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As Google, Microsoft Face Off, Small Cloud Companies Get Hurt

Stocks in this article: GOOGMSFT

The announced pricing for Google's services at I/O sent waves beyond the big names of the cloud sphere, and Microsoft wasn't the only company who will be pressured by this move. While the prominent names are squaring off over pricing, smaller companies will have to work to build trust among potential clientele - a necessity, if they want to store businesses' information in their clouds.

Sanjay Parthasarathy, founder of Indix and former corporate VP at Microsoft, said security is a primary concern for businesses. "What is happening now is enterprises are moving more and more business operations in cloud but have to be comfortable to do this," said Parthasarathy in a phone interview.

Proving reliability may be hard for Box, a smaller player in the cloud space that is battling speculation. After filing for an IPO in March, Box has yet to go public. Box blames the market for its delay, citing a market correction for software-as-a-service (SaaS) companies that occurred days after its IPO was filed as the reason the company stalled. On top of a reported net loss of $169 million and $124 million revenue according to the company's S-1 filed in March, Box announced it is seeking more funding from private equity investors as it waits to go public. 

Serving clients like General Electric (GE) and McAfee (INTC) as well as 225,000 other businesses, the smaller cloud company is still in the competition for cloud business solutions.In response to the Google Drive for Work announcement at I/O, Box CEO, Aaron Levie insisted on looking beyond storage when determining a clouds value.

"We already offer unlimited storage for our customers on our Enterprise plan, and you can expect more news on this front in the coming weeks. Ultimately, the value we offer our customers isn't about storage, it's about the capabilities we deliver that make content stored on our platform more valuable than ever before possible," Levie said in a comment to TheStreet

Dropbox, another firm in the cloud space and Box competitor, has over over 300 million users, but its services cost significantly more than the $10 per month Google is charging. Dropbox currently has 4 million businesses signed up for its services, and charges an entry level price of $75 per month or almost $800 per year. 

The San Francisco-based Dropbox has made moves that point to a potential IPO in the next year which include appointing its first CFO and filing a goal of $450 million in debt financing with $325 million already secured in February. Dropbox could not be reached for comment.

As Box waits to join the market and Dropbox has no official filing date set, both public and private cloud competitors move forward with innovation. 

With new collaboration techniques pioneered by Google as well as its unlimited storage offering, Parthasarathy said there still a long road ahead when it comes to cloud companies courting businesses. "Conductivity and storage is important but not everything a business does," said Parthasarathy.

"There is a lot of work to be done."

-Written by Kathryn Mykleseth in New York

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