Is education the vertical that will save Dropbox?

Make no bones about it: Dropbox is in an epic struggle to justify its existence. Will the education market be part of the solution?

20151104 drew houston dropbox open2

Dropbox co-founder and CEO Drew Houston speaks at the company's Open conference in San Francisco on November 4, 2015.

Credit: Blair Hanley Frank

Life is pretty stressful at Dropbox HQ. The company, once very much the darling of the so-called unicorn club, was comfortable in its billion dollar-plus valuation. After all, the hundreds of millions of people who use its product justify its valuation, right? Unfortunately, in today's funding and valuation crunch, users are less important than customers. That's a distinction which was surprisingly ignored only a few years ago, but today it's all about revenue.

Dropbox does have revenue, of course, but the number of paying customers -- when compared to the company's not-insignificant costs -- paints a difficult picture. That's the reason that Dropbox, perhaps going against its founder Drew Houston's true belief, is finally targeting the lucrative enterprise opportunity -- a busy space, but at least one in which users or their employers have the expectation that a product needs to be paid for.

Just the other day news broke of the giant chrome panda statue that Dropbox had commissioned for its San Francisco headquarters and the hastily written note beside it imploring its staff to look for ways to save money (it even emerged that Dropbox staff were losing some of their privileges -- gym laundry and the ability to invite unlimited guests to on-campus dinners, for example). The fact that these perks ever existed, and that anyone thinks it newsworthy that they cease to, is a pretty scary indictment of the technology industry and its largess, funded by investors. But that is a topic for another day.

In any case, Dropbox has a problem. A problem that, at least (and at last), the company is acutely aware of. Given all of this, it is interesting to see Dropbox launch its Education product today.

Dropbox Education is designed and positioned to meet the specific needs of educators -- across colleges, schools and universities. This is, of course, a massive opportunity -- not only because there are lots of people working and studying at educational institutions, but because inculcating students into particular tools and processes makes it more likely that they will use those same tools later in life.

Dropbox has already been investing in the education sector, and already has 4,000 educational institutions using its product (one assumes that means as paying customers, rather than simply "users"). Previously announced partnerships with Ingram Micro and Synnex will help deliver the solution into educational institutions worldwide -- institutions can work with these partners or with Dropbox directly.

In terms of actual product differences, Dropbox Education is tailored to most closely track to the management, security and collaboration needs of institutions, not to mention the economic ones. According to Dropbox, what that means in terms of specific product and packaging features includes:

MyPOV

The elephant in the room, of course, is that both Microsoft and Google offer educational institutions free (or close to it) access to not only file sharing (via their OneDrive and Drive products, respectively) but also a full suite of office productivity tools -- document writing, spreadsheeting, presentations, etc. Both companies also focus very heavily on the educational sector.

Given that the number of educational staff or students who don't need access to office productivity applications is virtually zero, it's a fair assumption to make that the number of potential customers for Dropbox who don't already have access to a file sharing tool is negligible. Thus, the question needs to be asked whether Dropbox Education brings any particular benefits for educational institutions that they can't already obtain via their Google or Microsoft relationships. There has to be some pretty significant value proposition for an institution to stump up $49 per student per year to get something which likely comes with another offering anyway.

I think this is an important move for Dropbox, less because education is a big opportunity for the company and more because it gives an indication that it's thinking seriously about opportunities that aren't so consumer-focused.

I am reminded, once again, of the comment that the late founder of Apple, Steve Jobs, made to Dropbox CEO Houston when they met years ago: Dropbox is a feature, not a product. Aside from the employee perks, panda statues and in-house catering, that is the real crux of the matter for this Silicon Valley darling.

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