Dropbox saved almost $75 million over two years by building its own tech infrastructure

A typical data center setup. (Courtesy: Wikipedia)

After making the decision to roll its own infrastructure and reduce its dependence on Amazon Web Services, Dropbox reduced its operating costs by $74.6 million over the next two years, the company said in its S-1 statement Friday.

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.

Dropbox was once the quintessential cloud success story, a startup that built a massive user base and brand presence thanks to its use of Amazon Web Services. Obviously, lots of companies are still happy to pay AWS to manage their infrastructure, as evidenced by the steady gains the cloud market leader made in 2017.

But once certain startups turn into big companies with hundreds of millions of users, with computing needs that they’ve come to intimately understand, it can be far more efficient to set up computing infrastructure designed exactly with those needs in mind. After a multiyear process, Dropbox completed what it calls its “Infrastructure Optimization” project in the fourth quarter of 2016.

“Our Infrastructure Optimization reduced unit costs and helped limit capital expenditures and associated depreciation. Combined with the concurrent increase in our base of paying users, we experienced a reduction in our cost of revenue, an increase in our gross margins, and an improvement in our free cash flow in the periods presented,” the company said in its S-1 statement, referring to 2015 through 2017.

Dropbox still uses AWS for less than 10 percent of its storage needs, it said in the statement. The company operates three data centers in the U.S. but none in Europe, and uses AWS resources in Europe to serve some customers on that continent.