Cloud Competition Heating Up, Carbonite Rolls Out File-Sync Software

Carbonite has long been known for one thing: Backing up your computer files. And for the customer, that means mostly staying out of your face.

If everything goes right, Carbonite’s software sits in the background, making copies of your valuable documents, photos, and other digital goodies. They’re uploaded to Carbonite’s servers, and there they sit, waiting in case your machine crashes.

Simple is good, right? Well, it turns out that in a world suddenly stuffed to the gills with “cloud” services for online file storage, Carbonite could risk getting lost in its customers’ minds.

“It’s so simple and it’s so quiet, it’s like having car insurance almost,” CEO Dave Friend says. “At the end of the year, you haven’t had an accident and you say, ‘Jesus, I wonder if I could do without that?’”

Boston-based Carbonite, which went public in 2011 (NASDAQ: CARB), is hoping to solve some of that stealthy conundrum with a new focus on software applications. The first of its new apps, called Currents, is showing up in a “beta” release today.

Currents finds copies of recently accessed files on a computer or other connected device and saves a copy on an online server. The files are then accessible on other devices that have the Currents app, and any changes get incorporated back into the original copy. Users can also send files to other people, let them make changes, and mark them up with notes and commentary.

If those features sound familiar, there’s good reason. Many professional software products are incorporating these kinds of online sharing and group-editing capabilities, including offerings from major public companies like Microsoft and Google, along with heavily funded private companies like Box and Dropbox. SugarSync, a smaller company, combines file-sharing features with digital backup similar to Carbonite.

In short, Carbonite’s territory is getting more crowded, and it’s probably not going to be enough to just offer file backup forever. And that means doing one of the things that’s traditionally the hardest for an established company—innovating.

To get over that hill, Carbonite has set up a small team of developers and designers, called Carbonite Labs, that works on new projects out of the company’s headquarters. Friend, the company’s co-founder and a veteran tech executive, moved his office to the same floor the Labs team operates on, and now sits just a few feet away from their communal table of laptops and post-it covered windows.

Currents is the Carbonite Labs group’s first public project. Friend said it was important for the company to come up with a useful standalone application, rather than “just doing another Dropbox lookalike” by adding online storage.

“Frankly, I think that train’s left the station,” Friend says.

One of the points of distinction for Carbonite Currents is that it’s persistently looking for and saving the most recently accessed files on your machine, in the folders and locations you tell it to look. The Currents app then displays those files, in order of the most recently changed, going back for 30 days (access further back is seen as a possible premium feature).

With consumer cloud file-sharing services like Dropbox or Google Drive, the user has to save files to the connected folder. Just save them to the computer’s desktop on accident, and it stays there, never getting backed up.

“The real copy is in the cloud,” Friend says. “I think that’s the right way to think about these things. It shouldn’t matter what device you’re on—it’s just what device you’re working on last.”

Whether that pretty fine-point distinction will help draw users remains to be seen. But Carbonite clearly sees its more aggressive move into the application layer of the cloud as a necessity.

The company, which mostly serves individual professionals and small businesses who pay annual subscriptions for online backup, has been in a mad dash to build up its customer base.

Carbonite has seen its revenue grow from around $19 million in 2009 to $60.5 million in 2011. But it has never turned a profit, with most of its cash being plowed back into adding customers through sales and marketing. In 2011, that activity cost Carbonite some $37.7 million—more than half of its revenue.

Like all subscription businesses, Carbonite has to keep an eagle eye on “churn”—the percentage of subscribers who drop the service. And the company says that earlier experiments with added services, like the ability to access backed up files from other devices, have kept subscribers more loyal. Currents could also work that way, keeping customers around longer by offering extra value.

It also could be a way to get more people to subscribe to Carbonite’s bread-and-butter business by getting the company’s brand in front of more people To its credit, Carbonite isn’t hitting people over the head with the upsell: Currents is free, and you don’t have to have a Carbonite account to use it.

“That’s to be proven, but that’s a really big potential benefit to us. You make something that does one job really, really well, give it away, and see if it can become an on-ramp to paid subscription.”

And that experimental attitude means Carbonite Labs is probably a phenomenon to keep an eye on as competition over cloud-based software and storage heats up.

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