Hype, Reality, and The Post-Shelter World with Box CEO, Aaron Levie and SaaStr CEO, Jason Lemkin

deeply thank him for joining the end of a great day in the enterprise. And I think it's always fun to be with Aaron, but for this topic, the real future of work, I think it's especially fun because I can't think of anyone who we've been talking more about digital transformation, future of work, when will things go online, the office 2.0, when will the office finally go on the internet? I mean, I can't think of anyone. You or you and me have been talking about this stuff for the better part of two decades, right?

Oh man, you just brought up like 6 terms I haven't heard in 15 years.

Yeah, but now everyone's a future of work fan, right? But it's the same idea, isn't it? It's just finally happening.

Well, yeah, it helps when the internet is about like 100 times faster and computing and storage is about 100 times cheaper. So it turns out that that's really important to, uh, to being able to enable these technologies. But go long for certainly for anyone, uh, Anyone younger on, you know, on this video than us, nobody will ever have respect for how much work it took back in the day. We would have to go fly around to conferences all throughout the country and stand at our little booth as founders. And I literally remember handing out like t-shirts just to try and get signups, just to promote like where work was going. And those were Those were the days, but I'm kind of, I'm a little bit glad that some of those, some of those days are over.

Yeah, so let's, there's a bunch of things I want to chat about, and I grabbed a bunch of your tweets to use as props.

Oh boy.

And I want to talk about, we chatted about a little bit backstage before we started, almost the different phases we've been in through March 15th, because you have even a different lens. But to me, this is an interesting chart. This was obviously right after we went into shelter. But this is Box and Zoom, right? So this is super interesting because this isn't me using Box in my left monitor and then firing up a Zoom call in the right. This is a new workflow, isn't it? This is a new use case that looked interesting before we all work from home, but exploded, right? So what have you learned? What does this mean? And like, what are we doing actually differently now than before March 15th for reals?

Yeah, well, I think it's, first of all, the one dynamic is that I think for probably anybody who would, you know, be paying attention to the SaaS universe and joining us today, probably actually less has changed about our daily lives than the vast majority of the world.

Yeah, you and I, we're working the same.

We're working more or less the same. We're in Slack channels, we're in Zoom calls, we're, you know, using digital workflows and, you know, storing data in the cloud. But the rest of the world, this was an overnight just shift in how people worked and how they communicated. And, you know, the easiest way, you know, the easiest way for us to think about it is just if you took 8 hours of in-person meetings a day that maybe we previously would have been if we were at a big, you know, CPG company or a bank or retailer or a life sciences company, That whole model is blown up, and now obviously everything that you're doing has been virtualized or digitized, and previously it just, that just wasn't the case. And so, you know, we saw it really early in our data. One of the earliest signals was sort of our change in IP address. So people moving from their primary work location to a remote location, and obviously that just sort of, you know, became exponential right around the middle part of March to the end of March. And then we saw a bunch of other characteristics that were changing in how people were working. And I think it's ones that now we're all collectively experiencing together. I think it's really how big of a shift this was for the worker that traditionally was working, you know, on analog business processes with in-person settings, how big of a change this was in their world where where all of a sudden, you know, now their job is on a computer all day long, interacting with all of their colleagues, and how big of a shift this is in terms of what that work looks like. And one thing that we're— I'm optimistic about is that even as the health environment, you know, hopefully gets better as soon as possible and we're back in offices, I'm optimistic that this shift in how we work continues forward, even kind of post the pandemic dynamic, just because I think people are going to see like, well, wait a second, I can just get on a video call and talk to my partner in a different country. I don't need to actually go and get an airplane every time I want to do that type of interaction.

Yep. And are there on the— going, are there new— have you, in talking to the customers that were, especially where you've seen acceleration since March, are there new use cases? Are there new uses of Box or an increase of prior use cases where maybe people are using Box a lot more for a certain reason than we might have in a traditional office environment or before all this? Has something changed with some of your bigger customers?

Yeah, so we have seen that there has been a, frankly, just a much more accelerated push to, you know, obviously in our buzzword terms, digital transformation, but for most companies, this is a very real idea, which is I maybe had a roadmap that was 2 or 3 or 5 years of projects I was gonna go implement, and I have to now both accelerate and reprioritize that list of projects. And, you know, it's interesting, When you look at the environment we're in, it's actually incredibly clarifying for most IT organizations exactly what they need to go focus on. Compared to a year ago, digital transformation actually had way too many sort of both nuances and sort of vectors you could go down that actually weren't as strategic.

Everyone had a pet project, right?

Everybody had their digital team and 5 people on that digital team were looking at blockchain projects and 3 people on that digital tech team were looking for long-term AI transformation. And at the exact same time, that company hadn't moved basic applications to the cloud. And so what this environment is doing is every enterprise is taking inventory of how they work, how the people in their organization can collaborate, how they work across their supply chain. And it is to some extent a bit of back to basics. I mean, It's incredible that the mainstay technologies of this era have been technologies that we've had for 20+ years. It's just they finally work well, and they have the ability to be ubiquitous all at once because we all have to use them to survive. So whether it's cloud storage or cloud video or messaging, I mean, you know, Ray Ozzie somewhere is out there being like, what the fuck, guys? I came up with all this stuff in the mid-'90s. Like, why is this now finally happening?

