Filing Information: October 2011, IDC #230624

Private Vendor Watch Service: Vendor Profile

V E N D O R P R O F I L E

B o x P r i v a t e V e n d o r W a t c h l i s t P r o f i l e : C l o u d - B a s e d C o n t e n t C o l l a b o r a t i o n S e r v i c e s E n a b l i n g E n t e r p r i s e s t o M o v e T o w a r d N e x t - G e n e r a t i o n C o l l a b o r a t i o n

Laura DuBois Ryan Patterson

Bharath Regula

I D C O P I N I O N

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-to-

use 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 next-

generation 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

I N T H I S V E N D O R P R O F I L E

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.

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S I T U A T I O N O V E R V I E W

C o m p a n y O v e r v i e w

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.

T A B L E 1

B o x C o m p a n y S n a p s h o t

Category Details

Functional and secondary markets Public cloud advanced storage services

Content and collaborative applications

Founding year 2005

Number of employees Approximately 300

Number of customers Over 7 million

Company location Palo Alto, California

Web site www.box.net or www.box.com

Funding initiatives Not currently seeking

Investors Salesforce.com, SAP Ventures, Bessemer Venture Partners, NEA,

Meritech Capital Partners, Andreessen Horowitz, Emergence Capital

Partners, Draper Fisher Jurvetson, U.S. Venture Partners

Sales channels Both direct and indirect

Revenue estimate Box does not disclose, but IDC estimates annual revenue of under

$50 million

Source: IDC, 2011

©2011 IDC #230624 3

I D C W a t c h F a c t o r S c o r e s

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, and

scalability

Corporate strategy: Go-to-market strategy, management pedigree, and

financial status (running on venture capital with insignificant revenue versus self-

sustaining 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.

4 #230624 ©2011 IDC

F I G U R E 1

B o x W a t c h F a c t o r S c o r e V e r s u s W a t c h F a c t o r A v e r a g e S c o r e

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

M a r k e t P o t e n t i a l

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 start-

ups. 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 200–300% 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.

©2011 IDC #230624 5

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.

T A B L E 2

S a a S M & A D e a l s

Date Acquirer Target Company Deal Value ($M) Specific Market/Solution Type

September 2007 EMC Mozy 76 SaaS backup

May 2011 Limelight Networks Clickability Unknown SaaS Web content management

April 2010 Salesforce.com Jigsaw 142 SaaS sales

May 2010 SuccessFactors CubeTree 20–30 SaaS collaboration

Source: IDC, 2011

6 #230624 ©2011 IDC

T e c h n o l o g y / S o l u t i o n

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 document-

centric 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 $25–35 per month,

respectively, depending on needs and volume.

©2011 IDC #230624 7

C o r p o r a t e S t r a t e g y

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 start-

ups.

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.

8 #230624 ©2011 IDC

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.

T A B L E 3

B o x D e t a i l e d F u n d i n g H i s t o r y

Round Date Amount ($M) Investors

A October 2006 1.5 Draper Fisher Jurvetson

B January 2008 6 U.S. Venture Partners, Draper Fisher Jurvetson

C April 2010 15 Scale Venture Partners, Draper Fisher Jurvetson, U.S. Venture Partners

D February 2011 48 Meritech Capital Partners, Andreessen Horowitz, Emergence Capital

Partners, Hercules Technology Growth Capital

D October 2011 81 Bessemer Venture Partners, NEA, Andreessen Horowitz, and Draper

Fisher Jurvetson, along with strategic investors salesforce.com and SAP

Ventures

Source: IDC, 2011

F o r c e M u l t i p l i e r s

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.

©2011 IDC #230624 9

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 SMB-

targeted 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-of-

mouth 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.

C u s t o m e r s

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

10 #230624 ©2011 IDC

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.

F U T U R E O U T L O O K

C h a l l e n g e s a n d O p p o r t u n i t i e s

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 leading-

edge innovation to its products.

©2011 IDC #230624 11

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.

E S S E N T I A L G U I D A N C E

R e a s o n t o W a t c h

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.

D i f f e r e n t i a t o r s

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

12 #230624 ©2011 IDC

Extensive administrative capabilities to manage users, monitor activities, and

customize and set security policies for user accounts to ensure auditability and

compliance

A d v i c e f o r I T M a n a g e r s a n d E n d U s e r s

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.

L E A R N M O R E

R e l a t e d R e s e a r c h

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 2010–2014 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)

©2011 IDC #230624 13

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