Developers

Why Box needs developers. Now.

March 27, 2014: 5:00 AM ET

Every tech company needs to woo developers. But a coming IPO accelerates the case for Aaron Levie's file storage company.

Box's Aaron Levie talks with Fortune's Jessi Hempel at the 2014 SXSW Interactive conference in March.

Box's Aaron Levie talks with Fortune's Jessi Hempel at the 2014 SXSW Interactive conference in March.

FORTUNE -- Box most often gets compared to online storage competitor Dropbox. But increasingly, it seems the soon-to-be-public startup is following the path of enterprise tech heavyweight Microsoft (MSFT). Why? The answer has more to do with its ambitions to build out a developer ecosystem than its impending IPO.

Box's growth strategy, per its recently filed S-1, has several parts. Increasing its global customer base is an obvious one. The company also says it will target industry verticals, a.k.a. industries like health care, financial services, and media and entertainment. But Box knows it can't possibly be all things to all customers. That's where its "platform" strategy comes into play. The company has long talked about developing an ecosystem of third-party developers around its technology, which lets corporate customers securely store and collaborate on documents online. It's also let large corporate customers take advantage of its software development tools to build their own customized applications. According to its recent filing: "By supporting these strategic relationships, we believe our platform ecosystem will extend to new use cases that deliver more targeted, higher value solutions."

Expanding its developer base could help Box attract more customers. And charging business customers for use of its software-building tools could represent a new revenue stream for the company, whose revenue growth will now be closely watched by Wall Street.

MORE: Cisco's Padmasree Warrior: Why I'm backing Box

That's why, at Box's developer conference in San Francisco earlier this week, CEO Aaron Levie announced a slew of new features for developers who use the company's software tools in their own applications. There's Box View, which converts files stored in Box into a version that's easy to open and view without downloading. There's also Metadata, which allows developers to attach information like geographic location to content stored on Box. More significantly, the company introduced an alternative pricing model to its per-user rate, which has traditionally only charged corporate customers based on how many employees are accessing the service. Now that more enterprise customers are using Box to build their own customized apps too, the company will also offer an option for large customers to pay a set rate for usage of its platform, regardless of how many end users they have. (For smaller third-party developers, Box's software development tools will largely remain free.)

"Our mission is simple," Chris Yeh, SVP of product and platform at Box, wrote in a blog post. "We'll build the best products to power the content and data for your applications -- leaving you free to focus on building the best apps to help companies take advantage of the massive changes in how people utilize software for this new information economy."

According to Box, more than 35,000 developers are currently building services on top of the Box platform, and over the last year, usage of third-party apps by Box customers has increased 292%. How are developers and corporations using Box to build their own applications? Examples include a health care startup that utilizes Box to store files sent between patients and doctors, and a company that used Box as a content storage and collaboration platform for building out an application that lets executives access agendas and other boardroom documents via tablets.

MORE: How to tell the difference between Box and Dropbox

Relatively speaking, it's still early days for Box's developer ecosystem. But while CEO Levie is fond of bashing Microsoft, he can also learn a lot from the much larger and more profitable company's past. (A fact that is not lost on Levie -- he recently brought ex-Microsoft exec Steven Sinofsky on board as an advisor.) Indeed, building out an ecosystem of developers is something Microsoft has had immense success with. Sure, the Redmond-based behemoth has had its hand in many different devices and applications over the years (it goes without saying that not all of them were successful), but Microsoft's reach and stickiness has greatly expanded because of the sheer size of services and enterprise apps built on top of its products. And while other tech giants like Google (GOOG) and Apple (AAPL) are probably the best examples of this phenomenon in the consumer-facing mobile world, Box's future rests in its continued adoption in enterprises -- Microsoft's bread and butter.

"The best software products are the ones that combine a great set of features that work right away when you start to use the product along with capabilities -- often called a platform -- that can be used as building blocks by programmers to both enhance and tailor the product for specific needs of an individual or organization," Sinofsky wrote in an e-mail to Fortune. "This is something that is critical to the long term sustained success of any software product."

A lot of tech companies -- big and small -- espouse the need for a thriving developer base. But few have done so as largely and passionately as Microsoft has. And now that Box is going public, it has even more pressure to prove its growth strategy (developer ecosystem included) will work. For the moment, the company is losing a lot of money because of its high spend on people, sales, and marketing. Lucky for Box, its losses are growing at a lower rate than are its revenues increasing. And if it can sell a sticky platform, not just an application, that trajectory could be accelerated. Just ask Microsoft.

Editor's note: This story has been updated with additional comment from Box advisor Steven Sinofsky. 

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