Sort of my question. Yeah.

So I think there's definitely a lot of cognitive dissonance if you've been doing this for so long, but the reality is most of the world hasn't been doing this for more than the past couple of years or the past couple of weeks.

Yeah. So let's talk about— I hadn't really— the pet project, it's interesting. I didn't mean it as a pejorative term, but it's true, right? Digital transformation has led every stakeholder in the enterprise, every C-level or senior person to to throw a chip in the table. What do they want to accelerate this year? And there's a fixed budget. There's only so much capital out there for these projects. Talk, tell me a little bit about the CIO-level conversations you've had since March. You don't hear about the blockchain initiatives anymore? Is it really just like 3 projects that I need? I need like, you know, sales, procurement, collaboration. What are the actual conversations like?

Yeah, I think the easiest way to think about it, that we kind of keyed in on early on was almost just like a Maslow's hierarchy of needs for IT, right? So it's like, what are, what, like, you know, before you get to kind of total enlightenment, what are the fundamentals that you're gonna need? What's the shelter of IT? And that's your basic cloud infrastructure. That's being able to do flawless video calls. That's being able to have a means of communicating in real time. I mean, I literally cannot imagine how we could run our company if we were only on email and we had, you know, sort of phone conference calls. Like, I just actually don't know how you would run a business before you had Slack, before you had Zoom or Webex or Google Meet or whatever. Like, I don't know how you could actually get your teams together virtually. And so, but there are literally thousands and tens of thousands and hundreds of thousands of companies out there where that's either being implemented right now for the first time, or frankly, it hasn't even been implemented yet. And these companies are still trying to coordinate and triage all of their work over email and over legacy ways of working. So there's a Maslow's hierarchy of needs, which is like, I gotta get my fundamentals for how do I store data? How do I communicate? How do I have core applications? Like you said, CRM, being able to work across the supply chain, you know, the kind of foundational ERP systems. And I think what's happening is companies are realizing that the really big sort of flip the business model on its head project and we're going to go and do a distributed ledger technology and all this, like that's going to have to get punted because we're in core survival mode right now. And so the way I would sort of deduce it is core productivity, data security, and cost savings have been the three big areas that we've seen companies focus on and CIOs focus on. If you don't have something that lines up to one of those three, It's, it's going to be really hard to get the attention.

Slow those down again. Sometimes you're a little fast, just so I can catch up.

Yeah, yeah, I'm sorry about that. We're trying, I'm trying to pack in like 4 hours of content right now.

So, okay, that's good.

Productivity, so like you've got to make business be able to function better, faster, smoother.

Yep.

Security, because now everybody is, is in this remote and distributed world and data security privacy is only going to get amplified. And then being able to save money, like you have to be able to prove that you're going to save my business money. Those are the only three that get funded in this environment. And, and so you have to make sure that, you know, from a software standpoint that you're able to help with those angles.

So let's actually, that's fun. Let's dig into those three, but let me step back and let's talk about content and Box. And Box is a pretty rich application today, which we can chat about. But let's talk about kind of the nuclear element of content, right? I feel like I'm struggling, and I'm not a CIO, but I'm struggling with content. I mean, the Slack and the Zoom is an obvious, how would we run our companies without Zoom or Google Meet? But I'm even struggling to find content in ways that even though I've always been on the web, right, I've had people— I could walk down the, you know, ask my friends, ask Brendan or Amelia, where is that prospectus? And it's not really that funny because we may be stuck at home for years. So is content in the core— people thinking about some of these core pieces of Box a little differently than in March? Are some things going from elective to mandatory, or that's different?

That, that is— that shift is, uh, definitely starting. I think, you know, video and, and kind of core communications was, was at the lowest level because you couldn't— you just couldn't even, like, you know, get your teams together until you could do a video conference or, uh, or, or kind of channel conversation. Um, this idea of content fragmentation, uh, and my data is in 3 or 5 or 10 different places is now being absolutely kind of amplified and becoming front and center for a lot of companies. If you go to an average life sciences company or a bank or a healthcare provider or a global manufacturer and you say, I want to get the latest financial document or the latest manufacturing file or the latest marketing campaign, there could be a dozen places where that content could live, which means a dozen different ways where you need to secure that data, a dozen different systems that you have to maintain a dozen different platforms you have to back up and make sure are redundant. So what we're trying to do at Box is basically wipe out all that mess and say, what if you had one platform that connects to all of your applications, whether it's Zoom or Webex or Teams or G Suite or Office 365 or Slack? And that's our whole strategy. Fortunately, I think companies are now paying more and more attention to that. I mean, we've only been at this 15 years, but I think people are starting to realize that, oh wow, there's actually an unbelievable amount of value in this data I have to protect it, I have to secure it, I have to drive business process around it, and we're certainly trying to make sure that we can support our customers as much as possible.

So I want to talk about that second piece you had, which I think was security, right? The first one was productivity. When you're having CIO-level conversations today, which of those buckets are you framing Box in?

