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In Part 1 of this discussion on whether Dropbox should be in the cloud business, I shared my thoughts on Dropbox’s overall advantage in the areas of “core technology” and “product differentiation.” It’s also worth reiterating that “cloud business” here refers to infrastructure and/or platform-as-a-service, not software-as-a-service.

In this post, let’s look at the other three dimensions of building a successful cloud business -- enterprise talent, business motivation, political will.

Enterprise Talent

As I’ve noted in my post on Facebook, the tough part about building a cloud business has more to do with people than technology -- without the talent, the technology is not going to build and sell itself. In plain terms, a cloud business needs four types of technical roles: (1) engineers who build the products; (2) engineers who operate the infrastructure; (3) enterprise sales who are technical; (4) customer support and service. (Specific job titles differ depending on the company and could be misleading, so I avoid using them here.) Certainly, there are exceptional, edge case engineering talents who can fill multiple of these roles, but that rarely happens at scale.

So how does Dropbox fit on the talent acquisition front?

Dropbox has always had a stellar reputation among engineers who want to work on big, hairy problems. And this reputation is very much supported by its epic journey away from AWS as told by Wired a few years ago, and an active engineering blog that’s constantly showcasing the cool stuff Dropbox is building. One snippet of the Wired profile is quintessential to Dropbox’s reputation as an engineer’s wonderland, where James Cowling, one of the key engineers who worked on Dropbox’s private cloud, turned down a job from Google to work on its global-scale distributed database, Spanner. His "I wanted to build something" sentiment is a common refrain among ambitious, talented engineers, looking for “extreme engineering” opportunities for that addictive rush and sense of impact. To be clear, Spanner is as ambitious of an engineering feat as they come. The Spanner project and paper have inspired the imagination of many engineers and quite a few startups looking to mimic and improve upon it. I used to work at one of these startups, an open-source Spanner-inspired database company, and I’ve seen and felt the rush first hand. The only strike against Spanner for Cowling was that it already existed.

Thus, Dropbox has been and will be in a strong position to attract the kind of engineering talent to fill role types (1) and (2). As we head into lean times due to COVID-19, many startups will fail and acquiring engineering talent will become cheaper. Surely many of them, particularly the risk averse ones will head to big tech companies, and I’m not passing any judgment here on that preference. For the more risk-tolerant ones, seeking a balance of stability and ambition during what will be a volatile economic time in the foreseeable future, Dropbox is a great option. It’s big enough to provide a stable salary, but not so big and bureaucratic yet that one’s impact is limited, especially if the company takes on the ambitious challenge of building a differentiated cloud platform. (Dropbox headcount at the end of 2019 is 2,801, according to its FY2019 10K filing.)

As for role types (3) and (4) -- enterprise sales and customer support -- Dropbox will have some extra difficulties, because they will be challenging to recruit and catalyze an organizational cultural shift.

The recruiting side will be difficult, because Dropbox will be competing head-to-head with all the biggest players in the space with no obvious advantage; its unique reputation among engineers doesn’t really carry over here. In general, there will be an intense demand for technical sales people or engineers who can communicate and storytell; both of which are in short supply. It’ll be competitive all around, not just for Dropbox.

As for the organizational cultural shift, it’s a common problem for non-enterprise companies transitioning into the enterprise business world. Success stories are few and far between. GCP is going through the pain of this transition right now, which is hampering its ability to catch up to AWS and Azure. Facebook will go through the same pain if it ever decides to enter the cloud market. For what it’s worth, Dropbox is already directionally set on becoming an enterprise company, with or without a standalone cloud unit, so it’s going through the same transition pain that Google is with GCP, albeit on a smaller scale.

Business Imperative

Dropbox has now been a public company for almost two years. At the time of this writing, it’s public market valuation of around $7.5 billion USD, 25% less than its highest private market valuation of $10 billion USD.

