Cloud Storage: Enterprise File Sync And Share Business Grows, But Consolidation May Be Ahead

The cloud-based file sync and share market is a fast-growing opportunity for solution providers helping businesses find a way to add enterprise control to employees' communications which, if not carefully managed, could result in compromised data.

It is also a fragmented market, one characterized by a wide range of vendors -- from a handful serving corporate users with tools providing file access and collaboration tools tailored to a business' policies to a multitude serving either end-user consumers or business users who cannot wait for their IT teams to put corporate policies in place.

Enterprise file synchronization and sharing is an on-premise or cloud-based offering that allows users to synchronize files or share them with others via PCs and mobile devices, either within or outside a business, depending on how it is deployed. It is a key part of business' mobility plans as it allows mobile users to ensure they have access to updated business documents and are able to share them based on corporate policies.

[Related: CRN's 2016 Cloud Storage Week Coverage]

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It is the kind of market where a solution provider has an opportunity to make a huge difference for customers of all sizes, especially smaller companies struggling to take advantage of the cloud, said Larry Velez, founder and chief technology officer at Sinu, a New York-based managed services provider.

Sinu is essentially the IT department of more than 100 businesses and is dealing in an environments where smaller companies increasingly have Macbooks or Surface PCs and wireless gear on-site, but nothing else, Velez told CRN.

"Every CEO we work with today is running her business from her iPhone," he said. "If the CEO can run her entire company from an iPhone, that has huge implications for IT infrastructures. And it shows the need for cloud-based collaboration."

The enterprise file sync and share market is large and growing quickly. Research firm MarketsandMarkets this year estimated the market would grow to $3.5 billion by 2020, representing a compound annual growth rate of 27.5 percent from last year's $1.1 billion.

Forrester Research in 2016 divided the enterprise file sync and share market into two segments: cloud-based Software-as-a-Service solutions, and hybrid solutions based either on-premise or in a hybrid cloud.

While hybrid file sync and share solutions offer better flexibility than cloud-based solutions for companies that still have the bulk of their content on-premise, cloud-based file sync and share offerings are important as businesses move more of their data to the cloud, according to Forrester.

Forrester estimated that by 2018 80 percent of enterprises plan to use SaaS for some or all of their content services, making cloud-based enterprise file sync and share offerings a better way for enterprises "to gain the benefits of mobile-friendly, secure file-sharing technology without the burden of migrating content to yet another repository."

The market is fragmented but is expected to quickly consolidate, according to a July report issued by research firm Gartner.

Gartner estimated more than 100 vendors offer enterprise file sync and share capabilities either as stand-alone vendors or as extensions to other storage or service technologies.

However, competition between the vendors as the offerings become commoditized is expected to lead to 30 percent of the stand-alone enterprise file sync and share vendors to be acquired and 40 percent to go out of business in the next two years, while the remaining 30 percent will evolve to bring in new capabilities, Gartner wrote.

Sinu's Velez said there are definitely too many competitors.

"Even Amazon has a product," he said. "Once Microsoft and Amazon enter a space, it's hard to think any of the smaller companies on the list will survive. It's like trying to build a new car company today."

There's no question there are too many competitors, said Rafi Kronzon, CEO of Cartwheel, a New York-based managed service provider.

"The big vendors control 90 percent of the data," Kronzon told CRN. "There are a lot of solutions that are basically add-ons to other services, but very few stand-alone vendors."

While Cartwheel has worked with Microsoft OneDrive and Google Drive to provide file sync and share services, Kronzon said his company works mainly with Dropbox and Box, both of which are based in San Francisco.

Kronzon called Box the "gold standard" for businesses. "Box has a big focus on security, which is a big focus for us," he said. "Box also does a great job verticalizing the solution, which is important for big customers."

Dropbox, however, is making big strides, Kronzon said. "Dropbox just released the ability to control and protect folder structures," he said. "Before, everybody had the same copy of the same folder, which meant that any user could run the folder structure for everyone after the change was synced."

Box has HIPAA compliance and has done a great job of being compliant for financial services, Cartwheel's Kronzon said. It is also tied closely to Microsoft Office 365. "Microsoft is letting Box come into the Office 365 space," he said. "I suspect Microsoft will someday acquire Box or Dropbox."

However, while Box has done a good job with the technology of enterprise file sync and share, the company continues to face a tough market, Kronzon said. "Box's stock prices are still below the company's IPO price," he said. "A closer relationship with Microsoft could help."

Velez said his company, and his customers, are big fans of Dropbox. "Last year, customers started asking for Dropbox by name," he said. "The only other company they ask for by brand is Apple."

When Sinu started working with clod-based enterprise file sync and share technology last year, Dropbox was the clear winner because of its superior syncing client, Velez said. And Dropbox is still the leader because of how well it works with other applications including Microsoft applications, he said.

"Dropbox syncs everything that is shared," he said. "We have customers with 6 Terabytes of data in Dropbox. It automatically finds and fills a customer's new devices."

However, Velez said, over time it is Microsoft that will win the enterprise file sync and share war, whether it acquires a company like Dropbox or builds on its own offering.

"Microsoft has so many leverage points for file sync and share," he said. "Look at Office 365, Windows 10 and Surface. I can see Microsoft beating Dropbox. Not this year, though. Maybe next year. That would be convenient for us. We are moving customers to Office 365 and would like to see a unified offering."

Ed Tatsch, president of ETS Networks, an Arden, N.C.-based managed service provider, said his customers are taking advantage of Microsoft OneDrive and Google Drive for their cloud-based file sync and share.

"Microsoft OneDrive is more enterprise-focused," Tatsch told CRN. "It plugs into Microsoft SharePoint, and has SharePoint on the back end. People like SharePoint, even if they don't like setting it up."