It's no surprise that Box, the content management and collaboration company born in the cloud, has met with so much success among small-to-medium businesses. The service provides SMBs with the kind of enterprise-class content capabilities that they didn't have the money and resources to deploy before.
But Box is now winning over major enterprises at a healthy clip, taking over content management chores for companies like Procter & Gamble, AARP and Schneider Electric - helping them support far-flung mobile workers and partners who need to access and work together on shared information.
In this installment of the IDG Enterprise CEO Interview Series, Box cofounder and CEO Aaron Levie talked with Chief Content Officer John Gallant and CITEworld.com editorial director Matt Rosoff about what's driving Box's success. He discussed Box's emergence as a key layer in the evolving cloud "stack" and why it will be so tough for traditional content management players to keep up with Box. Levie talked about why Box is laser-focused on making life easier for mobile users and how the company is going to be tailoring its offerings for vertical industries. He also explored the concept of the new enterprise app marketplace and explained why he's excited about 'wearable' computing.
John Gallant: Explain the mission for Box.
Aaron Levie: We have a fairly broad mission that translates into what we do and how we help customers every day. The first thing that we identified was that enterprise software was just far too complex to help people with their everyday business problems. So our mission is to build technology to make it really, really easy for people to get their jobs done. By doing so, you end up speeding up business. You end up allowing people to share their ideas and their information faster, and we think that creates much better companies and much better outcomes for businesses, whether that's in healthcare or finance, or in the pharmaceutical space or in education. There are a lot of exciting ways that these technologies are used.
We've tried to build a product that really resembles a lot of the innovation that you get from the consumer Internet around sharing information. How do you collaborate? How do you work from any kind of device? But we do that in a way that ends up being secure and able to be integrated to enterprises of any scale. That's really where we end up differentiating, where we can bring the value that usually has been locked in the consumer space. We unlocked that for large enterprises.
JG: When we first met a couple years ago now, you guys, as I recall, were all about enterprise content management. Now you're enterprise content management and collaboration.
AL: The evolution that we've gone through is, in 2005 when we started the company the entire premise was it should be really easy to share and access your files and your data from anywhere. Then in 2007 we decided to focus that entirely in the enterprise market. Ultimately the space that was being disrupted was the enterprise content management space. How we were disrupting that was, on one hand, enabling the technology to be used by an order of magnitude more businesses because it was cheaper and faster and simpler to implement. The other piece was that all of a sudden everybody in business had way more people to share with. You have contractors and clients and vendors and partners and colleagues, and so it wasn't just about how you manage the content. It actually really turned into how do you share and collaborate and move information throughout the business to get it to the right people? What we do today is, we think, a pretty neat mix of how do you collaborate and how do you manage information in one simple platform that works both for end users and for IT?
JG: There are a lot of companies in content management. There are a lot of companies in collaboration. What makes you guys unique?
AL: The way that we've traditionally seen this space is there's a little bit of a bifurcation in the ecosystem. You tend to have the consumer companies which build technology that makes it incredibly easy to get access to your files and your data from any of your devices. In the enterprise space you have incredibly complex yet secure technology that helps you manage your information at scale. What we haven't seen is a lot of companies that can blend both of those worlds together. We try to bring the ease of use and the elegance that you see from consumer technology into the enterprise in a way that allows large-scale organizations to implement the technology very easily.
One example is we work with Schneider Electric. They're deploying Box to 50,000 employees. That's the kind of customer where we are uniquely suited to serve just because of that mix of end-user simplicity and enterprise scale that really is unmatched at this point. We will continue to innovate along that dimension of fusing those two worlds together. At the same time, we're also building a fairly differentiated platform. We don't think it's just about how do you synchronize or how do you share or how do you store your data, but rather, how do you use your content in a variety of contexts that you can't get from any other kind of platform? We work with 17,000 developers that have built applications on top of Box, whether that's an internal application for a large enterprise or a commercialized partner that's building apps. We have a horizontal platform that makes it really easy to organize, manage and share data within all of these environments.
JG: Speaking of that platform approach, I want to talk about the Box Partner Network, which was announced not too long ago. In reading about it I was struck that someone had written that you want to be the repository for the entire cloud. Is that an accurate description of the mission?