I would say that security is probably the most impactful, where our differentiation shows up the greatest. This is now 15 years of innovation in data security compliance and protection of content. And that happens to coincide with obviously some of the biggest challenges around cybersecurity, data compliance and privacy, you know, GDPR, CCPA, who has access to your information, all of those issues, those are front and center for every organization. So we, we, we probably differentiate the greatest on, on our security and, and, um, uh, advanced capabilities around that. However, more and more our customers are saying, I want to go and simplify my IT environment so I can reduce spend and get onto a common platform to manage all of my content. So I do think we hit all three, but security probably is the biggest driver within our customer base.

Okay, I want— I do want to dig in on that and ask you some thoughts. But on the third one, on saving money, the third vector was saving money, right? How does Box, just as a use case, as a case study, how does— and I should know this, but I don't— how does Box save an enterprise money?

You're not thinking about that all day long?

I— well, there's some things I can intuit, right? In all seriousness, right? Uh, but, but there's some subtle elements to here, and it's not just soft costs, it's hard costs.

What are—

what's the pitch? What's the pitch to save money?

So, you know, it's different by company size, uh, but if you go to a company that has 5,000 or 10,000 or more employees and you, and you were to, you were to get this perfect sort of bird's-eye view of where information is stored, what you're going to find is effectively a plethora of SharePoint sites, document management systems, storage, network storage arrays, FTP servers, data rooms, and—

Yeah, 20 systems. 20 systems.

—backups to all of those systems. So, so for whatever reason, and I blame myself that it's taken this long, but, but for whatever reason, when you think CRM, you think, okay, there's one platform for CRM. When you think ERP, you think there's one platform in the cloud with, with ERP. When you think HR, you think there's one platform in the cloud. I'm going to move to Workday or SAP or Oracle. When you think content, people are totally fine with that can be my data center, I'll have it in my back office systems, and I'll keep paying these exorbitant rates for managing all that infrastructure. We, we are, are really ultimately trying to be the platform where you can manage all that content and then connect it up to all of your applications. And just as you would not accept having multiple CRM systems or multiple ERP systems or multiple email systems, we don't think the future is going to be about having multiple content silos in an enterprise.

I think it's terrifying from data leakage and security and a whole bunch of pieces. Do you have to sell that ahead or are CIOs and CTOs coming to that conclusion on their own? Where are we in that journey of seeing that?

We're getting closer. I think, you know, I think Part of the challenge has been most of the focus has been, okay, I got to protect my network, I got to protect my email, I have to protect my kind of core databases. And then what's funny is you'll spend millions, tens of millions, hundreds of millions of dollars securing all of your network, all of your on-premises systems, and then an employee will just send an email attachment of all of your banking data to a client. They will. They will. And so how do you protect that flow of information? How do you protect the pre-release patent document that you need to be able to share with your partners? How do you protect the marketing asset that is going to turn into the marketing campaign? How do you protect the movie script before it turns into a film? That is what we effectively are enabling for our customers, the ability to ensure all that data is protected even as it gets shared inside and outside the enterprise.

Yeah, and this, you know, Box in many ways has become a security company, right, in the space, and you're thinking about it more than I am. When I see evil core, Evil Corp, literally Evil Corp taking Garmin down for 4 days. Like, I thought Evil Corp was just part of, you know, whatever that TV show was, F Society. I didn't even know there was a real evil— I mean, Evil Corp took Garmin down, including partially airplanes, for multiple days, right? I mean, cyber ransom, like, it's getting crazy out there, right? And so how are you thinking about that and the value proposition? How can we— because I think this is going to get crazy the next couple years. It's going to be much worse than it ever was.

Yeah, it is pretty crazy. So, so what the, the, the amazing benefit that the cloud offers is, um, is when you have your data stored in the cloud, you can effectively bring an infinite amount of technology to, to that data to be able to protect it. So for instance, just yesterday we announced a new feature, um, with this product called Box Shield. And I saw it, you can upload a Word document or a PDF or a PowerPoint file and into Box and if you turn this feature on, we'll scan that data and we'll tell you that there's a Social Security number in that file or there's a credit card number. And then you can classify that data, and when you classify that data with whatever classification level you want, you can decide then what types of security controls you want with that content. So you can prevent that file from being downloaded or for being shared or from being edited on a different computer. So when, when, when data is stored in a central platform, we can bring to bear all of the malware detection, data scanning technology, IP alerting features that we're building and that partners are building. And then in one common platform, you can store your file once and get all of that extra security and protection. So that's effectively what we're working on. And Box Shield has a rule-based—

I can pick rules. If there's a social security number and other pieces of AI, then automatically it's limited to this org or this subset of the org. Exactly. Yeah, I still can't believe that in 2020 you can just email out anything or you can leave an unencrypted Elastic database in the cloud. Like every week it's like 15 million names were leaked, someone forgot to turn the security on the Elastic database. And, uh, but, uh, you didn't ask my opinion. I feel like there's a winner for Box. Like, I feel like the next 5 years are sort of terrifying for security, um, because I'll tell you, one of my CTO, one of the early things he said to me back in the day at Adobe Sign and EchoSign, he said, you know why we haven't been hacked? He says nobody cares, right? He's like, you don't even want to know. You don't even want to know back in the days all the issues we have. And he was thinking about them, right? There was no— hopefully there was no unencrypted data, Elastic database out there, or email. But, um, but now that the cloud— now that the cloud is becoming the dominant part of our economy, everyone's picking, right? Everyone's looking for holes and issues. How can I— and it's good for Box, but it's scary because, uh, everything's going to be found. I think all the issues are going to be found. Yeah.

