Forget the postponed IPO, Box may struggle just to survive, says Accellion CEO

Accellion's Yorgen Edholm says competitive pressures will intensify in the enterprise public cloud

Public cloud service providers, such as Box, will struggle to survive in an era that will be dominated by worries about data security and the ability of the big providers - Google, Microsoft and Amazon - to use public cloud services as loss leaders in return for market share.

That is the view of Yorgen Edholm, CEO of Silicon Valley-based mobile file-sharing company Accellion.

Box postponed a hotly anticipated IPO that was originally set for March 2014 in view of the of falling values of stocks of other publicly listed cloud companies at the time. This, Edholm told Computing, is symptomatic of a wider scenario that is making things increasingly uncomfortable for cloud companies like Box.

"They were supposed to be one of the hottest IPOs this year," he said. "They were the new company going to take over the world, but then suddenly Google and Microsoft say 'hey wait, we can't afford to forfeit that space', so now they're coming after them."

Box's response to this squeeze has been to try to carve itself a niche, hence its recent announcement at BoxWorld of a focus on vertical markets with Box for Industry.

"Their response has been to focus on vertical markets, which makes perfect sense," Edholm said. However, he continued, the announcement at BoxWorld left many questions unanswered.

"Box didn't say how it's going to work out the move into these customised verticals. Yes you've got HIPAA [US Health Insurance Portability and Accountability Act] compliance for healthcare, but what about personally identifiable data? Legally, that can't be stored in public cloud. They don't address how they are going to fix that."

Edholm said that he believes Box for Industry is merely a repackaging of an existing strategy to open up the platform to third-party developers. "Personally, I don't even think it's new technology," he said.

"Box has been working on its APIs, making the apps more and more customisable for quite a while. I think the new initiative around 'verticalisation' says 'if you have the ability to tailor applications what could you do with it?'.

"Well one of the things you could do is that a consultant could write a series of applications that are tailored for healthcare, say. That would be good for Box to make them look different from Google or Microsoft. This is the direction I think they are going in."

Ahead of its own planned IPO within the next two years, Edholm said that all cloud companies are coming under similar pressures, but that Accellion's approach is different.

With a foothold in enterprise from the start, he said, the company is focused on integrating all the "pockets" where people store data - such as "file servers deep behind the firewall" and also services such as Box and Dropbox - within a secure overarching private cloud. This is key to its other focus: enterprise mobility and the need to manage content rather than devices.

"People think that to have big mobile initiatives, to have people everywhere accessing the data means it has to be in the cloud - and to most people that means public cloud. But the fact is it just needs internet access and anyone that can [set that up] can have 'the cloud' in their own data centre."

The advantages of private cloud over public cloud, beyond the obvious ones around data location and local privacy laws, extend to ensuring security both by encrypting data in storage, as well as in transit, and also by being able to track and monitor all changes to the data, to prevent leakage of sensitive information.

This is especially important in the age of enterprise mobility, Edholm said, in which data can be literally anywhere in the world on any device, and where any edits to a collaborative document held on a public cloud service will be stored in the vendor's cloud.

So, given these apparent advantages, Computing asked, why has this model not conquered all before it?

"When we released the Accellion private-cloud model I couldn't understand why every big company didn't say 'this is the answer to our problems'," Edholm said. "The biggest reason is still cost. Many of the big public cloud vendors have deep pockets or are heavily financed and not looking at the bottom line."

There is also the due diligence required to research the alternatives, which means extra effort on behalf of the IT team, in comparison with the "utility" model proffered by public cloud in which new services can often be procured quickly without requiring the involvement of IT.

However, Edholm said, the biggest factor is the shock of the new.

"It's a new frontier. You would expect senior IT people [to understand], especially in big companies where you figure they should be more advanced, but frequently they are so busy with their own navels they are novices when it comes to new stuff."