“The cloud is not enough” warns Egnyte

Egnyte Business

The burgeoning enterprise file sync and share market has been the subject of countless column inches over the last 12 months – driven to some extent by cash-rich Silicon Valley start-ups with ambitious growth plans.

Today the UK channel officially welcomes another player to the pack in the form of California-based Egnyte. Active in the US for a number of years, the firm has now taken its first baby steps into the UK channel by signing up its first partners, Stafford-based 848 Group.

After closing a $29.5m a Series D funding round in December 2013, the privately-held firm said global expansion was on the cards, and that it would make strategic investments in product development, sales and marketing.

One key investment was the appointment of former NetApp and EMC channel bigwig, Jeff Nollette, as its VP of channels in April this year. (The vendor had also announced former-EMC exec Mark Rattley was on board for the role of general manager for Europe, but he later accepted a job at SAP.)

Despite this investment, Egnyte continues to proceed cautiously when it comes to building out its European organisation. While it claims to have a few people on the ground acting as consultants to partners and customers in the region, the firm says it is waiting to hire the new GM for the region before launching any channel recruitment campaigns.

“We want to make sure we’re aligned with his go-to-market strategy for the region before we recruit the partners we’re going to go to battle with,” explains Bart Giordano, Egnyte’s sr. director of business development, who says the plan is to have “one or two partners in half a dozen countries or so.”

Explaining Egnyte’s channel base in the US, Nolette says: “There are two ways we’re going to market; with MSPs and with the traditional VARs. We’re having great traction with the MSPs – this is just another service that they offer and we’re having fantastic results.

“On the VAR side, we’re at beginning of hockey stick. We do have a number of partners signed, who are mostly in the training and enablement stage, and a few that are further along putting together go-to-market bundles.”

Cloud is “not enough”

Egnyte’s slogan is “the cloud is not enough”, and it aims to distance itself from its competitors by offering customers a choice of cloud-only file access, on-premise storage access or a combination of the two. The firm says this hybrid approach to file services enables the channel to take advantage of continued on-premise storage sales as well as third-party software integrations, such as Google Drive and DocuSign.

In addition, Egnyte’s software runs on hardware from storage vendors NetApp, Netgear and Synology, which all have established indirect sales channels. The firm adds that EMC might also “be coming down the pipe pretty soon.”

“Customers like to have the option,” says Giordano, adding that Egnyte’s ‘and/or’ offering is ideal for companies such as legal or finance, or companies that don’t want to host their sensitive data in the cloud.

“Our most popular solution is the hybrid solution; our Storage Sync product that allows customers to sync directly from the cloud onto a local storage array. No-one else in the market can sync like that. That’s a key differentiator for us,” says Nollette.

Viable business model?

Clive Longbottom, founder of analyst Quocirca cautions that Egnyte is stepping into a crowded market. “There are also Huddle, Citrix ShareFile and several others who offer a hybrid or an ‘and/or’ approach, which makes differentiation difficult. Top this up with IBM, EMC and other behemoths who can offer similar services in an ‘and/or’ model, and it doesn't look so cosy for the likes of Egnyte. That more people are becoming more comfortable with a pure cloud environment also makes life difficult for them in the mid to long term,” he warns.

“However, for those who still do have issues around their perceptions of the security of information or the location of information in the cloud, the likes of Egnyte do offer a viable alternative to just storing everything in an enterprise document management system where migration to the cloud at a later date may be difficult.

“The key is in reaching critical mass through offering additional value-add services to survive.”

But it was Egnyte’s hybrid approach which attracted 848, which says it works with vendors that understand that “every end-user company had an existing IT strategy and any of the benefits of working in the cloud would need to be ‘folded into’ an existing budget cycle and set of decisions that had already been made.”

Elsewhere Egnyte has also been publically dismissive of its much bigger rivals; in particular taking swipes at fellow Silicon Valley start-up Box, which landed in the UK with a bang last year.

Egnyte, which is backed by venture capital firms, and has so far, raised $62.5 million from investors. This compares with Dropbox’s total of $607m; and Box with $414m and has plans for an IPO valued at $250m.

But in numerous interviews Egnyte CEO and co-founder Vineet Jain, has argued that while its rivals are well funded, their freemium business models cost a lot of money to maintain, which is why they’ve had to raise large amounts of capital.

“We have plenty of money in the bank and our burn rate is significantly less than our competitors,” says Nollette. “We don’t have any issues about running out of cash next year.”

Christine Horton

Christine has been a tech journalist for over 20 years, 10 of which she spent exclusively covering the IT Channel. From 2006-2009 she worked as the editor of Channel Business, before moving on to ChannelPro where she was editor and, latterly, senior editor.

Since 2016, she has been a freelance writer, editor, and copywriter and continues to cover the channel in addition to broader IT themes. Additionally, she provides media training explaining what the channel is and why it’s important to businesses.