Its revenue growth is also slowing down. Below is a chart I plotted of the year over year revenue growth rate between Dropbox and Atlassian, a peer workplace SaaS company whose go-to-market adoption is similarly self-serve and bottom-up, and whose annual revenue level is in the same range of $1-2 billion USD. The latter characteristic is important when comparing growth rate, because your base has to be similar for the growth rate comparison to have any analytical value and not be deceiving. That’s the reason why I did not choose Slack or Zoom. I also did not choose Box, because it’s always been an enterprise-focused, high-touch, top-down sales company, thus materially different from Dropbox even though their core products can appear similar.

No company comparison is apples to apples of course, and I welcome your suggestions of a more appropriate company to place next to Dropbox. But it’s slowing revenue growth, whether in comparison or in isolation, is rather evident.

Dropbox needs growth drivers. Part of that effort is its new “Spaces” product announced in September 2019, a work collaboration software that connects other work collaboration software, like Slack and Zoom. It’s a meaningful effort, as the company moves into the enterprise and as other similar consumer products like iCloud are eating away at its base, but the Spaces's traction level is too early to tell. Furthermore, Spaces as it is currently conceived falls short of Dropbox’s own narrative of becoming a “platform”. The wording “our platform” was used 177 times in its S1 filing. Yet, the original Dropbox file sync was a single-purpose application, and Spaces only appears to be a common “glue” of other workplace tools. None of these products are what you would consider a “platform” -- a place on which other applications can be built.

Building a cloud business would not only make Dropbox the platform tech company it’s been telling the world it already is, but more important, give it the long-term growth and revenue driver it needs to live up to its expectation and valuation. This undertaking is not for the faint of heart and requires technical capacities, solid business rationales, and strong commitment from the top. The business imperative is there, and so are the technical capabilities. But is there political will to commit?

Political Will

Judging from its recent announcement of a $600 million USD stock buyback program, Dropbox management seems to prioritize short-term stock price over long-term growth and ambition. Boosting its own stock price via buybacks may well be related to executive compensations, which is often connected to the company reaching a certain stock price over some timeline. But I don’t want to be totally cynical about this decision. If company leadership thinks the company is undervalued by Wall Street, and they can boost the company’s share price and public perception, which may help with employee morale and even improve retention, then it’s a valid managerial move to make.

The unfortunate tradeoff is that chunk of cash not being spent on product innovation, R&D, and potentially going into a huge and growing industry like cloud, where there are still opportunities to enter and differentiate. As co-CEO of Atlassian, Scott Farquhar, shared during the Morgan Stanley’s NextGen Software CEO Summit held virtually in late March, R&D dollars may yield higher ROI than sales dollars during an extreme crisis situation like the coronavirus pandemic. Of course, Dropbox’s buyback was authorized before COVID-19 became a global pandemic; no one can predict the future.

Further complicating the “political will” question is Dropbox’s frequent change in senior executives over the last year. Rank-and-file employees typically need a quarter to become productive and start hitting their strides. C-suite or VP-level executives need longer to get situated, and even longer still to take on ambitious new initiatives if they choose to. For what is worth, Dropbox’s infrastructure lead who was a key member of the cloud migration effort away from AWS is still with the company according to his LinkedIn, so some valuable institutional knowledge is retained.

At the end of the day, building a cloud computing platform as a business is expensive, complex, and needs long-term vision and commitment. When the idea for building Alibaba Cloud was percolating in 2009, the decisive factor between a go or no-go decision was Jack Ma committing 1 billion RMB a year for 10 years (in Chinese), which he followed through. That’s about $146 million USD per year, using the 2009 exchange rate of 6.83. Alibaba Cloud is now a legitimate player in the global cloud computing industry.

As I shared in Part 1 and in this post, Dropbox has some valuable advantages on its side to build a differentiated cloud business and drive the whole company to the next level. However, those advantages won’t be around forever. Whether the company will put those advantages to work and commit for the long-term is an open question.

