Hidden away in most S-1 filings is an interesting tidbit that we did not know before, and Dropbox’s S-1 is no exception.
Dropbox’s S-1 filing revealed that Dropbox had saved nearly $75m over two years by building its own infrastructure, as Geekwire reported.
Starting in 2015, Dropbox began to move users of its file-storage service away from AWS’s S3 storage service and onto its own custom-designed infrastructure and software, and the cost benefits were immediate. From 2015 to 2016, Dropbox saved $39.5 million in the cost of revenue bucket thanks to the project, which reduced spending on “our third-party datacenter service provider” by $92.5 million offset by increased expenses of $53 million for its own data centers. The following year in 2017, it saved an additional $35.1 million in operating costs beyond the 2016 numbers.
This is interesting, as Dropbox was once regarded as the poster-boy for cloud – a Y Combinator business that was able to use the low startup cost of AWS to quickly grow and scale a cloud business. Certainly, AWS is still doing fine too, having recently recorded $5bn in quarterly revenue.
By sheer coincidence, Apple confirmed that it is using Google Cloud Platform for some of its iCloud services, leading some to question why it hasn’t “done a Dropbox” and insourced its cloud storage before now. Isn’t Apple the company that insources everything?
The answer really comes down to Dropbox and Apple being very different types of companies. Dropbox is a SaaS software business where the TCO of its infrastructure is absolutely critical to its P&L. Every dollar shaved off its infrastructure per user is a huge deal for Dropbox.
Apple, on the other hand uses software / cloud services as a way of selling expensive hardware, and the margin (if any) made on its cloud services is a rounding error on the overall P&L.
As Steve Jobs himself put it, Dropbox is a feature, not a product.