And, and, and, you know, the, I think this only increases at an order of magnitude that we've never seen, especially with a distributed workforce that by definition has to share completely digitally. So now everything's getting digitized. And now the question is, do you know where all that stuff is? And yeah, and that's, that's what we're, what we're trying to offer our customers. All right.

I want to get your thoughts on this one. And like the phases we're going through. I asked Rob Bernstein this morning, who helped kick it off, he had no idea what the world's gonna be looking like. I asked Loren Padelford, and in his view, in e-commerce, it's been 10 years since March 15th. Like, and that, you know, I actually missed a cycle there. 10 years of accelerate of digital transformation, literally, in whatever, you know, 100 and some odd days. How are you seeing this? Is there, is, are we ever going back? Are we gonna, are we going back to a hybrid world? What's the future look like from where you sit?

Yeah, I mean, I think it's always so hard because the debate is always including this issue of, well, has the pandemic been resolved? Do we have a vaccine or not? And so I can only really imagine a post-pandemic world because anything pre-post-pandemic, you're making health and social kind of judgments that are so impossible to predict at this stage. So in a post-pandemic world, I do think we go back. But I think we go back differently. And I think, I think what happens is you get much more flexibility in, in how companies think about the workplace. And they think about the hours in the office and they think about the business travel and they think about which days you have to go to the office. And so I think what certainly representing Box, but more and more customers that I talk to, I think people imagine a bit of a hybrid future where offices are still incredibly important because we want to be able to see people. And be able to work with colleagues, and especially if you're earlier in your career and your company is more of your community and you want mentorship and it's your place of meeting friends and you don't want to be, you know, kind of holed up in your apartment working all day, then I think an office environment can actually be incredibly important to a company culture and company execution. At the same time, there's literally no reason why we have to have a classic 9 to 5. There's no reason why meetings and teams have to arbitrarily be the number of people that can fit into a conference room. So I think you'll see much more digitization of work that happens in the office. And so that will mean more distributed work, more video calls, less business travel, more hopping on just a quick sync with a partner as opposed to saying, hey, can I fly to you next week? And then you've got, you know, hundreds of hours of logistics of complexity that surround just that one little decision. In many respects, I actually think the world is moving faster because of this sort of complete virtualization, because at any given day I can hop on a call with a customer in Japan and Australia and multiple parts of the US in the same day. And so think about how much business that propels forward and how many decision— decisions that begins to propel. So I don't think people want to go back to the old way of working where every single thing that we did had to result in an in-person conversation, an in-person meeting. At the same time, I think there's a bit of fatigue of saying, okay, I'd like to get out of my house now, and it would be great to be able to go into an office and see people. So, so I really feel like I know, you know, it feels like, okay, you know, total compromise position, but, but I think the reality is that, is that, you know, there are mixed modes of how you want to work and what kind of people are inside of your organization. And we have to support a future that is hybrid, ultimately. And I think what's at the center of that hybrid future is digital. And digital is the thing that bridges these two worlds together. Yep. And just—

and I want to, I want to talk about that, but just in detail, remind me, what's Box— what's your current policy? What are you thinking on this point of remote work for Box?

So we, we have a policy. Yeah, we announced a couple months ago that people don't have to come back at a minimum until January of next year. And, and that if people want to move long term, we have a very flexible policy on that. And people that want to raise their hand and go do that We're basically supporting every request that's happening. And then obviously I think there'll be more remote hiring in this environment. Yeah. How are you thinking about that?

Is that a strategic hiring initiative yet or is it still early to figure all that out?

Certainly as time goes on in this situation, I think it'll have to become a strategic decision. I've, I've tried to not make wholesale changes to how we operate in the midst of this being a kind of very temporary crisis mode and really wait to see, like, how do things settle back in when it's not the crisis but it actually can be a voluntary way of working, as opposed to right now it's involuntary. So like, there's not really many decisions to make. Um, but, but the question is, once it becomes voluntary, what, what kind of, you know, corporate culture are you trading off between having a strong office hub versus a fully distributed team I don't know that we know the answer to that. And right now we have the luxury of not having to make any of those decisions because nobody's going back. So, so it almost doesn't really matter that much.

