Quickoffice Connect, LinkedIn, AutoCAD, FedEx, DocsInOffice.com, and Tagle. Box is heavily investing in increasing its sales team to directly reach to enterprise businesses.

Exit Strategy
Box is executing its strategy well but needs to continue to demonstrate revenue and customer traction as it penetrates the enterprise software market. The company is focused on promoting its solution as offering more advanced storage services than mere cloud storage such as file sharing, collaboration, and data protection.

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Key Acquisitions
Box has not made any acquisitions.

Current Investors
Box is not currently seeking funding. Table 3 displays a detailed funding history for Box.

TABLE 3
Box Detailed Funding History
Round A B C D Date October 2006 January 2008 April 2010 February 2011 Amount ($M) 1.5 6 15 48 Investors Draper Fisher Jurvetson U.S. Venture Partners, Draper Fisher Jurvetson Scale Venture Partners, Draper Fisher Jurvetson, U.S. Venture Partners Meritech Capital Partners, Andreessen Horowitz, Emergence Capital Partners, Hercules Technology Growth Capital Bessemer Venture Partners, NEA, Andreessen Horowitz, and Draper Fisher Jurvetson, along with strategic investors salesforce.com and SAP Ventures

October 2011

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Source: IDC, 2011

Force Multipliers
Partners
Box has partnered with various technology providers to integrate its product with various enterprise applications, extending their value. Box is integrated with over 150 enterprise applications, with key applications including: salesforce.com, Microsoft Office and Outlook, Google Apps, Google Docs, DocuSign, Quickoffice Connect, LinkedIn, AutoCAD, FedEx, DocsInOffice.com, NetSuite, EMC Documentum, Microsoft SharePoint, IBM FileNet, Live Office, Jive, Yammer, Apple, Samsung, HP, Orange, Motorola, MobileIron, Good Technology, and RIM. These partnerships enable Box to reach the large, small, and medium-sized businesses and gain popularity among enterprise businesses. Furthermore, Box has developed channel partnership with various resellers such as WEB'R, Board Tools, PCMall, and HEDLOC.

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Box secured its largest deal with Procter & Gamble (P&G) where Box deployed 20,000 licenses. Box is looking to develop similar partnerships in the enterprise space.

Partnership Opportunities
Box could partner with OEMs for desktops, PCs, and servers that are shipped directly to businesses and consumers. Having Box software preinstalled in those machines would encourage user trials, which would promote fast adoption of Box services. At BoxWorks, Box's customer conference in late September 2011, the company announced a strategic partnership with HP for Box to be preinstalled in HP's SMBtargeted PC laptops and with Motorola for preloading Box for Xoom tablets.

Channel/Sales Strategy
Box's solutions are designed for consumers, SMBs, and enterprises. Box is reaching the consumer market directly through its Web site and relies strongly on word-ofmouth communication, viral marketing, and direct promotional activities. The company is increasing its direct sales force to attain a strong growth in the enterprise market. Box launched its new Certified Reseller and Solution Providers programs with over 30 new partners to reach the large number of SMBs in the market. Box does not disclose its sales mix, but IDC estimates it is 90% direct sales and 10% indirect sales.

Customers
Key Customers
60% of the Box Web traffic and 85% of the revenue come from the U.S. market. As of the end of September 2011, Box had 7 million registered users and 100,000 businesses actively using the service. Box signed its biggest deal with Procter & Gamble where 20,000 Box licenses are available to the global workforce of P&G. Some of the key customers for Box are: Procter & Gamble Dell McAfee Clear Channel Six Flags TaylorMade Pandora Balfour Beatty

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Key Audiences
Box markets its solutions to consumers, SMBs, and enterprise businesses. However, Box is betting its future on increasing the footprint in the enterprise market. Box's solution is applicable to many different businesses but has strong traction in key vertical markets with a heavy mobile workforce, commitment to cloud computing, high-collaboration needs, and/or engagement with outside parties. The strongest performing verticals for Box include: High technology Retail Manufacturing Engineering and construction Financial services Professional services Life sciences Consumer packaged goods Media and entertainment

Geographic Reach
Box is currently predominantly selling its services in North America, although a large percentage of its users are outside of this region. 40% of Box application Web traffic comes from outside the United States, contributing to 15% of total revenue. Box plans to increase its international presence and is expected to expand into Europe in 2012. The company has also made a recent partnership with a reseller in Australia to enter the Australian market.

