Box buys dLoop to intelligently secure cloud content

Madan Sheina, Lead Analyst, Software – Information Management

Box hopes to give subscribers greater analytic insights into, and control over, the content stored in its cloud service following its acquisition of privately held dLoop for an undisclosed sum. This is a move that Ovum has been predicting for some time, and will make Box more attractive to the enterprise customers who are becoming increasingly interested in online storage and collaboration services like Box, but who also put a sharp focus on content security and management. It also comes on the heels of Box’s publicly stated intent to raise another $100m in venture funding, which could point to further acquisitions and a likely IPO in 2014.

dLoop will provide more granular safeguards over Box content

dLoop is billed as a “data analytics” vendor – but not in the traditional business intelligence (BI) sense. The company has a narrow focus on analyzing access to and usage of data, specifically unstructured content.

What dLoop brings to the table is advanced content analysis and data classification capabilities that give IT the visibility to drive smart-secure, analytically driven permissions and controls to (now probably Box-only) cloud content. Underpinning dLoop’s proposition are some sophisticated machine-learning algorithms to discover relevant document-to-people relationships that are not normally apparent or reachable by search or pattern-matching solutions.

Technically this is achieved by creating continuous document graphs and clusters from unstructured content using machine-learning algorithms to find related, relevant content based on tracking activity patterns – a technique that extends to content beyond the reach of search string and expression-matching solutions.

In many ways, it’s a more sophisticated and granular approach to content analysis –much like Autonomy (now part of HP) does with its Bayesian algorithms to discover key concepts and relationships in unstructured content that traditional full-text search engines cannot.

The fit with Box is simple: to enhance content discovery, protection, and insights to Box’s platform to allow for secure sharing and smooth synchronization across multiple devices, applications, and platforms. The fit for cloud is perhaps even more important: to provide sufficient visibility and control over content through smarter permission-granting, a critical element that enterprises require to trust cloud storage.

Box’s ability to protect and manage content is already a strong point

Box has already been developing administration tools that help protect business-critical content. The addition of dLoop’s technology will accelerate these efforts considerably and help to set it apart from enterprise competitors like Intermedia’s SecureSync, Egnyte, and most notably Dropbox and ShareFile (owned by Citrix), neither of which can offer customers granular control via content classification or the workflow rules engines.

Customers (particularly Box administrators) should expect to see new advancements based on the dLoop technology rolled out next year. Exactly how this will manifest itself in the Box platform remains to be seen; one possibility is functionality similar to ControlPoint (owned by Metalogix), which is a Microsoft SharePoint add-on used to securely manage permissions and automate and enforce governance.

But this will take time to incorporate into the Box user experience. Nevertheless, Ovum believes that dLoop’s functionality will prove especially valuable in e-discovery applications and highly regulated and document-intensive industries such as healthcare and insurance that require deep dives into content location and use. Box, unlike Dropbox, is HIPAA compliant and is therefore strongly positioned to carve out a deep vertical niche in managing electronic healthcare records. And, of course, security tops the priority list of health-related documents.

Box is kicking into acquisition mode

Box’s timing for this latest acquisition seems spot on, coming a week after it announced its intent to raise another $100m in VC funding. The company is certainly in the midst of an acquisition roll. Earlier this year, it also acquired HTML5 document-embedding service Crocodoc and mobile (iOS) application client Folders.

As Box angles for a bigger slice of the enterprise cloud storage and collaboration market, these swoops are necessary, particularly in the face of increasing pressure from consumer-oriented rivals such as Dropbox, that are now starting to push into the enterprise market with richer IT administrative content management and control features. Clearly, Box needs to continue to innovate to maintain its market momentum – it has garnered over 200,000 business customers and 20 million end users. Equally, it also has to face up to competition from much larger rivals – like EMC and Citrix – that consider themselves a more secure alternative in cloud storage.

One possible issue that might hold Box back in enterprise scenarios is its exclusive cloud-only service. Most enterprises will continue to store important content on-premise at least for the near term. Many may also explore using file sync and sharing solutions like Syncplicity – which provide an on-premise storage option in addition to cloud server replication to share documents with external parties and provide access to corporate content on mobile devices – as an alternative to email and impose policy-based content access controls.

Box will therefore need to convince enterprises of the value proposition, beyond just cost, of moving their traditional on-premise corporate file servers into its cloud, or perhaps just as an extension to a broader enterprise social, mobile, and collaboration platform stack. To do this effectively Box will need to revisit its pricing model for platform integration, particularly for those organizations that want to consume Box as a discrete cloud-based content collaboration service. To support this, Box plans to introduce usage-based, rather than seat-based, pricing in early 2014.

Nevertheless, Box is certainly a confident company and does not lack ambition. It recently opened an office in London, which now has nearly 100 employees, and has expansion plans into the Japanese and Australian markets as part of its ongoing global expansion program. With a trio of acquisitions under its belt and another healthy round of VC funding in the pipeline, all signs point to an imminent IPO in 2014. Rumors on Wall Street suggest that it has already chosen the banks for the flotation, with an estimated $2bn valuation for the company.

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