Analyzing the Dropbox effect: Market for mobile file sharing and sync heats up

Analyzing the Dropbox effect: Market for mobile file sharing and sync heats up

Analyzing the Dropbox effect: Market for mobile file sharing and sync heats up Analyst: Kathleen Reidy Simon Robinson Chris Hazelton Vishal Jain Andrew Hay 9 Mar, 2012 File synchronization across desktops and mobile devices of individual users and groups is a white-hot market. It is also a market that epitomizes the 'consumerization of IT' in the enterprise. Dropbox, which has had $250m in funding, has grown its user base from about four million in January 2010 to 50 million users today. To be sure, people use Dropbox to sync and share personal files, but the growth of Dropbox also comes from users mixing personal and work files on Dropbox accounts and using Dropbox to store, access and share business-related files, often from their own devices. The rise of Dropbox says a lot about how the technology we use and the way we work is changing. As we shift from desktops and laptops to a world of devices, many that we procure ourselves, expectations are changing, as well. We want to make sure we can get to all our files from all our devices and share them as needed with distributed and, often, cross-boundary colleagues, clients and collaborators while maintaining version control in a way that keeps us all sane. Adoption of ipads and other devices happened faster and often by an organization's most senior executives than IT was prepared for, and, in many cases, IT hasn't been able to meet end-user requirements to make these devices truly usable for work. It is generally easier for users to get what they need by using free or low-cost services on the Web; thus, we have seen the rise of Dropbox in the workplace. Perhaps the most intriguing element about Dropbox is that by luck or judgment it solved a problem that most people didn't know they had and one that they didn't actually have until they found they were trying to manage files across three, four and even five separate devices. In addition, the lack of a native file and folder system within Apple's ios means that users trying to save files locally to an ipad need a way to store this data, which is then accessible by more than one type of mobile application. Copyright 2012 - The 451 Group 1

The rapid emergence of such issues especially as ipad adoption has skyrocketed goes a long way to explaining why corporate IT and the enterprise IT supplier landscape has been slow to respond. Additionally, it's fair to say that many IT shops (with a few exceptions) have developed ostrich-like tendencies when it comes to the whole issue of bring-your-own-it; if anything, the emergence of Dropbox is proving that burying your head in the sand is not a viable strategy. Concerns about privacy, data leakage, and overall data control and security are forcing IT, security and compliance officers to look at alternatives to consumer and SMB-oriented file-sharing and -sync services. These demands from CIOs, coupled with the success of Dropbox, have certainly caught the eyes of startups and established players alike, and we are now in gold-rush-like days in this emerging segment. This is a market that crosses the boundaries of storage, security, mobility and content management, but is so far being labeled by the industry as 'Dropbox for the enterprise.' Defining the market This introduces a perhaps superficial, but we believe important, aspect of this emerging market: What exactly do we call it? This is an issue that most if not all the players here are grappling with. The term we have settled on (for now) is 'mobile file-sharing and -synchronization platforms,' mostly because it is the common denominator that incorporates at a base level what all emerging players are doing. However, we recognize that it is imperfect; while it does acknowledge that the fundamental driver is the explosion of smartphones and tablets, some players looking to add more value in areas such as collaboration may feel the term doesn't do them justice. Nonetheless, we believe the term is flexible enough to recognize that such offerings may be deployed on-premises or in the cloud (or even a hybrid of the two), as well as to underscore that these are platforms on which further functionality is being provided by some players. Dropbox is a cloud service, and that is part of what makes it easy for business users to adopt without the support of IT. The cloud is an enabling technology when it comes to mobile file sharing and sync, and is the dominant model today. It provides an easily accessible and low-cost storage platform for files, and can be easily adopted by individuals. However, the cloud is not a prerequisite; there is no inherent reason that synchronization services have to be run from the cloud, and there will be broader availability and adoption of on-premises options over time. Indeed, as mid-to-large enterprises begin to consider their alternatives here, we think the pendulum will increasingly swing toward on-premises, behind-the-firewall-style private cloud deployments at least this is how many of the emerging players here are positioning their offerings. Copyright 2012 - The 451 Group 2