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Chinese Version Below

Dropbox应该步入云业务吗?(第二部)

在关于Dropbox是否应该步入云业务的第一部分讨论中,我分享了我对Dropbox在“核心技术”和“产品差异化”领域有些整体优势的看法。再次声明,这里谈到的“云业务”是指基础设施或平台服务(IaaS or PaaS),而不是软件服务(SaaS)。

在此篇文章中,让我们看看构建成功云业务的其他三个维度:企业客户人才,业务增长需求,管理层意愿。

企业客户人才

正如我写的关于Facebook的文章中所指出的,打造云业务的艰难更多与人而不是技术有关。没有对口的人才,再有技术也成熟不起来,卖不出去。简单地说,一个完整的云业务需要四种技术角色:(1)构建产品的工程师;(2)运维平台的工程师;(3)有技术知识的企业销售;(4)客户支持和服务。(具体的职称因公司而异,所以用职称可能会产生误导,我就在此免去了。)当然,总有些特殊的、天赋超人的工程师也许会胜任多种角色,但这种人很少能大规模招聘到。

那么Dropbox在人才获取方面有什么优势呢?

作为一个公司,Dropbox在工程师圈圈里还是享有很高的声誉的。几年前在Wired杂志里记载的离开AWS故事,以及Dropbox活跃的工程师博客,都随时在支持扩大这一声誉。那篇Wired文章里有一个片段淋漓尽致的体现出为什么Dropbox是个工程师的天堂。在Dropbox搭建私有云项目中的一位关键工程师 James Cowling,再决定加入Dropbox之前拒绝了谷歌的一份工作,那份工作是做谷歌最厉害的全球规模分布式数据库,Spanner。他的“我想造点东西”的情绪是所有雄心勃勃,有才华的工程师们的一个常见的副词,总在寻找“极致工程”的机会,那种成就感和影响力是令人上瘾。Spanner其实已经是“极致工程”里最厉害的一个项目了,它的科技和论文激发了许多工程师和许多初创公司的想象力,都想模仿并改进Spanner。我曾经在这种初创公司中的一家工作过,是一家受Spanner启发的开源分布式数据库公司,所以我亲眼目睹并感受过那种“隐”。对Cowling来说,唯一不喜欢Spanner的地方就是它已经存在了。

因此,Dropbox是有些优势吸引技术人才来填补角色类型(1)和(2)的。由于冠状疫情对经济的影响,大势会进入一个精简的时代,许多初创企业会倒闭,招聘技术人才的成本将会降低。当然,许多人,特别是不能承受风险的人,会投奔大公司,我对这种选择也没有什么看法,每个人都要做适合自己的选择。但对于还愿意承受一些风险的人来说,Dropbox是个不错的选择。它足够大足够稳定,可以提供一份稳定的薪水,但还没有大到非常官僚,做不出什么有影响力的业绩,尤其是如果公司愿意雄心勃勃的搭建一个有产品差异化的云平台。(根据2019财年的10K申报,2019年底Dropbox的员工总数为2801人。)

至于角色类型(3)和(4),有技术知识的企业销售和客户支持,Dropbox将会面临一些困难,因为无论在招聘方面还是企业文化转型方面都会面临种种挑战。

招聘方面将很困难,因为Dropbox将与云领域里所有巨头正面竞争,没有什么优势;Dropbox在工程师圈里的声誉并不能延伸到这里。整个市场对有技术知识的企业销售人才的需求都会非常激烈。这是所有云厂商都需要面对的竞争,不仅仅是Dropbox。

从toC到toB的企业文化转型是一个普遍问题。成功的例子也屈指可数。GCP正在经历这一转变的痛苦,阻碍了它赶上AWS和Azure的进度。如果Facebook决定进入云市场,它也会经历同样的痛苦。值得一提的是,Dropbox已经在向一家企业服务公司的方向转型,不管做不做云业务,因此它也正在经历与GCP相同的转型痛苦,尽管规模小一些。

业务增长需求

Dropbox已经是一家上市近两年的公司了。在撰写本文时,它的市值约为75亿美元,比上市前最高100亿美元估值低了25%左右。

其收入增长率也在放缓。下面是一个对比Dropbox和Atlassian之间的年收入增长率图表。Atlassian是一家同行的企业SaaS产品公司,其产品采用类似与Dropbox的自助式,草根式的从下往上的商业和销售模式,其年收入水平也在10-20亿美元的相同范围内。在比较增长率时,收入体量在相同范围内很重要,因为增长率的基数必须相似,分析和比较才有价值,而不会有误导嫌疑。这也是为什么我没有选择Slack或Zoom。我也没有选择Box,因为它一直是一家专注于大企业服务、采用从上往下的商业及销售方法的公司,因此与Dropbox有着实质性的不同,尽管它们的核心产品可能看起来很相似。


