Brad Garlinghouse steps down from Hightail: Consolidation in the file sync-and-share market

When I heard the news that Brad Garlinghouse had left file sync-and-share company Hightail (formerly YouSendIt), I posted this tweet linking back to the Arik Hesseldahl piece at Re/code:

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More news has come to light that reveals Garlinghouse wanted to sell the company because of the consolidation of the file sync-and-share market:

Garlinghouse, sources familiar with the matter said, favored selling the company. He argued the cloud storage industry was fast becoming dominated by much larger and better-funded companies like Dropbox and Box, and it had become a crowded and hyper-competitive business. Hightail’s board of directors disagreed, prompting Garlinghouse to respond that it was “time for a transition,” according to the sources.

Ranjith Kumaran, a co-founder and board member, has allegedly been tapped as CEO. His Linkedin bio has been updated to reflect the new role, but on the company’s web site Garlinghouse is still shown as CEO, and Kumaran as board member and founder.

This transition is a point of confirmation for the underlying premise in the recent Sector Roadmap I wrote on the file sync-and-share market. We used a panel of analysts to evaluate which of three categories — best-positioned, niche players, or challenged — a long list of file sync-and-share companies fell into. Box, Dropbox, Google Drive, Microsoft OneDrive, Apple iCloud Drive, and Amazon Drive were rated as best-positioned. Hightail was rated as a niche player:

Those scoring between 1.5 and 0.5 are what we deem to be niche players — that is, they are carving out a particular industry, vertical, or limited set of use cases that would differentiate them in this new order: Intralinks, Egnyte, Hightail, Syncplicity, SugarSync, and BitTorrent Sync. These companies will need to push further into support for specific use cases. Many have done so already, like Intralinks’ support for deal making and boards of directors, or Syncplicity’s and Hightail’s support for geographic controls, such as the German regulations mentioned earlier.

Garlinghouse must have read the cards in a similar way, in that even the enterprise security features may become commoditized in the near future, as the enormous giants throw great resources at the problem space. I am predicting a great shake out, and more news like Garlinghouse’s departure due to conflict with his board and investors.

Disclosure: Hightail is backed by Alloy Ventures, a venture capital firm that is an investor in the parent company of Gigaom.