User requirements The main user requirements for a mobile file-sharing and -synchronization platform at the enterprise level are around enabling mobile access to files from different devices, the ability to keep these in sync across devices and enabling ad hoc sharing with loose teams. To be more specific, end-user expectations may include: Native apps for smartphones and tablets, to access and work with files and provide offline support. Desktop sync. Mobile device sync. Sharing files with known users on a domain and the ability to include external users. Version control and rollback. Web-based GUI/service. Integration with Quickoffice or other mobile productivity software. Support for a variety of file formats. 'It just works.' Business users themselves also want to know that their data will be secure, but they may have widely varying expectations and levels of sophistication in this area. Data security is a top-of-mind-issue for corporate IT departments, and one that is driving much of the exploration of 'enterprise-dropbox' alternatives. Security concerns While Dropbox is popular with all sorts of users, the company has also had its share of high-profile security blunders, and these haven't been lost on many in the world of corporate IT. But in many cases, it is probably ultimately less about the specifics of how Dropbox (or similar services) store or encrypt data than the overall model of consumer-oriented sharing services today. Corporate IT is looking for alternatives that may include features such as: Auditing and reporting to know what files have been shared and with whom. Integration with corporate directories to manage users and access control. The ability to restrict access to file-oriented functions (e.g., view, download, sync, share, etc.) at file, folder, user and group levels. This supports cross-boundary sharing, but with limitations. Integration with both mobile device management (MDM) and mobile application management Copyright 2012 - The 451 Group 3

(MAM) offerings that can provision, monitor and de-provision applications over the air. The ability to limit the movement of data to only the applications that IT has determined can be trusted to access corporate data either through rich mobile application controls, secure containers, metadata tagging or mobile virtualization. The ability to leverage two-factor authentication now or in the future. Sophisticated support for encryption, including data in transit and at rest on endpoints, as well as support for local key store on-premises to restrict access to data by law enforcement and government. Ability to retain data on-premises or run sync as an internal service for some data (or all) as required. Integration with ECM systems for long-term retention and records management as required for 'final' versions or compliance, or to integrate with other doc-oriented business processes. Supplier landscape ISVs and technology and service providers of various stripes are hearing the above requirements from IT departments, perhaps at a deafening volume if we are to read anything into the widespread interest in this market. Indeed, the number of potential players here is increasing almost daily, and includes established vendors as well as startups. Although some large vendors (most notably VMware with Project Octopus) have outlined their intentions to enter this market, we wouldn't be surprised to see the likes of Symantec, IBM, Hewlett-Packard and others announce initiatives here. The other notable aspect is the sheer diversity of the players entering this space; vendors come from a variety of backgrounds and have different focus areas, including virtualization, security, storage, content management and mobility. Table 1 outlines the providers focusing on the enterprise that we have begun to track, although it is a representative list and cannot be considered comprehensive. Table 1: Mobile file sharing & sync players Copyright 2012 - The 451 Group 4

Vendor Founded Funding Employees Focus Accellion 1999 $42m 100+ Cloud and on-premises file sharing and sync. AirWatch 2003 $0 (self funded) ~500 MDM with container for IT to manage document access on mobile devices. Box 2005 $162m 400 Cloud file sharing and sync. Citrix ShareFile Acquired ShareFile 2011, ShareFile founded 2005 NA ShareFile: 100 at time of acquisition Cloud file sharing and sync. Egnyte 2006 $16m 90 File server replacement and collaboration. Fiberlink Communications 1991 $50m 240 MDM with ability for IT and business line to push files to users. FileTrek Software 2002 $15m ~20 Cloud file sharing with version control / tracking. Funambol 2001 $22.5m ~85 Open source file sync and sharing on cloud for operators. GroupLogic 1988 NA (none recently) 35 On-premises file sharing and sync. owncloud 2011 $1.25m ~10 Open source file sharing and sync. Oxygen Cloud 2011 None 30 Sync from cloud service for on-premises data. RIM / NewBay Acquired NewBay in 2011, NewBay founded in 2002 NA NewBay ~300 File sync and sharing platform, cloud. Skydox 2009 seed only 20 Cloud sharing and sync with MS Office plug-ins for collaboration. SugarSync 2004 $41.5m ~60 Cloud file sharing and sync. Syncplicity 2008 $2.35m ~25 Cloud file sharing and sync. TeamDrive 2007 None 11 Cloud file sharing and sync. YouSendIt 2004 $53.7m ~190 Cloud file sharing and sync. Source: 451 Research Is this a feature or a market? After a failed attempt to acquire Dropbox in 2009, Steve Jobs is said to have labeled file synchronization a feature. We tend to agree, although what exactly it is a feature of could vary. Jobs meant the operating system, and Apple's idrive could be the first step toward more seamless sync between devices Apple devices at least. Microsoft SkyDrive and Google Drive can be seen via similar lenses, although all three bend toward the consumer market at this point. Copyright 2012 - The 451 Group 5

