Dropbox Weaknesses Don’t Justify Its Lofty Valuation

dropboxBy Dropbox (https://www.dropbox.com/branding) [Public domain], via Wikimedia Commons

Dropbox has seen rapid growth over the past five years. Last week, the cloud service provider said it plans to raise $250 million in fresh funding. The latest round of funding is estimated to value Dropbox at around $8 billion. Past investors include U2’s Bono, Sequoia Capital, The Edge, Y Combinator and Accel Partners.

On November 13, the company launched “Dropbox for Business” aimed at enterprise customers. Though its consumer business has risen mainly through word of mouth, the enterprise business will be a big challenge for the company. It will have to prove its mettle while competing with giants like Microsoft Corporation (NASDAQ:MSFT), International Business Machines Corp. (NYSE:IBM), Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN).

But instead of proving how it’s better than the giants, Dropbox is hiding its weaknesses behind a lofty estimated valuation of $8 billion, says Ted Hulsy, eFolder’s vice president of marketing. Hulsy says that corporate employees may be using Dropbox, but the corporations themselves need more robust features that Dropbox clearly lacks.

Dropbox’s weaknesses

Ted Hulsy highlights the following weaknesses in Dropbox for Business:

  • Dropbox for Business is still hosted on Amazon.com, Inc. (NASDAQ:AMZN) servers. So, it can’t provide storage solutions on-site, or on a local server. In contrast, its competitors allow their enterprise customers to host their data in public as well as private settings. It gives corporate customers more control over their environment.
  • Dropbox for Business’ file sharing policies are limited. Of course, it does let users control permissions to shared links and folders. But its competitors have more stringent policies such as download limits, expiration dates, download notifications and temporary guest accounts. These additional policies provided by Dropbox’s competitors are very useful to corporate customers, especially while handling sensitive data such as audits, contracts, records, etc.
  • A large number of enterprises still depend on a file server. But Dropbox for Business can be operated on laptops, smartphones, tablets and desktops. Its competing solutions provide the ability to cloud-enable a file server. That lets users access information from the server on any device, and changes are replicated back to the file server when a user edits a file.
  • Dropbox for Business can’t integrate with directory services if an enterprise doesn’t have an existing account with one of Dropbox’s identity management partners.
  • Dropbox doesn’t comply with HIPAA or Health Insurance Portability and Accountability Act. Other major cloud service providers have technical safeguards, physical safeguards and relevant policies to act as a business associate.
  • Though Dropbox is a big bandwidth hog, it doesn’t let administrators set bandwidth limitations. Also, Dropbox for Business doesn’t allow administrators to restrict the type of files users can upload to their Dropbox folder.

With so many weaknesses and lack of key features, Dropbox puts enterprise customers at the risk of data loss, data theft, and compliance violations.

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About the Author

Vikas Shukla
Vikas Shukla has a strong interest in business, finance, and technology. He writes regularly on these topics. - He can be contacted by email at vshukla@valuewalk.com or on Twitter @VikShukla10

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