Box CEO Aaron Levie: The post-PC era and our partnerships will help us win

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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.

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