To some extent, this argument is academic. Whether a feature or a product, there's no denying that many enterprises are fast-tracking projects to provide 'enterprise Dropbox' functionality and making budget available; hence, the interest from across the industry. From a pure enterprise perspective, the question about where this 'feature' should optimally reside is certainly valid; indeed, this is the crux of the matter at this point, and where the battle for hearts and minds will be fought over the coming months. Content-centric enterprise systems from the likes of Huddle, Liferay, KnowledgeTree and Open Text are already adding sync features, or products to extend existing systems or integrate with corporate content repositories; these could be on-premises or in the cloud. This approach may even have potentially more longevity than stand-alone tools, particularly in the face of the potential OS-driven sync, as the need for mobile files to get deposited back into a system of record at some point will still remain. Meanwhile, virtualization-centric players argue that the mobile device is just another 'desktop' that should be supported as part of a comprehensive offering, and many virtualization players are developing or acquiring capabilities here. Citrix bought startup ShareFile, VMware is talking about its 'Project Octopus' (although not in much detail), and RES Software has pre-announced HyperDrive, an on-premises mobile file-sharing and -sync platform that it plans to make generally available in May. Additionally, security-centric players are building a case around securing the identity of the individual, no matter what end-point they are accessing, and we should expect to see vendors emerge with products and features aimed at securing these Dropbox and other mobile file-sharing platforms. Service providers and mobile operators have also seized on the opportunity by providing consumers with the ability to share, sync and secure their digital content across mobile devices and computers. Vendors such as Funambol and NewBay Software (acquired by RIM for $100m late in 2011) provide white-labeled software to mobile operators, OEMs and ISPs. These service providers cater to the consumer market for storing and sharing digital media, files and PIM. However, service providers and mobile operators are also distributors of software to SMBs. Finally, there are some angles here that impact backup and storage specialists. For cloud-based approaches in particular, the file-sharing and -sync phenomenon offers a level of protection for data that is typically poorly protected in many organizations. If a file is accidentally deleted, lost or corrupted, or if the local drive fails, or if the endpoint device is stolen, then users have a simple way of recovering their files from the cloud. The 451 take Copyright 2012 - The 451 Group 6

Despite the excitement around Dropbox, it seems unlikely that there will be any one winner in the enterprise for sync and sharing services. Support for mobile access and synchronization of data across devices will broaden. In some cases, it will be a feature of broader content management and collaboration systems this is particularly relevant in the enterprise, where data seldom lives in isolation from broader processes and systems. Dropbox, we expect, will play in the enterprise market more credibly than it currently does, and there will also increasingly be add-on tools to make Dropbox more palatable to corporate IT departments. But there will be many options and players for some time to come. We also anticipate that, to some degree, the current interest in sync is a reflection of where we are in the maturity curve in terms of mobile-device adoption. Tablets and other devices will get better support for files and file management natively, via the cloud or both, which could decrease the need to procure file services either individually or as an organization. Corporate systems of record will also get better clients for these devices, reducing the need to take files out of systems like Microsoft SharePoint in order to access them from a tablet device. We may also ultimately have fewer devices, as our tablets get more powerful, and so we will have less need to keep files in sync between them. It will take time for these scenarios to play out, however, and in the meantime, it is 'game on' in the market for enterprise mobile file-sync and -sharing platforms. Copyright 2012 - The 451 Group 7

Reproduced by permission of 451 Research; 2011. This report was originally published within 451 Research s Market Insight Service. For additional information on 451 Research or to apply for trial access, go to: www.451research.com Copyright 2012 - The 451 Group 8