At a tactical level, going back just for founders, as you say, obviously it's much more efficient for you to talk to existing and new customers over, over, over Zoom or Google Meet. Right. It's much more efficient. Has— back in the day, we all wanted to sell everything remotely on a GoToMeeting or a WebEx. No one wanted to get on planes. And then we learned it mattered. Right. We learned it mattered. And I remember I told you the story, you'll forget because you hear a lot of stories, but you were kind enough to have me be a panel at BoxWorks in 2012. It was right when I was recovering from Adobe. And one of your customers came up and grabbed me on the arm and she violently disagreed with something I said on the panel, which I thought was very tame. And she's like, that's not what Aaron told me. And that was like a magical moment to see. She probably met you for 20 minutes, right? But that magical connection from that face-to-face, right? Um, is this efficient? Where are we going to go back? What's your gut on this now that you've become very enterprise? And more importantly, are buyers okay taking more risk? Are buyers okay saying, you know what, I met Aaron, but not like— is it okay? Is it— has the rules changed and meet— this counts as— does this count as meeting for a 7-figure deal?

Yeah, it's, it's a great question. I mean, a couple, couple, couple things to consider. One, you know, we are, I'll give you one example. We are one of the larger SaaS providers that leverages public cloud. And so we spend, you know, a healthy amount of capital on the public cloud. I have never met in person the sales rep of, maybe I have in passing or whatever. I don't think I've ever met the sales rep of those public cloud deals, but I'm on video calls with them or conference calls. And it's just, you just know, like, okay, Google or Amazon or IBM, whatever, like, these are going to be, these are going to be, you know, substantial platforms that you can trust. And that you're— and you care way more about, are they there for you when there's a problem? Are they able to hop on a call? Are they able to go solve, you know, one of your core issues? Not did they take the time to drive to your office and deal with all the kind of perfunctory stuff that kind of goes into that. And what I would, I would, I would flip it a little bit and I think that we as a selling ecosystem think of in-person interaction as being very customer-centric, which is very intuitive for, you know, a long list of reasons I don't need to get into. However, what I would posit is that that's maybe customer-centric for that one customer you're meeting that day, but what about all the other customers that you could have been helping to support that day that now you had to not be able to. Well, that's the question, right? Right. And so, so the question is, is that like, if can I trade 5 video calls with customers for 1 or 2 in-person meetings and overall actually build a much more customer-centric organization because now I can be supporting many more of our customers in a single day. And so in the past, you know, couple of months in this environment, I have spoken with more customers than I ever have, you know, certainly in a normal, in an equivalent time period in a kind of pre-pandemic world. And it's because it's trivially easy for both sides to say, hey, let's just jump on a video call tomorrow to hash this out for 30 minutes. And you don't get that, that's actually more customer-centric than me getting on an airplane and coming in and doing a 1-hour sort of full presentation that, you know, again, a day later, everybody kind of forgets anyway, because it's just one of, I mean, like this is actually a, to me, a much better way to be able to serve our customers at scale But I don't think it fully replaces the in-person dynamic. I think we will be on airplanes at some point and we will be going to meetings. But I think that the question will be like, what really is the value of that dynamic versus being able to serve your customers virtually? I think that remains to be seen.

Yeah, we did it. We did a little event right after we went into shelter, right? I mean, things were crazy, right? And Stewart Butterfield came and he said he'd spoken to more customers already, like in the first 3 weeks, than he had in years. He said one of his customers said, oh, Slack must be really struggling. He said, why? The CEO's on the Zoom. That's a really bad sign when the CEO has to get on the Zoom and sell me the product.

That's funny. I mean, well, I think I can— I'd imagine even at $1.6 trillion, Satya is on many, many video calls with top accounts.

Yeah, I mean, who knew that would be such a competitive space? It's fascinating, isn't it? That the way Microsoft, Google, and Amazon compete, it's bare knuckles in the trillions. We didn't know that you could compete beat that way.

Yeah, I know. I've talked with customers, and it's like, yeah, last week I talked to Satya, and I talked to Thomas Kurian, and it's like, wow, we are all trying to grow.

Yeah, I remember when Diane Greene went, I'm like, yeah, I guess cloud's going to be pretty big. It must be worth her time to kind of boot— get this Google Cloud thing really going. But yeah, it was all bigger than we thought, I think. Just a couple of things I want to make sure— so we have a few questions minutes for time. Go ahead.

I want to actually, um, I want to underscore that point though, though. It's all bigger than we thought. I think, I think that we probably were, you know, anytime that we thought about cloud, and this is, you know, this is always this tricky thing with analysts, is like, well, you have to take some baseline to, to then imagine how big this thing is. And I think the baseline we took was like, okay, well, how big is the software industry today? How, how many servers are sold today? Well, let's say data centers move to the cloud at this rate or whatever. That, that all makes sense. I don't think what we, what we imagined though is like flip it and you basically say like imagine a world where everything that could become digital became digital. How big would the internet need to get? And, and how many use cases would there be for the internet? Not sort of the bot, like what do we have today? And then that moves to the cloud, but like what could the world do with, with unlimited computing? And, and you're just now seeing that play out. And, and I think that there's there is probably another couple orders of magnitude of growth in these markets, which is why I don't get that energized by like, okay, is Azure in the lead? Is AWS in the lead? Is Google in the lead? I don't think it actually matters to any of these players. They could all grow 10 times the current size, and there'd probably still be growth left.

