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June 18, 2012

Box’s cloud service launches in Europe: Q&A with CEO Aaron Levie

Today Box opens its London office. CEO Aaron Levie sat down with CBR to discuss the company’s European rollout plans.

By Allan Swann

Aaron Levie is the 27-year old CEO and co-founder of Box, an online file sharing and collaboration/cloud content management service for enterprise. Part of the next wave of bright young things coming out of California, Box was launched from Aaron’s University dorm room in 2005 with now-CFO Dylan Smith. The company already boasts former Facebook, LinkedIn and Flipboard executives, and quickly whipped up some £15m in start up funding with backing from SAP, Salesforce and Mark Cuban. It is now focused on its European rollout, which begins today.

Aaron Levie, CEO and co-founder of Box
Aaron Levie, CEO and co-founder of Box

Tell me a bit about the founding of your company?

Dylan and I were both in our sophomore year of college, I was in LA and he was in North Carolina. In 2005, the internet was bouncing back from the dotcom bubble, but there weren’t a lot of services online that would let you share and store your information on the web. We didn’t invent the idea, but by the time 2005 had rolled around there were much better storage options, much better bandwidth and more devices to access information from, including mobile.

We looked at that confluence of factors and decided that we could a build a more commercial, and much simpler way to put collaborate with enterprise data online than any of the alternatives that existed at the time.

You had a bit of assistance from some high profile funders too?

Somehow we attracted the attention of Mark Cuban. That was pretty exciting, and he funded the company initially. That gave us the impetus to drop out of school, move up to Palo Alto, and build up the company for a couple of years. In 2007 we saw that Google, Microsoft, Apple, these big incumbent players on the consumer technology world were subsidising the cloud solution for their consumers, to develop stickiness across all their platforms and devices.

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The enterprise market didn’t have that so much, and we saw that enterprises cared a little bit less about the pure pricing aspects, but more about security, the platform and collaboration. That’s when we decided to focus on enterprise.

You are using a consumer model though, the ‘try before you buy’ or freemium model…

We implemented a freemium business model in 2006, across our entire product line. Individuals can start out on our free product, but as it spreads within your organisation it eventually reaches a CIO, or IT decision maker. They may be looking for better security, better data management, with integration into their identity management systems or logging and reporting systems. We have an enterprise edition which allows you to have those capabilities.

They effectively standardise their company on Box. That’s why we have 1 million end users, inside around 125,000 different businesses actively using our product.

So where is the gap in the cloud market that you expect to compete with the big boys, such as IBM, Oracle, SAP and

We still think of our entire business as existing in a gap. The cloud is extremely disruptive to what the traditional enterprise/legacy players are used to. They build products that are released every three years. At Box we build and update our website every week.

From a pricing standpoint we also tend to be much more cost effective. We don’t have a multi-billion dollar legacy business model that we’re trying to convert over to the cloud.

We have already proven to be very competitive with all the legacy players – that’s why we’re used by 83% of the Fortune 500.

What about critics complaints that these ‘continuous rollout’ business models are more like beta testing on your clients, rather than releasing a finished, high quality product?

We have built Box on a web-scale kind of model; so much more like a Facebook than an Oracle. We leverage the fact that Box is web based as our advantage – we actually have segments of customers that choose explicitly to be a Beta customer. There is no extra charge.

They then have the choice of whether they want new technology ‘sooner’ or after we’ve tested it against everyone else.

For example, we have a new feature we launched three weeks ago – Enterprise Search. It’s the first time that any online collaboration system has had enterprise wide content management search within a cloud solution. It allows you to search all of the data inside your enterprise, not just what a single user has.

It’s a new concept that has never been done in the cloud space before. We chose 100 customers who chose to be Beta customers of this, and once we get through the feature requests and we improve the functionality, we will be able to roll that out more broadly.

So you feel that flexibility gives you an advantage over the traditional operators?

Oracle and SharePoint suffer from those really long [development] cycles. Business changes so quickly these days. Having a three year cycle means that by the time the software rolls out, and by the time you implement it in your business, your business probably looks nothing like the world in which that technology was initially developed.

A great example is when SharePoint 2010 came along. Microsoft had been working on that since 2007. But what happened in 2010? iPads all of a sudden appeared. There was no concept of tablets entering the enterprise in 2007. So they’re already years behind.