AL: Some nights. It depends on where the strategy session ends up. But I think we want to certainly be the place where document and unstructured content goes. I think we are realistic. I only have a half-way baked reality distortion field, so while we absolutely would want to be that platform, we're realistic in thinking that there are going to be lots of ways people manage and store their information. We would certainly want to be the most enterprise viable and the most scalable platform. But we know that data is going to go to a lot of different environments. One of the benefits of using Box, however, is that when you centralize your content in one place we build extensions and we work and we have partnerships with all of the main SaaS services out there, whether it's Salesforce.com or Jive or NetSuite or Zendesk. So once you store your content within Box, you can then extend that out to many third-party applications that you would want to use that content within. We're very focused on how to become the central hub for your content, but we understand that there are going to be a lot of other forces in the ecosystem that we have to compete with.
Matt Rosoff: You mentioned Schneider Electric, and I'm curious. When you go into a big account like that, what are their biggest concerns? What are they trying to solve and why are they choosing you as opposed to a competitor? What do you tell them to close the deal?
AL: Let's look at a couple different use cases. Schneider is incredibly neat because of their scale. Think about a company that has 140,000 to 150,000 employees globally distributed but at the same time they have an incredibly innovative IT strategy. They want to get out of managing data centers. They want to get out of managing infrastructure for all their technology. They're big customers of Salesforce. They're big customers of Tibco and Tibbr and a bunch of other cloud services. Their view is -- how do they enable employees to have best-in-breed technologies that speed them up and help them accelerate but that are, at the same time, going to be secure and compliant for an enterprise of their size? Look at that problem set where, okay, the technology has to be easy enough for end users, it has to support a multiplatform world, they're not just a Microsoft shop. They're not just an Apple shop. They have a diverse array of technologies. The technology needs to be secure enough that they can scale it out and have confidence that they have visibility and know what's happening to their data.
When you think of all those different dimensions you actually are constantly reducing down the set of companies they can work with. And then you throw in a dimension like they want to build custom applications on top of their cloud service so they have one central data repository, but they can leverage that data for unique applications in their business, whether it's the documentation workflow, whether it's somebody doing repairs out in the field and needing to pull up information. When you look at that entire problem set, it ends up being Box. It ends up occasionally being Microsoft. But there are few other providers that have really been able to produce that kind of scale of an offering. That's what we've been spending eight years doing.
One of the unique things again about our situation is we've spent more time on this problem than any other cloud provider in the world, because we've been doing this since late 2004. We just had to think about the problem and think about the platform more than anyone else, which gives us a pretty significant advantage on a lot of large enterprise companies that are just getting into this or consumer companies that are kind of moving up-market. When you compare us to a company like Microsoft, the challenge with Microsoft is they're not really telling a multiplatform story. They generally are always favoring their platforms and their ecosystems first, which is not a very customer-centric view of the world. It's a very Microsoft centric or inwardly centric view of the world. It's a very diverse landscape out there, which means that enterprises need technology that's going to sit in between all those different platforms. We have a unique business model that is entirely aligned with supporting lots of platforms. We make more money the more people can use our product in their organization. Whereas, if you're Microsoft, you make more money based on how many services that are based on your platform you can sell into an organization. We just happen to be solving a different dimension of problem that is more suited for how enterprises work today.
MR: On the flip side of that, when you go into a big company like Schneider, what's the thing that they push back about the most? Is there any particular area where they say -- wow, you're close, but you don't have X?
AL: I think that for some enterprises it's less that they're not adopting something and more about the time frame or the timeline in which they're adopting this type of technology. Often it will be the case that an enterprise is not able to move their entire business to the cloud or it might not be the thesis to move their entire business to the cloud. But rather they want to move net new workflows or use cases to the cloud first.
A great example is a pharmaceutical company that just implemented 10,000 iPads might not be trying to reorient every business process to the cloud. But because of those iPads it means that their sales teams now need access to critical content from those devices. That's a proposition that will be very cloud-first within that organization, even though maybe the entire business is not going to be moving to the cloud yet. In those kinds of environments we end up having a slightly different conversation with customers. The conversation is less about how do we solve every problem in your business, and more about how do we help you solve some of these new use cases that have just emerged in the past couple of years? We're obviously fine with either one, because we believe this is certainly a long-term game and if we can get into an organization via their iPads or via the teams that need to be collaborating, we believe that's a great entry point into helping that organization solve their broader content problems.
