Negging out competing backup solutions that use 3rd party cloud providers is something Dropsuite investors should expect from Microsoft.

DSE currently has 3 advantages over Microsoft in their particular niche

1. It's backed up on a different cloud
2. The solution is specific to MSPs and have integration with MSP specific systems
3. It's cheaper

My current thoughts are:

1. I think this is the weakest advantage. If number 2 and/or 3 are addressed by Microsoft, I'm not sure MSPs and end customers would care. Technically speaking, it's not difficult for Microsoft to have developed a completely segmented backup system.
2. This is probably something Microsoft will never directly address and leave it up to its backup partners. The MSP backup TAM is too small for them to care.
3. Pricing in my mind is the biggest risk. There's nothing really stopping MS from pricing it at Dropsuite's price point or even significantly below - and still make a decent gross margin. The real risk lies in Microsoft strategically deciding to dissuade customers from exporting M365 data to third parties, turning backup services into a loss-leading product.

Why would Microsoft want to dissuaded customers from taking data out of M365? Most likely because of all the $100s of billions of capex they're spending on AI is predicated on the idea they hold a competitive advantage in customer data. By keeping data within their ecosystem, Microsoft strengthens its AI value proposition and maintains its edge over rivals.

This is why I find Dropsuite such a challenging investment. It’s like facing a big brown bear on the loose - sure, it’ll probably head to the stream to feast on some salmon, but at any moment, it could turn around and maul you just for sport.