Yeah, we didn't realize that every process that could run in the cloud would run. That's why I almost teased that on the first slide, Box and Zoom. Like, maybe, maybe there's no magic combination with Box and Zoom, but there could be next year. That could create a workflow that didn't make— that didn't really make sense before, right? As standalone apps. That's what I'm looking for, these interesting combinations that, um, before everything was in the cloud, we didn't— we couldn't even predict. We couldn't even predict that these combinations would happen.

Yeah, totally right.

Um, we might have hit this one before, but I, I did want to— I put a lot of slides, but I want to make sure at least we hit this one in terms of unexpected change. This is a tweet from a little while ago, but it's interesting because it's across industries, right? So when we had Rob Bernstein this morning, we looked at the spend index for Coupa, which if you haven't seen in a while, it's rather depressing when you see how deeply impacted industries are, right? When we look at the cloud index and we're like, wow, like that index was up 11% yesterday, and you pop into what Coupa is seeing underlying and you see just I mean, you see the impact of 33% unemployment, which is like, yeah, it's not even— it's like a different galaxy than what we're living in the cloud, isn't it? It wasn't even the point I meant to make, which we could chat about. We could chat about that, but let's talk about this one first and maybe that one if you want, because I'd love to get your thoughts. But what are you seeing across industries that's maybe different than people see or would expect? You seen any special insights here? I think it mostly—

it's been intuitive, but in a surprising way. So it's like not at the full level of counterintuitive, but it's it's kind of fun and intuitive, which is like, yep, the least digitized industries, we saw the fastest growth, um, from a collaboration standpoint. And, and it's, and it's, you would, you would sort of think that, okay, the laggards are gonna, you know, really take a long time to come into the cloud and to get digitized. And where we saw some of the fastest pops were from the laggards, because all of a sudden you had government agencies that, that, you know, quite literally couldn't run their functions They couldn't go and process loans, or they couldn't go and work with— we did a deal in Q1 with the US Department of Agriculture, and they couldn't work with their farmers because they didn't have, you know, cloud technology. And so that was actually where we saw these immediate bursts of—

that's interesting on the left, that some of the slowest, most slowest moving organizations traditionally became the fastest. Exactly.

And so you kind of had this massive reversal, which is why in tech, like, largely we're not working that differently. And it's— and I think this is consistent with this other— like, it's really— it is— it's deeply unfair on every dimension. Like, I think it's worth acknowledging the tech industry is dealing with a complete bizarro world environment right now, which is the companies are able to operate smoothly because we've been working this way for a decade and a half. The business models are holding up better than almost every other industry because most of the time people have the customer already on credit card and already all the information, and it's easy to buy more and it's easy to have recurring subscriptions. The services are obviously entirely digital, and so you don't have to usually go into a physical area to get them. So it truly is unfair, but it does unfortunately, you know, again, kind of correlate to why we're seeing this divide in business performance and market caps. In the digital industry versus the non-digital industry. And that is why in the tech industry, like, the way we work is not changing dramatically because this has already been a part of how we operate. Well, we're a cloud of privilege.

We are. It's the strangest thing. It is so privileged. And we were privileged before and we didn't appreciate it. I don't know that we appreciate it today because our lives haven't changed enough. But the privilege in the cloud, it's unprecedented, I think, in our lifetimes, the privilege we have. Working in the cloud, like having a business from the cloud in a country with 33% effective unemployment, and everyone's hiring. Not everyone, you know, maybe there's a few Eventbrites and TripActions, but there's open recs on the Box site, I'm sure, right? The privilege is crazy. It's almost— I don't even know. Where do you— I want to— I do want to at least finish this tiny bit of thread on the state and local governments because it's interesting, but how long is this going to solve itself? Can the cloud grow when the country doesn't work when Boeing's losing $1 billion a week or whatever it's losing when our airlines are shut down? I mean, how long can this split, this dichotomy exist?

Well, that's like 100 times above my pay grade as a question.

Well, you're above my pay grade.

It appears to actually be above everybody's pay grade.

It might be, right?

I watched some of these New York Economic Council talks, and they'll have like Stanley Drunkenmiller and And like, you know, like when he's confused about how the economy is playing out, like, I'm like, oh God, well then, you know, I don't know, I don't know who has this thing figured out. But, you know, I think the answer has to be no, this can't continue unless you have, you know, just some economic recovery. I do think it's incredibly important that the government, you know, finds ways of making sure that the individual employees are protected. I have no real opinion about kind of the, the business stimulus side, but at least, you know, people's paychecks are covered. And then frankly, obviously the bigger issue is like our country needs to, you know, grow up and fucking deal with the health crisis and wear masks and do social distancing and not do stupid stuff and start to actually, you know, take this thing seriously. And it's been this really unfortunate thing to have this dimension of, of people being like, well, the health safety measures are what's going to impact our economy, so we're not going to do those things. And then we kind of open up and then our economy is impacted even worse because of then that, you know, the health issue blowing up on us. So it's like we have to address the health issue first and then hopefully the economy will follow. So, um, uh, but, but yeah, it's, it, it seems unsustainable Certainly, but again, I think Shopify, the Shopify numbers are a great example, which are 100% growth on massive scale, which is just continued evidence that some of these markets are just way, they're way bigger than we realized, and these companies are way smaller than the market size than we realized. And that's sort of what's playing out in some of these categories. Yeah, it's interesting.