JG: When you go into those big enterprises are you replacing something else or complementing something that they already have? I mean, are they getting rid of existing document management systems?
AL: There are two types of customers in this case. The really small or medium size business often will be replacing, or in many cases they never even had existing technology to solve it. If you're a 500-person company, you can basically comprehensively get out of ever having an infrastructure. We're actually a good example of that. We use Workday, we use NetSuite [financials], we use Zendesk [customer service software], we use Zuora [billing and payment], we use Box, we use Gmail. We don't have internal IT servers supporting our employees. We're seeing this more and more from companies in the hundreds to thousands of employees range. In that case we absolutely are reducing the need to buy file servers or on-premise collaboration technology.
For a 50,000 person company or 100,000 person company, the more realistic approach is that we complement existing technology. We solve the new use cases that have just emerged -- iPad or Android content access, or external collaboration with vendors and partners. But one of the unique things in our product area is, if you think about it, the net new use cases really ultimately become the de facto use cases in these businesses, or default use cases in these businesses. What will happen is that more and more of your content goes into the new system. Then that new system becomes more of your repository or system of record over time. We believe that over time it becomes a much more challenging environment for on-premise technology vendors because more and more of that data is going into these new platforms as opposed to the legacy ones. It's more a matter of time. But we do believe that most of these businesses will end up at the same point, just on different kind of horizons.
MR: You mentioned the balance between usability and security. How do you manage that balance as you add more of the features that enterprise IT requires? How do you make sure you're not making it difficult for users?
AL: This is the nuts and bolts and why it's really, really difficult to balance both of these universes. I'm nearly positive any company would love to both be easy to use and integrated into the enterprise at a pure kind of conceptual level. The challenge is how do you orchestrate that within a product development organization and at the same time you have a rapidly changing marketplace and rapidly changing customer base? What ends up happening is you generally are always slightly imbalanced on one side or the other, and you're always oscillating to make sure that you're rebalancing over time.
I'll give you one small example, just to show you the depth of this kind of challenge. We were visiting a customer the other week that has 5,000 employees. It's a very innovative company, but they require certain security standards in their organization. So in this case they have two-factor authentication that has to route through a VPN before people can get access to business applications. They specifically implemented Box because they wanted Box to be the simple solution to their enterprise collaboration and sharing. But at the same time the only way to authenticate with our platform in this organization is through their standard method of authentication. So you have a situation where the motive of the enterprise is incredibly consistent with where we see the future going. They want a simple application that makes it easy to use and makes it easy to share their information. But the way that you get into the application creates a little bit of extra friction for end users. You're trading off a little bit of friction for better security and better protection of users. The challenge is then you have users that now have to deal with this issue of -- well, do I use the sanctioned IT solution that has a little bit of friction? Or do I use the unsanctioned solution that isn't going to be the standard in my enterprise and probably puts me at odds with the security policies and practices of the organization? Our job is to make sure that we reduce the friction on this kind of implementation as much as possible. That's as much a product management challenge as it is a professional services challenge, as much as it is a sales and education challenge.
There's no single thing that I can do which just says make it simple, and that's all you have to do. It's a much more in-depth and thoughtful process, to make sure our customers are as successful as possible at meeting both of these types of demands and needs. That's the nuanced area, and the less nuanced area is you have a product management organization that comes from the consumer Internet. You have a product design organization that comes from the consumer Internet. Most of our engineers that have worked at or would otherwise work at Web-scale consumer Internet kinds of companies like Google or Facebook or others, and so you uphold a level of innovation, a level of velocity that we think is unmatched by the enterprise space. All this comes together delivering what is a very differentiated type of enterprise product that has a consumer look and feel but again, can be implemented by these organizations in a way that meets their IT policies and compliance and regulatory needs.
JG: Aaron, in many cases IT people judge the strength of an enterprise company by their range of partnerships and the scope of partnerships they have. Talk about the whole partnership strategy. We talked a little bit about the partner network. But talk about what your strategy is in terms of building connections throughout the industry.
AL: This is actually something that has been core to our thesis since day one, which is that because of the cloud you can now have a new degree of openness that encourages partnerships, encourages these open platforms. That was the first thing that we identified pretty early on because of APIs and Web services and just the amount of integration and matchups that were happening on the Web in the past five to eight years.