Our COO used to work at Intuit. Intuit basically had ‘reacquire’ their customers every couple of years after a product release. Because unless the vendor sold you a new version, you were done paying them any money. The software also gets bloated – you have to do these significant software updates, and tack on all these new features – even if people didn’t need them – just to create a selling point so they could sell a new product.

That’s the brilliance of SaaS – you’re always on the latest software that we have, but paying a single fee. That solution looks exactly the same as anybody else – you get all the updates exactly as they happen.

Mobile has been a big focus of your platform, what changes is this bringing to the cloud?

Probably 95-98% of all mobile devices in the workplace are no longer Windows. The fact that in just a 5-10 year period, greater than half of all enterprise computing is already done on a non-Windows device is incredible. By this I mean iPads, and Apple and Android smartphones. Those changes cause cascades and ripples that run through an entire company’s IT strategy.

Microsoft does offer its own cloud service…

Customers are looking for solutions that work on every platform. So fundamentally you can’t just go to Microsoft anymore. If you do, they’re just going to tell you to buy a Windows 8 tablet or a Windows phone. That isn’t going to work. Most businesses are moving to a ‘bring your own device’ model.

One of the big schisms in the industry when discussing cloud is security. How do you convince the most stubborn old CEO that Cloud is the way to go?

When our customers look at their enterprise landscape today, we tend to be solving three problems; one, how do we collaborate around information; two, how do we get to it from any mobile device; and three, how do we share it between home and work. In every single one of those use situations, your data is going to leave your network anyway.

You’re really looking at the most secure way to do that. The cloud is actually more secure than the server in the basement.

We’re 470 people at box. We live or die based on the security and reliability of our platform. We have more people than in your IT organisation, dedicated to solving any security problems straight away. You can’t get that kind of response on your own proprietary platform.

Mobile is obviously a huge growth area, where do you intend to focus Box’s energy in the future?

We have a customer advisory board, which can give us some insight into market trends. It asks questions such as ‘Is Android emerging more in your organisation, or are you holding out for Windows 8?’

We try and synthesise what we think our customers will need with what we already see them doing. We have a 120 engineers, and all they’re working on is making the core platform work better, adding more services our enterprises need, and to making it easier for end users to collaborate and share information, whether that’s on your mobile device or your desktop. Also, or Netsuite, or any other SAP environment you want to extend your data to.

So tell us about your UK rollout, why now, and what can we expect?

We’ve been looking at this for the last couple of years, thinking about when we’re going to launch our international strategy. One of the benefits of the cloud is that you’re global on day one. Our tenth customer was not from the US. We have already been drawn into international markets by customers dragging us into their work environment, whether they’re in the UK, Germany, France or Hong Kong.

Europe will be our first market we focus a full international strategy around. We’re starting off [today] with a small office in London, which will become our official headquarters in Europe for now, we plan to have 25 or so employees by the end of the year, and then by the end of next year we would like to have 100 across Europe.

Right now, 12-15% of our revenue comes from Europe, and we haven’t even launched here yet. That’s one of the reasons we moved to launch, because these customers feel like they have to come to us, rather than us having a physical presence and going to strategically work for them. We’d like Europe to account for 30% of our revenue in the next year and a half.

So who are some of your key clients you will be targeting?

We’re actually coming in from a position of strength here, we already have some of the largest car manufacturers in Germany, some of the largest media companies in the UK. We have BAA who runs Heathrow, and O2 is already a customer. So we have a pretty good brand base and client list to scale up with.

You aren’t concerned about doing a large scale launch in the midst of a European financial crisis?

No, not really. Whether you’re in a recession or a bull market, you’re in an company that needs to be faster, more competitive and more productive, all while cutting costs. All those point to the cloud.

Where you tend to see problems in a down economy are in the large companies, such as an IBM or an Oracle or a Cisco. In fact in all those cases, those companies have talked about how their European numbers are weaker than anticipated. If you’re a European company in a tough financial situation, do you really want to spend €50 million on that big Oracle upgrade this year?

Cloud tends to be counter-cyclical. It doesn’t tend to follow the same economic trends. But all things equal, we would all prefer a growing economy.

If you come to this juncture where your SharePoint upgrade is going to cost you millions in upgrades and license fees and implantation costs, whereas your Box implementation might cost, say, two hundred thousand* – which one are you going to choose?

* Correction: This article originally stated 200 million, rather than the correct 200,000.

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