How Dropbox used land-and-expand to move upmarket and close big enterprise customers

In 2013, 93% of employees were using Dropbox to share files without company approval, according to a Spiceworks study. This widespread, unauthorized usage helped drive Dropbox’s land-and-expand strategy, where individual user adoption created momentum for enterprise-wide deals. 

However, to secure these deals and achieve its current 7% share of the enterprise market, Dropbox had to develop enterprise-specific features.

Read on to learn:

• Why Dropbox’s pivot to enterprise was important
• The key enterprise features that helped them secure bigger clients
• How competition with Box pushed Dropbox to evolve its strategy
• How WorkOS enhances Dropbox’s enterprise features

Let’s start by looking at why Dropbox’s move into the enterprise market was bound to happen.

Why Dropbox's pivot to enterprise was inevitable

MIT students Drew Houston and Arash Ferdowsi founded Dropbox in 2007. In 2008, Dropbox’s referral program took off, resulting in 3900% growth within 15 months. 

However, this success didn’t translate to profitability, prompting a pivot into the enterprise market. Here are some more details about why:

Growth to profitability challenge

While Dropbox's customer base grew, profitability remained out of reach. Being a primarily consumer-focused brand in an infrastructure-dominated market put Dropbox in a tough position — the real money was in the enterprise market, and Dropbox wasn’t able to close those deals quite yet. 

Tech analyst Ben Thompson referred to this as the “messy reality of actually making money," and it’s likely what pulled Dropbox from the consumer market into the business market.

High churn rates

Another reason for Dropbox’s enterprise pivot was the churn bottleneck. Consumers quit Dropbox much more often than large companies do. 

Tomasz Tunguz, Venture Capitalist at Redpoint, noted that SaaS companies face high SMB churn rates between 31% and 58%. In comparison, enterprises typically have churn rates between 6% and 10%, meaning Dropbox can more easily retain its higher-paying customers.

Stiff competition

Competition also played a significant role in Dropbox's shift toward the enterprise market, particularly from Box. This rival had already started making the enterprise pivot a while beforehand, way back in 2007.

Box’s early investment in compliance features, such as achieving HIPAA compliance in 2013, gave them a significant edge in securing customers in regulated industries like healthcare and finance. This put pressure on Dropbox, which didn’t achieve HIPAA compliance until 2015, causing them to lose out on key enterprise deals during that period.

How Dropbox transformed from consumer to enterprise

Transitioning to enterprise clients wasn’t as simple as hiring a sales team and giving them big targets. Dropbox had to transform in two ways:

1. From consumer app to enterprise app: Dropbox had a strong consumer-focused reputation, which made many enterprise IT admins hesitant to adopt it. Without the right positioning, IT admins questioned whether Dropbox’s focus was truly on enterprise needs.
2. From invisible, background app to engaging, lovable app: Steve Jobs famously told Dropbox’s founders that Dropbox was a feature, not a product. Competitors like Google, Apple, and Microsoft eventually commodified cloud storage. To compete, Dropbox had to evolve beyond file-sharing and invest in new functionalities to stay relevant to enterprises.

4 Dropbox enterprise features that led to success

Four key features — made specifically for enterprise Dropbox customers — made the pivot possible:

1. Authentication

Enterprises need apps that integrate with secure authentication systems like Okta or OneLogin. A good percentage of the Fortune 500 aren't even allowed to use products that use just a username and password.

To address this, Dropbox introduced single sign-on (SSO) in 2013 and Active Directory integration in 2015, allowing enterprises to manage user access more effectively.

By 2020, SSO became a basic requirement even for smaller companies, and Dropbox’s early move helped secure larger enterprise clients.

2. Compliance

Dropbox struggled to enter industries requiring strict compliance (e.g., HIPAA, SOC II) because it lacked the necessary certifications. Box, a key competitor, became HIPAA compliant in 2013, allowing it to capture customers that Dropbox couldn’t.

Dropbox finally got HIPAA compliance in 2015 and later expanded its compliance to standards like ISO 27001, SOC 3, GDPR, and PCI DSS — each new certification unlocked access to new markets.

3. Administration

The "land" part of Dropbox’s land-and-expand strategy refers to individual employees using Dropbox without IT approval, leading to unauthorized or "shadow IT" usage within companies. This created security and compliance challenges for IT departments. 

To address these issues and gain legitimacy with larger organizations, Dropbox had to provide IT admins with tools that allowed them to monitor and control how Dropbox was used, offering better oversight and security for these unapproved accounts. 

Here’s a timeline showing when some admin features were added to Dropbox: 

• In 2013, Dropbox revamped its admin console as part of its Dropbox for Business push, allowing admins to monitor user activity like passwords, log-ins, and sharing.
• By 2015, Dropbox introduced tiered admin accounts with three access levels, helping enterprises manage teams with varying admin roles and permissions.
  

• In 2016, Dropbox enhanced its admin console with granular controls, allowing admins to set permissions at team and folder levels and manage team folders from a centralized view.

4. Integrations

To gain enterprise customers, Dropbox faced a massive challenge. Founder Drew Houston admitted, “100 percent of our customers are going to be either an Office 365 customer or a Google Apps customer.” 

Dropbox's best strategy was to focus on integrations, allowing customers to use it alongside other apps. 

Here’s when the integration features were added:

• In 2014, Dropbox for Business API was launched, enabling enterprises to integrate Dropbox with their existing services. This built on the platform's existing integrations with over 300,000 apps by adding team-level functionality.
• In 2018, Dropbox Extensions was introduced, which made it easier to move between Dropbox and web-based apps, and later doubled its extension support.
  

• In 2019, Slack, Zoom, and G Suite integrations were added. These integrations strengthened Dropbox's position in the enterprise market, making it a complementary tool rather than a standalone solution.

Related read: How being enterprise-ready helps Slack land big deals

The role of Dropbox enterprise features in its growth

Dropbox took the task of expansion seriously. It built an open ecosystem to satisfy the requirements of IT departments.

Their success is an example of what the land-and-expand strategy needs to work. You can land with a good app, but you can’t expand just by tacking on an enterprise sales team. Your app needs a host of features that range from authentication to access controls. These features aren’t fun or exciting to develop, but they make enterprise sales possible.

Enterprise-ready features are non-negotiable if you want to land big contracts and make big money (and we’re assuming you do).

Nowadays, you don’t have to spend the better part of a decade becoming enterprise-ready. With WorkOS, you can become enterprise-ready today.

How WorkOS enhances enterprise features for compliance and identity management

WorkOS enables companies like Dropbox to add essential enterprise features, such as SSO and Directory Sync, within weeks instead of years. These integrations can help close big enterprise deals faster.

Here are more details about what to expect:

• Single Sign-On (SSO): With a single API-based integration, WorkOS supports both OIDC and SAML SSO for all the major enterprise IdPs like Okta, Microsoft Entra, and OneLogin.
• Directory Sync (SCIM): Automatically syncs user data between your customers' IdPs and your app with Directory Sync.
• Compliance: Enterprise deals hinge on compliance. WorkOS adheres to industry standards like GDPR and CCPA, so you can meet security requirements without the headache of managing it yourself.
• Scalability: Whether you’re managing a few users or tens of thousands, WorkOS scales with you.

Ready to take your app to the next level? Sign up with WorkOS today to start building for enterprise.