NEWS ANALYSIS: IBM is like an old-time singer who hasn't had a hit in years. Box may help it get back onto the charts.
Don't look now, but IBM may have just saved Box, and Box may have helped to rescue IBM. Okay, that may be overly premature and even more simplistic, but it's not that far off base.
Old school (IBM) and new school (Box) came together June 24 in a landmark partnership in which the two companies ostensibly will solve major problems inside each organization. Box, which has never shown a profit, now has a major-league mentor and deep-pockets sugar daddy; IBM now has an influx of new-generation energy and sensibility that it couldn't develop in-house.
Don't get me wrong. IBM, with all its resources, could have developed software and services similar to the kind Box has had for years, but why? It simply doesn't have time or energy to re-invent all the online storage and collaboration tools, intellectual property and the wide user base that Box already has built. IBM is too busy reconfiguring itself for the long haul, and this deal fit right into its plan.
Both companies need a hit
IBM is like an old-time singer who hasn't had a hit in years. Box may help it get back onto the charts.
On the other hand, Box lacks a key secret sauce that IBM can contribute: the in-solution business intelligence to make its products even more useful. Big Blue's worldwide sales force, support staff and installed base won't hurt, either.
"This deal is largely about using IBM’s artificial intelligence on the corporate content in the Box service," Frank Gans, chief analyst for market researcher IDC, told The New York Times
. "And it fits the pattern of the recent partnerships for IBM."
IBM brings a ton to the table, of course: its trusted name, global reputation, not to mention an astounding set of patents and products. It also has its excellent data analysis tools and the well-known Watson artificial intelligence franchise. Box is a trusted service used by millions of consumers and employees in organizations who store all types of content, including photos, videos, sales records, business documents and health care images in the Los Altos, Calif.-based company's cloud.
Will work on new-gen projects together
Together, the two companies plan to develop new-gen applications (Box's expertise at this point) that will enable work groups to complete enterprise projects and initiatives quicker and more efficiently. Business is all about speed to production and market, and this collaboration may be able to provide that.
Box is one of the many new-gen software companies that has yet to make a profit on the financial bottom line, and in the world of public companies, this eventually has to happen. On the other hand, if CEO Aaron Levie and his people trim expenses to go into the black, they lose growth momentum. It's a real conundrum, but the IBM deal could provide a pathway out of it.
"For us, this is massive," Levie, 29, co-founder of Box, told the Times. "This is our most substantial partnership in the enterprise market. Our future customer list will look more and more like IBM's."
Nothing wrong with that. Box, which started as a consumer play, is strictly enterprise now, and the more seats a potential customer company has, the more Box likes it.
Why this is such an important development
This impact of this partnership cannot be overplayed, according to storage industry experts contacted by eWEEK
"I think this is a huge announcement, probably as big as it can get for both companies," Yorgen Edholm, CEO of file sync and share company Accellion, told eWEEK
. "In fact, I think this is big for everybody in the cloud business. This is because at first it was just going to be Dropbox and Box, and a few others (handing most of the online storage). Then Microsoft moved in two years with more vigor than anybody could have imagined with their cloud storage; this pretty much forced Box to up its game."
Thus, the entire online storage market had to up its game.
"When you go up against a company with the power of a Microsoft, you can either run and hide, or you get a bodyguard. IBM is now Box's bodyguard," Edholm said.
"IBM's partnership with Box is a no-brainer. The company has struggled to maintain its position in the royal court of Silicon Valley, so hitching your wagon to the current prince is an understandable strategy."
In fact, Edholm said, "when we look back at the end of the year, we will see that this was one of the biggest developments that happened."
'Couldn't be more complementary in focus'
Al Hilwa, program director of software development research at IDC, told eWEEK
that "this is one of the most expansive and multi-faceted announcements we have heard in recent years. The offerings of the two companies couldn't be more complementary in focus, and an alliance of this type can be hugely beneficial to both.
"The facets range from bringing IBM's international data centers and services to Box customers, to building mobile apps with IBM technology that leverage Box capabilities and APIs, and a lot of stuff in between. IBM is able to make such partnerships because of its investment in Softlayer, MobileFirst and Bluemix, which really change its abilities to play with new companies. It remains to be seen if Box will move to IBM's infrastructure completely," Hilwa said.
Like other older IT companies, IBM needs to move into new sectors. Those would include cloud computing, new-gen and IoT security, social media and mobility. By 2018, IBM told the Times
, the company hopes those businesses will bring in an addition $40 billion in revenue.
Under new CEO Ginni Rometty, IBM has been signing new partnerships right and left for months. These deals include a relative oldie, Apple, and other newer companies such as Twitter and Facebook. They are all designed to help the giant IBM ship correct its course to new-generation cloud and mobile computing, which had, in some ways, bypassed it.