Box CEO fires back at Dropbox: I don't think it will work at scale

Aaron levie drew houstonJohannes Simon/Getty Images, Steve Jennings/Getty ImagesBox CEO Aaron Levie (L) and Dropbox CEO Drew Houston (R)

Things are heating up a little bit between Aaron Levie and Drew Houston, the two 30-something, star CEOs of Box and Dropbox — and it could get much more intense as both companies make bigger strides in the business file storage market.

It all started when Houston took a swipe at Box — without specifically mentioning the company name — during his company’s first-ever user conference Dropbox Open on Wednesday morning.

He basically said Dropbox is spending much less money than its competitor — who he referred to as the “Dropbox for the enterprise” — while taking only 10 months to sign up the same number of paying business customers as his competitor did over the last 10 years.

“In the last year, we’ve added more paying business customers than they have in their lifetime,” Houston said.

Levie apparently didn’t take it too nicely, and in a phone call with Business Insider, argued Dropbox still has a long way to go to catch up Box in the more serious enterprise market.

“This isn’t an apples to apples comparison,” Levie said. “I don’t think that having the users back up their photos is the same thing as the CIO deciding to standardize on a content management platform for their entire business.”

Customer bragging rights

Aside from Levie’s jab at Dropbox’s Carousel (a photo-storing app that failed to gain much traction), his comment is meant to suggest that Dropbox’s customer base is largely comprised of small teams within companies using it for general purposes, not for company-wide deployment, which requires a lot more technology and spending.

“We’ve been competing with them for quite some time in the small business part of the market,” Levie continued. “I don’t think it will work at scale in the enterprise. I don’t think anything that they said today changes that.”

In order to better target the enterprise market, Dropbox released a new product called Dropbox Enterprise today. The new product has stronger security and admin features, as well as better user data insights and customer support tools.

But Levie said getting the really large business customers usually involves more than just that. There are a lot more security, compliance and legal measures that needs to be ironed out, resulting in higher sales and marketing costs. “It’s actually a real technology decision that takes time that you have to negotiate a whole set of challenges. We’re just very different than how Dropbox is approaching this market,” he said.

Dropbox is counting on what it calls a “bottoms up” approach, where it hopes to convert existing Dropbox users into customers of its more robust business product. Dropbox claims it already has 400 million users worldwide across 8 million companies. Only 150,000 of those companies are currently paying customers, meaning there’s a huge opportunity to go after.

Microsoft vs Google

Levie compared the difference in their approach to how Microsoft Office 365 and Google Apps are different. Google Apps may be used by a lot of small and medium sized businesses, but most of the big companies that require heavy security measures tend to stick to Office 365, he said.

“Google Apps has millions of small businesses, but Microsoft is what is becoming the standard in the Fortune 500 and larger enterprises. That’s just because the DNA of the companies are just very different,” he argued.

Aaron levie boxAlison Buck/Getty ImagesBox CEO Aaron Levie

Levie also offered some more details about its use at big companies. GE has signed up for 300,000 of its employees, while Schneider Electric and Eli Lilly each signed up for 80,000 and 40,000 users, respectively. Dropbox, on the other hand, revealed Wednesday that its business product is used by big companies like News Corp. and Under Armour.

Dropbox is still considered to be worth over six times more than Box. Dropbox was valued at $US10 billion in its last funding round, while Box is now roughly valued at $US1.6 billion in the public market. But when asked about it, Levie simply shrugged it off as “more of a private vs. public market difference.”

Box is expected to generate about $US300 million in revenue this year, while Dropbox is reported to be booking around $US500 million a year.

Despite all that, Levie stressed that the real story isn’t about the competition between Box and Dropbox. It’s about replacing the old guards like EMC and NetApp, while leading the transition to the cloud. 

“The market is a lot more dynamic and rich than just us two,” he said. “This is a much more complicated landscape than the file sharing market that dropbox plays in.”

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