The other thing is that, more pragmatically, we can only provide one solution to our customers, which is a fairly broad solution but it's focused on content management and collaboration in the enterprise. That means that we have to work within an ecosystem of partners for two-factor authentication, threat monitoring and analytics, the ability to have business intelligence around things that are happening on your Box account, the ability to integrate content within third-party systems like Salesforce.com or NetSuite. We have an incredibly partner-centered view of the world. I think we have the leading partnership team in the industry. We split up between the open developer ecosystem and commercial partners like the HPs and Dells and Salesforces of the world and we focus on working with both in a very comprehensive manner. I think this is absolutely core to our strategy, and the great thing is it's incredibly compelling for customers. It means that when you go with Box you're not going to be locked out of working with other vendors or other partners.
I think that the industry has far too long been at the mercy of companies like Oracle, which basically say -- we're going to build everything in this vertical stack. We're going to lock out partners from working with us and that basically creates this very challenging environment for customers. Our view is the exact opposite, as it should be. Because we're more of a startup and we have to work within a network of other services. But we believe there's a shift moving more towards best-of-breed platforms working together, as opposed to buying all of your technology from these vertically integrated providers. What we see more and more from customers is for their ERP they're dealing with NetSuite. For their human capital management they're going with Workday. For their email they're going with Google. For the CRM they're going with Salesforce. In that kind of world you fundamentally not only need to partner with a brand new set of providers and a much larger ecosystem of providers, but you also need to have a lot more openness around your technology and around how information can flow between these systems. That's what we've focused on at Box, and why we focus so much on our platform and so much on our partnerships.
JG: Just quickly as an add-on to that, talk about Box Embed. What is it and what are people doing with it?
AL: Box Embed is the manifestation of this, which is we developed an HTML 5 embeddable object, which basically lets you pull up content from Box from any third-party system -- whether that's Salesforce.com or Jive, or even your intranet or extranet where you can embed Box within those environments. Our view, again, is that once you have your content stored in the cloud that content should follow you to wherever you are. You shouldn't have to log into different systems to see the same information. So we have Box show up in contextual ways inside these third-party platforms. If you're looking at a Salesforce customer record, you see the content that is explicitly associated with that customer. I might be looking at a specific kind of customer that we're working with and I can see all of the presentations that I did for that customer. I can see all of the products that I shared with that customer. I can see the specific contract that we've been working on. That's what Box Embed is all about. We have about 20 partners right now that we work with. You'll be seeing us open that up quite a bit more throughout the year.
This is also how we'll enter into a lot of different kinds of verticals and industries. It's not just about the sort of job function applications like sales or support or finance, but also how do we get into different industries. How does the legal industry use Box Embed within applications in the legal industry? How do customers in the healthcare space use Box Embed to help different medical providers or insurance companies? We're going to make sure this content and this platform extends into lots of other kinds of services beyond just the names that you'd expect.
MR: What is the biggest unfinished task, or what's the thing that you're focusing on most right now, or for the next few months?
AL: Well we haven't created a monopoly yet, so that's unfinished. I generally go to sleep every night thinking -- what can we do to do that faster?
I'd say something that's pressing right now is... I think like everybody else we recognize the opportunity that mobile has created. This idea that there's going to be, I don't know what the latest figure is, over a billion smart devices, smart phones, probably two billion. But mobile devices are outselling PCs three to one, two to one, and at a rate that is really unstoppable at this point. We think that fundamentally changes how businesses are going to work. Not just the fact that now I have another device that I can access information from, but more importantly, this becomes a primary computing device for a whole new set of job functions.
We see that as kind of our PC moment. If you think about the transition from the mainframe to the PC, how that created new leadership opportunities for Microsoft and Intel and others, we see the same kind of transition from PC to post-PC as creating those kind of leadership gaps and opportunities. We happen to be a company that was born right at the center of this shift. On day one of our company we thought about the mobile implications of having access to your information from anywhere. We were rapidly orienting and organizing our company around that effort. You're going to see a lot of stuff from our platform, from our hiring, from where we're building out our teams that is completely oriented around the mobile enterprise, the post-PC enterprise, and we really want Box to be the hub for content and for information in this new post-PC enterprise.
JG: You have carved out a unique niche in the market right now. What do you expect the competitors to do? This isn't something that the Microsoft's and the other leaders are just going to cede to you.
