Perhaps the answer to this lies in the incentives for VCs. The current dropbox strategy produces a sustainable, lifestyle business for its employees and customers. They are happy with a product that meets their needs. It's not what VCs want at all; they want either total domination or acquisition. The middle-ground is uninteresting to them. So, had they stayed with AWS, they may have bought a 10% chance at 10x more VC return, and a 90% chance that they are bought up and absorbed into OneDrive.
I prefer the current outcome to a swing for the fences.
I don't think it would be possible for them to stay with AWS considering their storage volume usage. As soon as the storage was out everything else has followed as well
Dropbox's business IS storage, which means running on top of storage is always going to be a threat and cut into their margins. What incentive does AWS have to give Dropbox a really sweet S3 deal? They know Dropbox needs the storage. It's like why it's better for a business to own the building its in, because if you become successful, your landlord has the incentive to increase your rent. This isn't about if AWS can provide a compelling bulk rate for S3, it's about if your business lives or dies based on the AWS deal renegotiation.
No, I don't think that Dropbox should manufacture its own hard drives. The main reason is that switching hard drive manufacturers can be done piecemeal as you need to buy them. Getting data out of S3 if the contract negotiations go bad can cost more than storing it. It's just very different economics and level of vulnerability given the two.
Sure, that was a great feature in 2007. (S3 existed when Dropbox was founded, FWIW.)
It eventually stopped being a differentiating source of value, and trying to out-commodity the CSP’s on storage cost at scale seems like a bad strategy to bring value back to the product. At tremendous effort you make it possible to lower prices by 20% or whatever, in order to keep the same profit on an undifferentiated product. Who cares?
I prefer the current outcome to a swing for the fences.