当然,没有哪两家公司是完全一样的,我也欢迎读者提建议,推荐一家更合适的公司放在Dropbox旁边做比较。但Dropbox的收入增长放缓,无论是与其他公司比较还是单独来看,都相当明显。

Dropbox需要新的增长引擎,也在往这方面努力,比如在2019年9月发布的新产品,Spaces。这是一款连接Slack和Zoom等其他办公协作软件的办公协作软件。随着公司进入企业服务行业,也随着其他竞品(比如iCloud)侵入Dropbox的核心用户群,这种产品是既有必要的,但现在看Spaces的使用深浅度还为时过早。此外,Spaces这个产品目前的形式很难达到Dropbox为自己的做一个“平台”的定位。“我们的平台”一词在其S1文件中被使用了177次。然而,最初的Dropbox文件存储加同步软件只是一个单一用途的应用程序,而Spaces似乎只是其他办公协作工具的一个“粘合剂”。这些产品都不是大家公认的“平台”:平台一个可以搭建其他应用程序的地方。

建立云业务不仅会让Dropbox成为它一直在告诉世界它已经是的真正的平台科技公司,更重要的是,这也是公司需要的长期增长加收入的引擎,从而有朝一日达到估值的预期。步入云行业需要胆魄,需要技术能力、坚实的商业基础和高层的坚定承诺。业务增长需求是存在的,技术能力也是。[[链接到第1部分]]]。但公司高层有胆魄和坚定承诺吗?

高层意愿

从Dropbox最近宣布的6亿美元股票回购计划来看,Dropbox管理层似乎把支持短期股价的优先级放在了长期增长的前面。通过回购提高自己的股价很可能与高管薪酬有关,高管薪酬往往与公司在一定时间内要达到一定的股价挂钩。但我不想对这个决定完全愤世嫉俗。如果公司领导层认为华尔街低估了公司的价值,他们可以通过股票回购提升公司的股价和公众认可,这可能有助于员工士气,甚至提高留用率,那么这也算是个合理的管理举措。

可惜的是,这笔钱就不会花在产品创新、研发上,跨入一个像云计算这样巨大、不断增长的行业中。Atlassian联合CEO,Scott Farquhar在摩根士丹利3月底举行的NextGen软件首席执行官峰会上分享了这一点,在像冠状病毒这样的极端危机情况下,研发可能会比销售的投入有更高的回报率。当然,Dropbox的股票回购计划是在COVID-19全球化之前授权的;没有人能预测未来。

使“高层意愿”这个问题更加复杂的是,去年Dropbox频繁更换高管。普通员工通常需要一个季度的时间适应新环境,才能开始提高工作效率。副总裁级别或以上的高管需要更长的时间来适应新公司,以及更长的时间来实施自己的新项目,新措施。值得一提的是,根据Dropbox的基础设施负责人(他曾是迁移AWS项目里的关键成员)的LinkedIn,他仍在Dropbox工作,所以起码还保留了一些极有价值的经验和知识。

归根结底,要打造一个完整的云计算平台和相关业务成本高昂、复杂,需要长期的愿景和定力。2009年,当构建阿里云还只是个想法的时候,决定干还是不干的关键因素就是马云承诺每年10亿花十年的投入,而且他没有食言。以2009年6.83的汇率计算,每年投入约1.46亿美元。阿里云现在已经是全球云计算行业里不可忽视的一个玩家了。

正如我在第1部分和本文中所分享的,Dropbox如果想构建一个有差异化的云业务,从而推动整个公司更上一层楼是有一些宝贵的优势的。然而,这些优势不会永远存在。公司是否会把这些优势发挥出来,并有长期的意愿坚持下去,这是一个悬而未决的问题。

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