MIT Technology Review declared Dropbox could have one of the "most interesting IPOs" of the year. That was January, 2017. But the IPO never came.
Though it is unclear why Dropbox delayed its long-rumored public offering until last week, its pending entrance into the market is crowded with far larger companies with more robust sales teams and expansive user bases.
But more enterprises are looking toward content and document management tools to round out communication suite offerings. Storing documents in the cloud or sending attachments via email is no longer enough, and more businesses are looking to document management systems that can allow for real-time collaboration, editing and versioning.
The content management market is growing, and two-thirds of enterprises are currently using or planning to use SaaS content management in the next two years, according to Cheryl McKinnon, principal analyst at Forrester, in an emailed statement.
While many have looked toward the enterprise market as the saving grace for Dropbox's future profitability, the heavy investment by enterprise giants makes it a more difficult market to break into. Google and Microsoft already have suites of collaboration tools and are working to improve content management offerings.
So rather than fighting for paying enterprise customers, Dropbox may be better suited to compete in the SMB market, an area it already caters toward. By expanding its SMB market hold, the company would be providing technology to an often overlooked market, an area where it could carve out a niche.
"Most of these big organizations out there already have a tremendous collaboration overload problem, and Dropbox would do nothing to address that," said Carrie Basham Young, CEO of Talk Social to Me, in an interview with CIO Dive.
If Dropbox can "make its way into the SMB market where companies are not necessarily using G Suite or Box or Microsoft and Office 365, then there's definitely a market there," she said. "But I think it's an uncharted market, and it's a smaller one than any of the bigger vendors are trying to address."
The current state of the document management market
As content collaboration platforms have emerged, companies are frequently adopting more than one solution to meet back office needs.
To help manage "file-centric workflows," collaboration tools primarily focus on "file sync and share" as its core competency, which is enhanced by collaboration and content management, according to Gartner's Magic Quadrant for Content Collaboration Platforms published in July 2017.
While Box is positioned above market rivals, Microsoft, Dropbox, Google and Citrix are also considered content management leaders. Clustered at the top of the market, providers have to differentiate themselves in nuanced ways.
For Microsoft and Google, collaboration platforms fit into the suite of Office 365 and OneDrive or G Suite offerings, respectively. But customers have complained about poor search offerings, finding it difficult to locate content, which can waste employee time and resources, according to Thomas Vander Wal, independent senior consultant and advisor, in an interview with CIO Dive.
That's where Box comes into play. Known for its search capabilities, the addition of its tool presents a small monthly cost per employee but offers "a little bit quicker and more efficient" capability, according to Vander Wal.
"Despite IT's best efforts at licensing a single cloud storage solution, people are still going around it because it doesn't meet their very specific needs."
Carrie Basham Young
CEO of Talk Social to Me
But collaboration isn't always formalized across teams. "There are a lot of different places where people are collaborating on content, and they're kind of using whatever tool is most convenient for their very particular use case," said Basham Young.
Whether it's internal communities or office social networks, teams are adopting tools in micro-use case levels, regardless of if they're company sanctioned.
So while platforms like Box will be mandated by IT as the enterprise-wide solution, smaller teams often look for more agile tools and use personal Dropbox accounts to create and share content in a way that's meaningful to them, according to Basham Young.
"Despite IT's best efforts at licensing a single cloud storage solution, people are still going around it because it doesn't meet their very specific needs," she said. "Even though IT is trying to put something in place that they think will serve the needs of users, it's still not affecting every use case properly."
While Dropbox as a shadow IT tool is good for boosting a company's user base growth, it will not boost its share of paying customers. Instead, if Dropbox can continue to cater toward smaller teams in a more formal way, it could emerge as a true powerhouse in the SMB market.
"Box has become the de facto enterprise solution, whereas Dropbox is really being used on a smaller team level," Basham Young said. "And that's where shadow IT is coming into play. Smaller user groups are preferring Dropbox or G Suite, even if Box is available to them."
The inevitable Dropbox vs. Box debate
Chalk it up to name similarities, but it is impossible to outline Dropbox's potential prospects without first looking toward the earlier entrant in the market.
Box became a public company in 2015 and has worked to increase partnerships and integrations across platforms, which has helped the tool become more "sticky," according to Vander Wal. The platform has been able to cross the "sea bridge" between internal use, customers, consultants and contractors in terms of collaboration, something that both Microsoft and Google have struggled with.
Through its IPO, Box was able to convince customers that its platform had long-term viability and was worth enterprise investment. By comparison, without going public, Dropbox's stance as a public company does not offer long term assurance.
Organizations now look to adopt tools in five-year windows, as opposed to the 10-year cycle it was before, because employees get frustrated when tools are changed too frequently.
Chalk it up to name similarities, but it is impossible to outline Dropbox's potential prospects without first looking toward the earlier entrant in the market.
"I think the IPO will help [Dropbox]," Vander Wal said. "Whether it will help them get to profitability, I am not exactly sure. But I think it will help get around the corner they've been seeming like they wanted to turn for a long time."
Talk Social to Me is a paying enterprise customer of Dropbox, but they're a small team and it works well for their use case, according to Basham Young. But "I think Dropbox has a long ways to go," she said.
Competitor companies have more market share and specialize in not just document storage, but also collaboration and communities.
Those sort of all-in-one tools are going to be more prolific in the enterprise than Dropbox, which really "only serves a singular function, which is document storage," Basham Young said.
Dropbox is "sort of a lone wolf collaboration tool that small teams might find interesting, and I think there's a small market for them in the SMB market," she said. "But it's going to be an uphill climb for them to address the same kind of integration opportunities that Box, Microsoft and Google have."