AL: We've been doing this for eight years so I don't know what you expect. Here's the challenge. There are two types of companies in this space that are really important and interesting to watch. You have the traditional on-premise infrastructure providers, the EMCs, the NetApps of the world, and they have a classic innovator's dilemma challenge, which is in the future world when you buy little to no on-premise infrastructure. That means they have to become more software companies than hardware companies, and that's a complete shift in pricing and economics and the DNA of these companies. That's not a simple transition to go through. They don't really have a lot of the core DNA to make that transition happen, and it shows up on a pretty consistent basis. I think if you ask anybody what end-user application EMC has produced you really wouldn't get any answers, or any good ones. So they have a very deep challenge in the world and the paradigm is shifting around them and their business model is going to have to change pretty radically because of that. If an enterprise doesn't buy EMC or NetApp for on-premise and the cloud providers don't buy EMC or NetApp because we can build it all through commodity infrastructure, then who do you sell to if you're one of those vendors? That's a really disruptive change in the ecosystem. Now there are a lot of things they could do, but none of the changes is going to be simple or without a lot of internal challenge and strategic taxing and consternation.
On the Microsoft side, or the vendors that have traditionally played on the software side of the space, Microsoft has a set of unique challenges that are specifically slowing them down, which is that they are not the de-facto post-PC platform. Apple and Google are far more the leaders in that space. They have an issue where their operating system business is ceding to two other platforms and they've also had to go through a software delivery disruption, which is obviously instead of building on-premise technology they now have to build software in the cloud. That was an easier transition that I think they've actually been going through pretty effectively, quite frankly. I do give them kudos for making that transition. They're no longer telling the world that cloud is not the future. They are absolutely investing in and they're working aggressively to make sure that they're building for that future world.
But the challenge is most of their business was being driven by the operating system and a few core applications that are being disrupted because of post-PC and mobile. It's not actually obvious what they do because of that. On one hand they can build applications for other platforms like Apple and Google. If they do that, all they're going to do is make those other platforms more viable and more compelling, which means you have even less of a reason to go buy the mother ship operating system. But if they don't support it then what ends up happening to some other core business areas that they often have been well known for? They have a huge paradox that they're facing, which is that any move they make will not produce the same kind of level of dominance that they once had. That's not an easy thing to grapple with. That is not a straightforward answer, and when they're competing with companies like Box, where we have a very straightforward path that doesn't really have any contradictions to any of our legacy business models because we have no legacy business models. We're going to be moving at full speed to make sure we're building the most innovative product and platform that works across all devices and environments.
MR: I read recently you were testing some internal apps that sound like they might expand what you're doing. There's a possibility you could get into some content creation stuff, or there's a possibility you could get into some other types of collaboration with more real-time communication. Are you thinking in those adjacent markets at all?
AL: We're definitely thinking in those markets. We've long had a view that more and more content creation will be cloud first. And what we mean by that is data won't just start on your desktop and then be transferred to the cloud It will actually be started in a cloud-native environment. So if you think about that kind of transition that's going to occur, the value proposition that we have to customers is we are the place where you share and store your information. So very naturally we might also need to be or want to be a place where you can create that information as well. We're actually exploring a lot of different directions around that. I would say that anything we do in this space will be far more oriented around our platform more than anything else. Our view is that we want to be a platform for this content creation and content collaboration, but occasionally you have to go build out proof of concept or applications that can help lead people to this type of future. We're absolutely exploring different kinds of technology there, but certainly nothing that I can announce or talk too much about right now obviously.
JG: You've talked about the enterprise software companies that people are familiar with today, and typically they started off in a particular area, whether it's database, financial or human resources. Then they expand the product line to cover a lot more of the waterfront. What is the ultimate expansion strategy for? What will and won't you do?
AL: We're very focused on staying true to our mission and making it easy to store, share, and manage information. What I think you'll see us do is focus more on what are the implications when end points like mobile devices change that proposition, rather than us getting into different vertical product areas. We think a lot about what content and collaboration looks like when you are doing it in a mobile-only environment. Imagine if you will, there is no PC in the picture of your workflow. What would it mean to create and share information? What kind of technologies would we want? What kind of capabilities would we want to make that happen? That's one dimension that we're putting a lot more focus on.