Rob said this morning from Coupa, they're coming up on $500 million ARR, he said, that's already larger than the market was for the whole category. So it's like, it just changes, right? That's a very tactical, but it's the exact same point. Totally. Yeah, so one last, just two quick bits of advice, and then I want to open up to questions more tactical. So state and local governments, maybe I imagine some of this is like the Jedi contract, like it could take 10 years to wrangle out a decision in some cases, right? When I was briefly at Adobe, This was like their secret sauce. They could drive alignment with these governments. Like, just for folks struggling with this, what did you see? What did you learn? How do they drive internal alignment? Like, it is different. How do these old companies make a decision in 30 days? Yes, you need to, of course, but it doesn't mean you will.

Yeah, I think, I think the advice, the advice here is probably what any, you know, any entrepreneur should always be kind of thinking about is the are you solving a problem that is urgent and painful for the customer? Yes. If they don't solve this problem and if they don't get it immediately solved. And in some customers, we are fortunate enough to line up to an urgent pain point and in other customers we aren't. And, you know, a lot of the growth that we saw in Q1 from our enterprise segment was situations where, were situations where we happen to line up with an urgent, you know, need. And when you do that, companies have a funny way of aligning behind those, those needs very quickly. And it's our job to make sure that we're as customer-centric as possible. And we're having all the conversations with line of business, with security, with the CIO, with legal, going like— the sales process has looked exactly the same. It's just been in some cases accelerated and in other cases completely on pause. And the good news about this environment from a selling standpoint is you kind of figure out which mode you're in really early in the sales cycle.

And, and, and there's the discovery process has been shortened, huh?

The buyer doesn't have enough time to waste your time. And so, and so you really quickly can qualify in or out, you know, whether this is a real opportunity and whether you're going to be able to be helpful for that, for that customer. Yeah.

Last one I want to hit and then make sure we just can just do one or two questions because this will be interesting to founders and others. Products changing. So I don't exactly know what you mean by this, but it's super interesting. In the middle of March, you pivoted the Box roadmap to just do features that would transform work while being remote. That sort of makes sense, but what do you mean by totally changing your roadmap? Are you building software differently than you have for the last 15 years? Is there, is there some insights here that other folks can take away?

I would say that the— not our software development process, but just the product roadmap. And, and so what we did was we looked at We looked at what we wanted to build in the year coming into the— versus coming into the year versus in March and April once we knew that people were going to be doing remote work. And we basically said anything that doesn't relate to sort of remote and distributed collaboration and data security, we're not going to focus on.

You dropped it. You dropped it.

And we're going to put all of our chips on things that only help people while they're in this work from home, collaborate anywhere type of dynamic. And that was the bet that we made. It was highly focusing of the product strategy. And what we saw was, lo and behold, we actually were shipping software faster in some cases than we even anticipated because we just had this hyper-focused approach of what do we have to build, what are customers going to need right now, and how do we make sure we're going and solving those problems?

Yeah, it's interesting. Yeah, that focus really does accelerate the roadmap, doesn't it? It's like— because everyone's got a pet feature. It's like a pet IT project, a pet CIO project.

And they're all right.

They're all correct that you want to build all these things.

They are, they're all correct on, but, but for different timescales. And, and what became very clarifying was the stuff that was needed right now based on the urgency of our customers' problems. And so that helped us prioritize very, very efficiently.

Yep. All right. Just a couple and then I'll let you go because you're so kind to give us the time. One sort of fun one, but I think you'll find it interesting. When Lauren was on just before from Shopify, do you know how much revenue is enterprise at Shopify? Do you know how much is Shopify Plus?

And just to break this out, what's the distinction of the revenue groupings?

Well, Shopify Plus is the enterprise group. The line might be like $10 million of revenue. I forget what it is, but it's clearly enterprise. It's selling to big brands, big names.

Knowing Shopify, I'm gonna say 20%.

It's gone from 20% to 29%. Okay. So anyhow, we had a little fun because if you go that fast, you're gonna be like Slack. You're gonna be all enterprise before you know it, right? Even if the product doesn't feel like— I mean, Slack is enterprise today, right? And now Lauren's point, he said don't do SLAs, don't do RFPs, build the right, build a safe and secure product, resist doing SOC 2, push all of it off because most of it doesn't matter. Like an SLA, he says don't even do contracts. I actually believe SLAs and contracts are stupid because if the customer wants to leave, let them go, right? And an SLA doesn't bring the site back up, does it? It's nothing.

I found that to be the case, yeah. It does nothing.

But what do you think? Do we need RFPs and SLAs and all these things in 2020? Do you still do them? Does your team still doing all this?

We do all those. What I would say is, if we could kill RFPs, I would, you know, I would donate anything to anybody.

That was his point, is don't fill them out. But I'm saying I'm going to ask Aaron because I think we're not past those yet.