FUTURE OUTLOOK
Challenges and Opportunities
Challenges
Box is still growing and developing its operational capabilities. To attract enterprise business and maintain it successfully, Box needs to demonstrate its capabilities in performing large-scale deployments and providing customer support. Box competes in multiple areas such as file synchronization, collaboration, and file sharing. Box is therefore competing with companies that have sole focus in those markets. To remain competitive, Box has to ensure it continuously brings leadingedge innovation to its products.

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Brand leaders in security, storage, and information management like Symantec, EMC, and Autonomy have shown interest in participating in the market. Should these suppliers develop or acquire technology that is an alternative to Box, the company will be left in a defensive position. Thus, to avoid getting edged out by larger players, it is critical that Box develops more strategic partnerships with some of the larger software companies that are attempting to enter or have already entered the cloud storage or SaaS storage markets.

Opportunities
Box has the opportunity to OEM or license its technology to service providers, SaaS providers, and ISVs alike. In many ways, the functions Box is offering are an extension to on-premise file storage, security, and information management offerings. Hence partnerships and investment in the platform to make it easier to build custom applications leveraging core Box content management and collaboration capabilities make sense. Box could continue to grow its partnerships with various other technology providers, strengthening its partner ecosystem and maturing the Box platform to realize its vision to be the de facto storage, content management, and collaboration platform for business professionals.

ESSENTIAL GUIDANCE
Reason to Watch
Box's extensive feature set surrounding collaboration and file sharing with administrative control makes Box an attractive product for enterprises. The company has partnered with many technology vendors to extend the value of over 150 enterprise applications, enabling Box to easily demonstrate its product capabilities. Box is tied into two IT megatrends mobility and cloud. Box is an early participant in the emerging opportunity for connecting mobile users and a growing universe of smart devices with centralized IT services, data access, and cloud storage services. Increasingly, mobile devices are being brought into the corporate workplace for increased user productivity. This introduces a challenge for IT organizations that must provide centralized IT controls over the devices and how users access data stored in the cloud.

Differentiators
Box is differentiated in the market by the following: Ability to access data anywhere from any device including mobile, tablet, and PC with an easy-to-use interface Robust content preview technology that allows users to preview all types of documents and rich media files directly in the browser Open API that enables easy integration of Box's capabilities with enterprise applications

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 Extensive administrative capabilities to manage users, monitor activities, and customize and set security policies for user accounts to ensure auditability and compliance

Advice for IT Managers and End Users

Enterprises that are consolidating disparate file servers and modernizing technologies for file sharing, collaboration, and synchronization would be well served to evaluate solutions like Box. The Box solution enables online backup, data protection, and file sync services in a way on-premise solutions do not. This solution also eliminates the need for file servers, SharePoint, VPN services, on-premise storage, and so forth. However, when evaluating any public cloud storage service, firms should vet the supplier's data privacy, security, and SLA terms. With recent publicly known security attacks and unplanned downtime events, firms must place the highest levels of scrutiny on public cloud services to ensure these solutions are not introducing unnecessary risk to their organizations.

LEARN MORE
Related Research
U.S. Public IT Cloud Services by Industry Sector: More Details on the Opportunity (IDC #226222, December 2010) Cloud Storage Impacted by Datacenter Transformations and the Changing Role of IT (IDC #226214, December 2010) Public Cloud Business Continuity Services Remain an Underserved Opportunity (IDC #224792, September 2010) Adoption and Spending Intentions on Public Cloud Backup Services (IDC #224265, August 2010) Storage in the Cloud: Overview of Key Players and Service Offerings (IDC #224244, July 2010) Worldwide Storage in the Cloud 20102014 Forecast: Growth in Public Cloud Storage Services Continues as Firms Decapitalize IT (IDC #223396, June 2010) IDC's Worldwide Storage and the Cloud Taxonomy, 2009: Assessing the Opportunity from All Angles (IDC #221293, December 2009)

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Copyright Notice
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