Box Moves To Change The Way It Charges Customers

The way enterprise software companies make money is changing, and Box, a much-watched upstart that filed to go public earlier this week, the change couldn’t come at a better time.

At Box Dev 2014, its developer conference in San Francisco, executives from the online-storage company revealed a plan to charge customers for using its infrastructure.

Box, to date, has charged business customers the same way everyone from Microsoft and Google to Oracle and Salesforce typically charge: a monthly or annual fee per user or “seat.”

Now, for some of its enterprise customers, Box will charge based not on the number of users but on access to its infrastructure. That means any interaction between Box’s services and a user—whether an employee, customer, or partner—that takes place through its application programming interface. Box calls these “API actions.”

A contractor uploading an invoice into an accounting system might be an example of an API action, as would an accountant reviewing that invoice while approving payment. Traditional seat licensing doesn’t cover this scenario well, since the contractor isn’t an employee who’d be covered by a companywide deal—yet she makes use of the same Box infrastructure.

A Money Box

It’s pretty clear why Box needs to make a change: While its revenues are growing quickly, more than doubling to $125 million in the last fiscal year, it lost $158 million in the same period.

Cloud storage is where Box began, but the field remains vastly competitive, and seems destined to become a commodity offering.

Instead, Box is reaching out to developers to help it grow into areas like document management, workflow and collaboration. That’s one of the reasons Box is changing the way it charges for its storage, file sharing and syncing service.

“The business of storage is getting cheap,” Chris Yeh, Box’s senior vice president of product and platform, said in an interview. “We have to give tools to developers to help them build on top of Box. The future is using box to build what they need.”

Third-party software developers won’t pay a fee, since Box wants to encourage them to build its tools into their products. But enterprises that make use of Box’s tools for uploading and displaying content will pay a fee above a certain volume of activity, starting at $250 or $500 a month depending on the product.

The updated pricing scheme reflects how more and more customers want to use Box, Yeh said. The seat-based license was just the way the sales team knew how to sell, he added.

Companies often want to share files and documents they store inside Box with partners and their own customers, and that makes seat licensing less useful, Yeh said.

Box has long known its online-storage business couldn’t be sustainable because prices would keep falling to near nothing. That’s why it’s building its business out into higher order applications like workflow, collaboration, search, auditing and the like, Yeh said.

Outside The Box

At Box Dev, the company also released a couple of new features. One is a document-sharing service called Box View that makes use of technology the company bought last year when it acquired Crocodoc. Box View renders documents into standard Web pages. Developers can use it to build customized document viewers. (A free version is available which displays Box’s logo.)

One way a developer might use Box View is to create an animated carousel or a flipbook kind of visualization, Ryan Damico, Crodococ’s former CEO and now Box’s director of platform, said during his Box Dev presentation. Companies could use Box View if they are already Box customers, but it also works with other storage systems. It’s the first standalone product separate from Box’s core storage offering that the company has released, Yeh said, and it won’t be the last.

Box also said it’s close to the general release of Box Notes, a collaboration tool that it announced last year.

Photo of Box CEO Aaron Levie (left) with Zendesk CEO Mikkel Svane by Anthony Myers for ReadWrite