Another dimension is that we're thinking a lot about how to move into different industries and different spaces. We're a horizontal product that's focused entirely on making it easy to store, manage and share information, but in the healthcare space that is done slightly differently than in the financial services space, which is done slightly differently than the pharmaceutical space and so on. You're going to see us verticalize our partnerships and our go-to-market and our alliances as we want to move into more of these industries in more of a concerted way. You'll see more kinds of capabilities like that will begin to emerge. We have an announcement coming in the next couple of weeks specifically around the healthcare space that we're very excited by. So it's not so much that we'll move into different application categories. It is that we're trying to evolve and add to the concentric circles around content management and collaboration to be able to support more types of use cases for customers.
MR: I know you've talked in the past about how devices like the iPad Mini can expand your overall market  by giving people who previously didn't have a PC with them access to a computer. Have you seen any other new devices, new form factors that you're similarly excited about? Is there anything on the horizon that you think has a lot of potential in terms of mobile devices?
AL: The super far out one is obviously Google Glass. I applied to be an explorer, whatever that means. So I think...
MR: Don't you have a board member from Google or something that you could get a demo of that?
AL: Not from Google. We do have a board member from GE, ex-GE, but we do have some high-up employees from Google. But I'm confident that we'll be able to get Google Glass, I'll put it that way. It would be impossible for us to discuss whether or not that's going to be successful. I'm not going to make any sort of assumptions or predictions on that. But it's a good example of how people are going to access information will change over time and we're building a platform that will support any of those new kinds of end points or environments. So, whether you can pull up a document from your glasses, that's the kind of capability that, obviously we would want to build for it if that actually becomes a core part of our future. Again, I have no ability to know whether or not that's the case. But our view is that we want to work wherever people are and we want to work on any device that people are accessing information from. We're pretty excited about a lot of the innovations going on. I think the wearable computing trend is really fascinating.
Sometimes I am embarrassed to admit it, but the good news is so few people have heard of it that it tends to not be that embarrassing. Microsoft had this watch back in the early 2000s that I owned that let you pull up sports scores and stock ticker and email from your watch. So I've always been very excited about this idea that we should have really convenient ways to access information and we would want Box to be a core part of how that happens in a business context.
MR: I remember the SPOT Watch. I never owned one.
AL: I'm glad you know the name. Nobody, literally, I can be in the geekiest of groups and nobody ever owned a SPOT Watch.
MR: Is there anything cool going on at Box that we didn't ask about?
AL: There's definitely one thing. Because of mobile devices and because of all these new platforms that have emerged, the barrier to create software is actually dropping quite dramatically. What we're seeing is much more distributed innovation all throughout the world for building applications on these mobile devices and these mobile platforms. We're seeing these five and 10 and 20 person startups that are emerging that are building applications that are being used by hundreds or thousands or millions of end users inside of businesses.
The challenge is those companies don't often have a very straightforward go-to-market path within the enterprise beyond the end user. We actually see the emergence of what we're thinking about as kind of an enterprise app economy which is -- how do you make it possible for all these apps to be more enterprise-ready than they are by default? How does that then create a possible monetization channel and a possible economic opportunity for those app developers that they wouldn't otherwise have access to? This is where our OneCloud Platform comes in. But the bigger idea is we're moving to a world where you might have thousands or tens of thousands of developers and application providers that are able to create really meaningful businesses because of the post-PC revolution and change. But it's going to take new kinds of economics to make that happen. That's something we're exploring quite a bit internally. We're hoping to figure out ways that we can really introduce our customers to these app developers and these application providers and then create a really compelling business model for all these apps that are focused on the enterprise.
JG: We always wrap up with the $64,000 question. You're talking to a group of senior IT executives and you say to them: If you have this problem you should be talking to us. What's the problem?
AL: This will sound redundant at this point. But if you all of a sudden are implementing bring your own device to work, if you have sanctioned or purchased a truckload of iPads or mobile devices, once you get those devices secured in your organization, the very next thing that employees are going to ask for is -- how do I get access to my information? How do I share? How do I collaborate? Box has built an incredibly secure platform to make that happen. We have tried to do everything in the opposite way that something like SharePoint has done, and build incredibly simple applications for businesses of all sizes. We're finding that more and more enterprises need solutions like Box to make their employees productive.