An interesting article in TechCrunch called "Why Dropbox decided to drop AWS and build its own infrastructure and network" explores the reasons why Dropbox made the decision, executed between 2014 and 2016, to abandon Amazon AWS storage services, where it had hosted users’ content since the company's inception in 2007, and decided instead to build its own network of data centers.
I remember reading a more detailed and comprehensive article about the move in 2016, and it had seemed like a text book case about the importance of having control over the elements that give a company its competitive advantage, a constant theme in my discussions with entrepreneurs in the context of my work as a professor at IE Business School: when you work in a specific field, the elements and technologies that sustain your activity must be completely under your control, not subcontracted to a third party, however good and competitive that party may be.
Amazon storage services are undoubtedly good and competitive: it is the absolute market leader, an experienced company with huge infrastructure offering enviable levels of service: no systems is completely error free, but in general, Amazon makes few mistakes, although when they take place, we know about it due to the massive impact. Dropbox was by no means dissatisfied with its supplier or its conditions: the service was born there in June 2007, had grown to reach 300 million users by mid-2014, and was fast becoming one of the main storage services that people of all kinds, including unauthorized corporate users, used habitually in the day to day.
Instead, the issue was the belief that if a company is built on a given technology, then the company must control it. Ask anyone what Dropbox is, and the answer is simple: storage. Does it then make sense for a company that sells storage to use somebody else’s infrastructure to store things?
So Dropbox embarked on the daunting task of migrating more than 500 million users and about two hundred thousand client companies to new infrastructure, data centers built by Dropbox itself, an ambitious and expensive project for a company with about 1,500 staff and, at that time, only about a dozen of them dedicated to infrastructure. A huge challenge, which entails, among other things, changing the company: trying to attract and retain talent it didn’t need before, and becoming very competitive in an environment awash with companies that already do this, and on a huge scale. No easy task, but one focused on long-term sustainability.
That is precisely the focus of my discussions with many entrepreneurs: if technology constitutes an important part of the business that you are trying to assemble, you have to have full control of that technology. A company that aspires to turn technology into the basis of its competitive must develop it in-house if it wants to aspire to something. The romantic theory that says it is enough to have the idea, make a business plan and then to go out and look for suppliers for the technology that supports it, leads in the vast majority of cases to failure. Even if the supplier is the best in the field or takes a stake in the company does not solve the problem: you will continue to be a company that sells something that does not build, does not dominate, and that cannot hope to meet the problems that without doubt, will arise. When a particular technology is the basis of what you do, that technology automatically ceases to be a commodity that you can buy anywhere, and becomes something that you must master to perfection, in every aspect and nuance: quite simply, it is too important to leave in the hands of a third party.
Dropbox provides a clear lesson: no matter how successful a company’s service or how difficult it is going to be to change it: if you sell something, you must identify the fundamental basis of what you sell, fully control it and even become an expert, a reference in it. If not, you will be an intermediary that your supplier may consider jumping if the time comes when your business is profitable enough to do so, and you will lack the expertise to be truly competitive or to attract and retain related talent. With all that entails.