Well, unfortunately, there's too many things you just lumped in. So RFPs, It's like we should kill as an industry and we should end— there's no way to compare two software products from two different vendors using any kind of classic RFP that I've ever seen. And the biggest problem with RFPs is they don't ever track trajectory of the vendor. They always track point-in-time feature requirements. And it's hilarious the amount of times when a customer will buy a solution because like on that day of that month of that year, one feature existed in one product and didn't from another, but then literally like 3 months later, the other product just blew past that other company. And 'cause you just like, you don't get a sense of the momentum of the vendor from a typical RFP process. So I hate RFPs. SLAs is very different. I am very pro SLAs. So I'm gonna take the other side of this one, Jason. And I would not, we would not be comfortable relying on an infrastructure provider behind the scenes in our setup that wasn't gonna sign up for very significant SLAs. And I do think that while the kind of, we can debate the kind of recourse of an SLA, like should you just leave? Should you sue the vendor, whatever, different debate there. But I do think having a shared agreement of what is my service level going to be of your product is actually really important. And I think there's a big difference between 99.8, 99.9, and 99.999999. And it can be epic.

It matters, matters a lot. So I'm with you. It was a good challenge. I was here with your thought. I also think it's something you should just give. Yeah, right. You should stand behind it. Right. It's not even that complicated. You put it on your website, you put it in the contract. And it's not nearly as complicated as infrastructure changes and a whole bunch of other things that are part of it. 100%. So last question before we run out of time, but I want to get some real insight. There's a whole bunch of things in this question about box infrastructure and bare metal and hybrid and cloud, but let me simplify them. You've gone from all of your own infrastructure, maybe because in the old days we had no choice, to being running on multiple clouds, to thinking through this piece, to moving to security and performance changing. Just give us your insights on all these pieces, on all the clouds, on hybrid clouds, on multiple clouds, on your own infrastructure. Just where is this going over the next— what have you learned? Maybe the more interesting question is, what have you learned circa 2020 to 2022?

Yeah, I think certainly when we started, we started the company in 2005, so we had to build our own infrastructure. And you fast forward 15 years and you just do the math and you realize that a Google or an Amazon or somebody else is going to put 100 times the capital or 1,000 times the capital into their infrastructure strategy than you're going to be able to do. And then, and then you really have a decision point, which is, am I going to be able to shave out those margins, the 5% or 10% extra margin that you might be giving up, that that vendor is going to be extracting from just your infrastructure spend? So it's not your company margins, just on your infrastructure margin. And would you want to trade that for, you know, possibly the uptime benefits, the scalability, the additional features that that cloud provider has? And I think more and more the argument is going in favor of leveraging, you know, the cloud more and more. Certainly for us it is, and it lets us focus more of our attention and energy on software. And we want to be a software company and we want to have the behind-the-scenes parts of what's running Box be obviously, you know, incredibly, um, you know, robust and performant and secure. But, but whether that's something in our data center, something in, in, uh, another major, you know, very large company's data centers, um, as long as we're securing, protecting that data, I think we've got a little bit of flexibility on how we do that.

And what's your— and then just last follow-up question that I will let you go— but what's your practical, practical— because you're right in the center of this— what's your practical learning on multi-clouds? The practical learning on running on Amazon and Azure, and I mean, it's a lot of work. It's a lot of work. It's so much work. They're not the same. It's so much work, right?

And it's funny, they really wanted to differentiate from each other and not make it easy to be portable between the systems.

Yeah. So is this— does this get us anything? Is it just the world we're in? Is this a crazy tax of the cloud? Does it make any sense? Like, what have you learned from this multi-cloud world? And, but a lot of CIOs want it. They want, they want, and they want to pitch the vendors again. They want security, they want trust, but it's like an SLA. I get it, but I don't get all of it.

Yeah, I think, um, uh, I think there should be a, a limit. Like, you should never do it because of some academic reason, um, like, like, you know, we want, um, we want, you know, competition between the vendors or whatever. Like, I mean, that's probably not academic, but that's a very expensive price to pay for managing a multi-cloud environment. I think the only main argument is that there's different features of different cloud providers, and that there are sometimes a reason why you want to be able to leverage a unique feature of one major service. And then you have to decide, is that unique feature worth a split architecture that then your software team is going to have to go in and figure out a way to abstract? And sometimes it's worth it, sometimes it's not. But I would generally say simplicity in architecture is always a good north star to have because it's just going to free up your time and energy in the company. And I think we need more simplicity in architecture in most environments that we see. All right, that's helpful.

All right, everybody, we're out of time. Everyone in the enterprise, check out BoxShield. This is— I'm terrified of security. I'm terrified of evil corp. I, I am terrified of content being everywhere. It's— I've just lived in the content world, right? And in eSignatures, actually, we had a single unified place for your contracts. We actually had all these benefits early because of the nature of the service, and I've seen all the issues, right? So check out BoxShield. It's, it's a great choice. Um, sign up, sign the contract this quarter. Um, and Aaron, thank you for your time. It's, it's always wonderful that you're able to share with us. All right, talk to you soon. Peace.