Q&A: The cloud collaboration firm that’s still on-prem

Vineet Jain Egnyte

Tell me a bit about your background.

I finished my undergrad in engineering and got a job with Tata Motors in India. I worked there for three and a half years writing C code on VAX/VMS platforms: you can see how I’m really showing my age now! I had come to England to visit my sister in 1992 and I decided to contact a recruiter just to see what might come up. Within a week I had two job offers, one with BT – I didn’t even know what the acronym stood for – and the other with Boots. My deciding factor was purely physical location because apart from my sister I had no family here. I was a 21-year-old who wasn’t even used to a cold winter. So I chose Nottingham.

But after a year I wanted to do something bigger – I wanted to go to the US. I spoke to recruiters and I got a couple of offers. One was Computer Associates in Pittsburgh and one was Bechtel in San Francisco. Purely because the weather’s better in San Francisco I did that for a while, and then I joined KPMG where I started as a consultant. After four and a half years I was the North West District practice director, a very fancy title.

At that point I was pretty clear I wanted to build my own product. I didn’t leave my family to work for someone else. I started [supply chain software firm] Valdero, and quickly took on funding from Kleiner Perkins and Oracle’s Ray Lane. But although we grew the company very fast, it wasn’t all rosy. Enterprise software was very competitive and Oracle was buying everything anyway. After four and a half years the word came down from the top that we should sell the company. So we did. It wasn’t a fantastic exit by any means but it wasn’t terribly bad either. It was a humbling lesson for me – I felt I had personally failed to create value for employees, all of the employees. That’s a sense of failure I still carry. That also motivates me. Having loads of foolish optimism – and you need that to do startups – I started again with Egnyte.

Why cloud collaboration and file storage?

We have landed in a very hot space. Without using the word ‘vision’ because that’s so full of it, and I’m more of an execution guy anyway, the two things that I started off with in the beginning and wanted to make sure this company does, are happening. We’re also very lucky – it’s a hot space. We’ve grown to 160 employees and I’ve only raised $33m, with the last round coming from Google.

And when you started Egnyte what were the challenges you thought you could solve?

The most honest answer is that all I was trying to do was to replace the physical file server. I didn’t even use the word cloud, even though it was hosted, multi-tenanted and this and that – we called it on-demand, and it was pay-as-you-go. After a year we replaced the words on-demand with cloud and we were like, ‘holy shit we’re a cloud company’!

You said there were two things you wanted the company to do?

I was very clear on day one that I’m going after the enterprise. In my lexicon you’re either a consumer play or you’re an enterprise play. You’re either a cat or a dog, you can’t be anywhere in the middle. SMB is indeed a viable pathway to bigger accounts, but if you want to be a big viable company for the long term, you need to focus. This market has gone past early adopter stage and is entering mainstream. We’re definitely reaping the benefits.

The other big thing was that I had no confusion or misconception that anything that used to work on a local area network at speeds of 100 Mbps or 1Gig or whatever your network speed is, if you are replacing that with something purely in the cloud, it won’t match it in terms of latency. Plus for certain verticals there are compliance issues with data not being on-prem or being readily available when needed.

I was making the big bet that this is about perception management: your data used to be tangible – you could literally touch the server in a closet – now it’s in someone else’s cloud there’s a perception you’re losing control. The bet I placed was that this is about complete device and data mobility. Today, we have three data centres [two in the US and one in Amsterdam]. Last week I learned that 47% of data access is now from mobile devices. Two months back that number was 43%. BYOD is real. Ease of use, any device access is absolutely critical. But at the same time people want in-the-office performance and IT is still responsible for regulatory compliance needs.

As everything starts going into the cloud the pipe that you have, the bandwith that you have, becomes a choke point. So my thesis was this: indeed you have data up in the cloud but you also need subsets of data on-prem. You need data closest to the point of consumption. IT needs a central point of control so they don’t need to change permissions – it just works. So the big bet I am making is that hybrid cloud computing is imperative. There’s been too much hype about the cloud – it’s like the mythical paperless office that never happened.

You said you can’t be a cat and a dog. But you are trying to be on-premise as well as cloud.

