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Dropbox acquired CloudOn Inc., a three-year old Israel-based startup, with plans to absorb its team and soon shut down its product offering -- a move that could be related to Dropbox's new partnership with Microsoft.
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CloudOn offers a web-based collaboration tool that lets users open, review and edit Microsoft Office documents on any device with Google Chrome or Apple Safari browsers. It was already integrated with Dropbox as well as Box Inc. and Google Drive so users could store documents in those applications.
Alan Lepofskyanalyst, Constellation Research
CloudOn had previously been seen as a viable alternative to using Office as it provided document versioning capabilities across different mobile platforms. But recent moves from Microsoft to broaden its cross-platform capabilities for the Office suite have changed the market viability for Office alternatives such as the CloudOn app.
"Now Microsoft has released native iOS applications for Office, limiting the appeal of a third party product to do the same thing," said Alan Lepofsky, vice president and principal analyst at Constellation Research, Inc. in Toronto.
The CloudOn app will discontinue service on March 15 and is no longer accepting new customers. CloudOn will email all nine million of the company's users on next steps and has already posted details about the transition and how to transfer files out of the service on its website.
Dropbox declined to disclose financial terms of this week's acquisition.
Microsoft and Dropbox
The CloudOn buy comes a few months after Dropbox struck a wide-ranging partnership with Microsoft to enable mobile editing of Office documents directly in Dropbox. Users can also access Dropbox accounts from Office application and connect Office and Dropbox applications on iPads, iPhones and Android smartphones. Dropbox also unveiled its new application for Windows phones and tablets this week.
Microsoft referred questions on how the CloudOn acquisition may impact its Dropbox partnership to Dropbox. In response to the same question, a Dropbox representative said Microsoft and Dropbox are partnered to make it easier for customers to access, edit and share while continuing to use the same apps.
Part of the motivation for Dropbox to acquire the CloudOn app may have had less to do with the product itself than keeping its user base away from competitors and adding to its technical brain trust, Lepofsky said.
"The development talent [may] help Dropbox improve the set of capabilities they offer natively inside Dropbox, thus limiting the time users spend in other applications," he said.
Companies like Box and Dropbox that rely on storage, and in many cases a free or inexpensive sales model, need to either expand out partnerships or find new ways to innovate, said Maribel Lopez, analyst with Lopez Research in San Francisco.
"The things that make [Dropbox] more valuable are the integrations with other products I care about," Lopez said. "If my [customer-relationship management] system doesn't do document management well and I need to host my documents somewhere else, those two being integrated makes sense."
Dropbox's move also comes the same week its main enterprise file sync and share and cloud storage competitor Box is set to go public, according to multiple published reports. It's unlikely the IPO will have much of an impact on customers, or Box's products going forward, Lepofsky said.
"Box already has a significant amount of funding, but the IPO could provide some validity to the company in buyer's minds," he said.
Some other products that compete with Dropbox, Box and Google Drive include Microsoft's own OneDrive,Amazon's Zocalo, Citrix's ShareFile, AirWatch by VMware's Secure Content Locker, BooleServer's BooleBox, Accellion Inc., Acronis International, Soonr Inc., WatchDox Inc. and Novell Inc. among many others.