As enterprise security concerns grow, a tailwind emerges for Box

While privacy, compliance, and security concerns once kept highly regulated industries out of the cloud, these issues now almost compel them to make the leap, Box's Aaron Levie says.

Demand for new security tools grows as businesses adopt cloud computing

Video: Demand for new security tools grows as businesses adopt cloud computing

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When cloud computing first took off, the least regulated industries were some of the first to get on board, given they had fewer privacy or security concerns to consider. Since then, however, that dynamic has effectively been turned on its head, argues Box CEO and co-founder Aaron Levie.

"Security in the cloud has generally exceeded security and privacy and compliance solutions for on-premise environments," Levie said to ZDNet, "almost forcing regulated industries to move to the cloud much more quickly."

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To differentiate itself inthe cloud content management business, Box has focused heavily on building up security and compliance offerings. On Wednesday, the company posted solid second quarter financial results that demonstrated how the strategy has paid off. Its largest European transaction for the quarter came from the Metropolitan Police of London.

"We're seeing some of our fastest growth in industries that are the most regulated and most security-conscious," Levie said, citing business in the life sciences and financial services sectors, along with government. "Intially, that would've been counterintuitive."

Increasing security, privacy and compliance concerns -- driven in part by new regulations like the GDPR -- should particularly help Box win companies that are multinational or headquartered outside of the US, Levie suggested on Wednesday's earnings conference call.

"In general, we see a significant amount of headwind for large enterprises, having to deal with all of the varied compliance in privacy challenges of just operating a global business today in the digital age," he said on the call. "So that headwind for a customer, becomes a tailwind for us."

Box plans to add to its advantage in this space with its new investments in artificial intelligence. So far, the company has teamed up with Google to bring computer vision capabilities to its platform, but Levie said AI will be useful for more than just data management.

"Applying AI to content security and in a compliance-oriented way is incredibly hard and something we have a pretty significant amount of focus on," he told ZDNet. "We're pretty excited what machine learning and artificial intelligence will do to further our differentiation in this market."