OK you got me there! I was talking about the point of view of the target market…

But there are some companies just trying to do cloud… I met Box for example and I asked Aaron [Levie, CEO] if they would ever do an appliance or something like that, I think you know what his answer was.

Aaron believes everything should be in the cloud. Aaron is a good example because last July when I raised my ‘C’ round, word gets around the Valley pretty quickly. And Google Ventures which is literally next door to us said, ‘would you like to pitch to us?’ Why would I want to pitch to Google when they believe everything is in the cloud? I’m completely counter-intuitive to them. But they said pitch to us so I did. Within forty days they gave us money. I asked Bill Maris who’s the head honcho there, ‘why did you invest in this company’? He said ‘you’re the first company that has pitched to us and said it’s not about the cloud. It’s about device and data mobility, where on-prem has a critical role to play, and we are recognizing that’."

End users need a consumer-like experience but IT needs complete control, including giving the users in-the-office performance. What we announced yesterday was that until now, the cloud part was ours. Our walled garden. What we have announced is that if you are a large customer or service provider you can put the storage part – not the processing part – into Amazon, Azure, Google storage or even NetApp storage. That gives you two things.

Your IT has complete control of data not just in the cloud but on-prem, and even the cloud of your choice. But if you are a large company and you have your contract with the [Amazon] S3’s, the Azures of the world, you can leverage that from a pricing point of view. But the most important thing is that you get the data closest to the point of consumption. Storage is not where the fun is. Storage is a race to the bottom. The price Amazon are talking to us about storage has gone down 24x compared to when we started the company. Are they going to start paying us to use their storage?

For us it’s all about complete control. Now you don’t have to live in my world only, which is what Box or Dropbox force you to do.

If a CIO is using Egnyte they end up with data on-prem, they have data in the cloud, in different clouds. Isn’t that adding to the complexity?

In general you’re right. It’s often a very binary decision. On-prem is on-prem. We have customers who only have data in the cloud, too. But we hide the complexity whether you want your data in the cloud or on-premise, and regardless of whose cloud you want to use. But the excitement is not in the storage layer, it’s what you can do on top of it.

Box and Dropbox are both talking about their IPOs being quarters away rather than years away. Those funding events are going to leave them with very deep pockets. A lot of end users know the brands – it’s pretty competitive for Egnyte…

Dropbox has been a great rainmaker – everyone has heard of it but IT hates it. Box is definitely out-marketing everybody. But I don’t have to have any schadenfreude – they don’t have to fail for us to succeed. But their net burn is $8m. They’re losing $96m a year. I will be amazed to see when they do an IPO, with that kind of loss. They’ve raised $310m. I’ve raised $33m. But the thing in our favour that none of these guys do today to the best of my knowledge is that we’re the only cloud company that is perceived to be a friend of the storage vendors – NetApp, EMC, HP, whoever. Because we don’t threaten them – we embrace on-prem. So we can leverage that to get an unfair advantage.

So you’re absolutely right that sometimes we’ve seen great marketing; I’m not sure Box is as big as the shadow it casts. Box touted that one of their big customers is Balfour Beatty, the big construction company. Then I learned that Balfour Beatty is using Egnyte. When they were doing the Dallas Fort Worth [airport] project, a $2bn project, they had to deal with heavy lifting in terms of the number of files and they wanted fast on-prem access in the shared construction site, so they use Egnyte. All of their projects use Egnyte. All of them. It should be designed for enterprise from day one. Starting in consumer and morphing into enterprise isn’t the same thing. So marketing can cloud the real capabilities of a platform, but the best way we can fight that battle is with partners.

I know as a privately held company you won’t divulge revenue but how is growth?

From 2011-2012 we grew sales 300%. We grew bookings 4x, and from a recognized revenue point of view the company is in the $15m to $20m range. Demand is just crazy right now. We need to scale this operation now from a people point of view, a process point of view and of course a back-end point of view too. We need to scale and keep on scaling, because demand is coming. That’s what keeps me up at night: how to grow the company fast enough to meet demand.

 

 

 

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