With Sinofsky On Board, Box Is Now Capable Of Mounting The First Credible Threat To Office

With Sinofsky On Board, Box Is Now Capable Of Mounting The First Credible Threat To Office

ALEX WILHELM

posted 8 hours ago

Today Box announced that Steven Sinofsky hasjoined its operations as an adviser. The relationship was kicked off via Facebook message, consummated over pho, and gives Box key talent and experience that it needs to grow its enterprise-facing document storage solution. And to build its next set of products. The race to store your files online is not a mere struggle for dominance of low-margin cloud document management. Price pressure via increasing competition from wealthy technology companies is already leading to, in some cases, the elimination of consumer storage costs. For example, Flickr will give you a terabyte of space for your pictures, and Outlook.com has essentially unlimited storage.However, on the enterprise side of things, Microsoft and Box are currently locked in a mini arms race, with Microsoft boosting its SkyDrive Pro business offering to 25GB of storage per seat. Boxrecently doubled its consumer offering to 10GB, and added a new, $5 per month per seat plan that gives small businesses 100GB per employee.

So the marginal price of storage is rapidly declining, and those savings are being passed to consumers and customers in the form of price cuts that lead to constant pressure for storage companies. Thus, Box will want to expand beyond its current key offering — file storage and syncing — and into something harder to commoditize.

We stated earlier that the struggle to store your files is about more than their mere storage. It works out like this in practice: The company that stores your files is the firm with the best shot at helping you edit them due to sheer proximity and convenience. Therefore, he who holds the files, gets to generate software income from their ownership.

The analog to this situation is a hard drive and a new set of Office apps. The files were on your hard drive, and Office lived in the same environment, making their existence harmonious. Now, cloud storage has moved that content away from Office, leaving Microsoft to scramble to build a suite of web apps to handle the editing work that had begun to slip out of its control.

Box has done a terrific job at signing up corporate clients to its service. Clients that, I presume, are Office users. Eventually, those customers will have the choice of upgrading their Office software, or snagging Office 365 subscriptions for their employees. But if their files are stored with Box, how palatable is that? At best a connection would have to be built between their productivity software, and their files that Box holds. This is not a perfect solution.

What if there were another option? What if Box built a set of editing tools on top of its cloud storage service, moving its business up the value stack, while defending its margins in the face of slipping data-retention fees. To do something like that, it would want to have on board someone with intimate knowledge of Microsoft and its Office products and how to sell productivity software to enterprise customers.

That’s Steven Sinofsky.

Box claims to have 180,000 business customers and expects 100 percent revenue growth in 2013. Those figures indicate that Box could scale a productivity solution to a meaningful size in short order. It would need to be damn good code, of course. I am not saying that this would be easy, more that it is now possible.

Box has hinted that it is working on some internal software that could be construed as indicative that it is working on the above. In an interview with TechCrunch, CEO Levie stated that the company is testing “some of [its] own applications.”

There are ample reasons for the success of Office, and Office 365 has shown rapid growth in its early stages. The cloud productivity suite is at a $1.5 billion yearly run rate, up 50 percent in a single quarter. If Box generates $8,333 in yearly income from each of its 180,000 business clients, the two are the same size (this calculation is more for fun than any other reason).

I am not saying in any way that Box is an Office “killer” or any such baiting nonesense. The gist of this is that Box has an enviable enterprise install base, a key strategic advantage as being The Holder of the Files, and now the exec that called the Office shots at Microsoft for years. That sums together into an enterprise-facing productivity solution, in my view.

Box is going public sometime soon — I’m trying to get more on that, but haven’t heard much lately — and when it does it will want to tell investors how it will increase its per-seat revenue to ease fears of margin pressure. We know at least one way they could do that.

Steven Sinofsky Joins Enterprise Cloud Storage Firm Box As An Official Adviser

ALEX WILHELM

posted 12 hours ago

Today enterprise cloud file and document storage company Box announced that it has brought former Microsoft executive Steven Sinofsky on board as an adviser. The move matters, as Sinofsky has deep experience with both Microsoft Office and SkyDrive, two products that Box competes with.

Box, which today remains storage focused, iswidely expected to introduce document editing tools on top of its cloud file system. This would put it in direct contention with Office, a key profit source for Microsoft, and Google’s Docs efforts.

Sinofsky departed Microsoft following the completion and shipment of Windows 8, and the Surface tablet hybrid. It remains slightly unclear to this day, but his quick trip out the door was not exactly voluntary. According to Todd Bishop of GeekWire, the pairing of Box and Sinofsky started with a Facebook message, and was consummated over bowls of pho.

Box, for now, is downplaying the Box-Microsoft war narrative. Box CEO Aaron Levie, in a statement provided to GeekWire, stated that his company would “love to get closer to Microsoft,” instead of growing its competitive surface area with the rival firm.

That’s bunk, but expected bunk. TechCrunch has reached out to Sinofsky for clarification of what his specific duties will be with Box and what areas of the company he intends to focus on.

Sinofksy was a considered candidate by external parties for the CEO role at Microsoft following Ballmer’s departure. It’s safe to say that anyone who had been pulling for a Sinofsky return can lay that dream to rest. Box is increasingly maturing into the company that could mount the first credible enterprise challenge to Office’s decades’ old hegemony.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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