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u 102 u
August 5-18, 2013
Business India u the maga zine of the cor por ate wor ldStart-up
e is accountable to no one.
u 103 u
August 5-18, 2013
Business India u the maga zine of the cor por ate wor ld Start-up
of hosting, managing, maintain...
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Taking on the Big Boys - How ZOHO is finding ways to thrive against Microsoft, Oracle & SalesForce


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Taking on the Big Boys - How ZOHO is finding ways to thrive against Microsoft, Oracle & SalesForce. Read the complete story in Business India

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Taking on the Big Boys - How ZOHO is finding ways to thrive against Microsoft, Oracle & SalesForce

  1. 1. u 102 u August 5-18, 2013 Business India u the maga zine of the cor por ate wor ldStart-up H e is accountable to no one. He is a man with lots of chutzpah. He has shunned venture capital. He entertains no plans to take his company public and couldn’t care less about the Wall Street. He dares to take on big players like Microsoft, Google and Salesforce. com – and he does this with products built in India. Meet the inimitable Sridhar Vembu, ceo, Zoho Corpora- tion, a man few have heard of, and one who has kept everyone warned. With many start-ups that die and get buried in the blazing competi- tion of Silicon Valley, Vembu was determined not to be among them. Thanks to his determination to suc- ceed, Zoho is fast becoming known for its business, productivity and collaboration applications at prices that show his nerve to take on com- petitors. Customers use Zoho appli- cations online to run their business processes, manage their information and be more productive without having to worry about expensive or outdated hardware or software. Zoho is emerging as a top player in the crm (customer relationship management) market, dominated by the likes of Salesforce, Oracle and Google for enterprise comput- ing. According to the recent Gart- ner report, Market Share Analysis: Customer Relationship Management Software, Worldwide, 2012 the crm market experienced 12 per cent growth in 2012, which is three times the average of all enterprise software categories. Being a privately-held company, Vembu shuns any talk about revenue or evaluations, but market sources estimate Zoho’s business to touch $200 million this year, while it has been unofficially evaluated at over $1 billion in worth. The company has around 1,800 employees (about 1,700 in India; 100 in USA, China and Japan) and it is growing rapidly. Spurred about entrepreneurship Vembu was always passionate about building products that would make a difference. After obtaining his B.Tech in Electrical Engineering from iit, Madras, and a PhD in Electrical Engi- neering in 1994, he served as sys- tems design engineer in Qualcomm in wireless communications from 1994-96. Spurred by a passion to play a role in the emerging technology industry in India, he reinvented him- self as a software entrepreneur. With the support from his brother, who was also employed with Qualcomm, and who wanted to return home to India, Vembu stayed in Silicon Valley to set up the foundation of what was to be AdventNet. The com- pany specialised in Network Management. In 2001-02, even though the network business had a huge meltdown during the downturn, and many compa- nies took significant hits, Advent- Net managed to keep itself afloat. The company really exploded in the open when it set up, at a time when Cloud computing was gaining momentum and offered B2B apps directly to end-users. In2009,thecompanywasrenamed as Zoho Corporation, and it created three business divisions:, a broad suite of online productivity, collaboration and business applica- tions for businesses, which currently has 8 million users; ManageEngine, which provides it management soft- ware, has over 70,000 customers; and WebNMS, a network manage- ment suite has 25,000 Tier I carrier deployments. In taking on the $4.7 billion crm sales market dominated by giants like Oracle, Salesforce, Microsoft and sap, Zoho already has 8 million users across the world who rely on its comprehensive suite of applications and a growing number of small and medium sized businesses are opening up to it. On a growth trajectory, Zoho has more engineers than any other cate- gory of employees, whereas its clos- est competitor, Salesforce has a larger sales team vis-à-vis number of engi- neers. The company’s flagship prod- uct, is providing stiff competition to Microsoft Office on demand, which means for its online services. Building and integrating The first product launched on Zoho. com was an online office application, Zoho Writer. Seeing early success of its online offerings, it increased focus on Cloud-based applications, which are becoming an alternative for many today as they drive away the burden Taking on the big boys How a plucky startup is finding ways to thrive against much larger competitors like Microsoft, Oracle and Vembu: believing in a bottom-up approach
  2. 2. u 103 u August 5-18, 2013 Business India u the maga zine of the cor por ate wor ld Start-up of hosting, managing, maintaining applications. Other products that fol- lowed include Sheet, Show and Mail, as well as a host of business appli- cations ranging from crm to Proj- ects, Invoice and Meeting. Currently, Zoho portfolio consists of more than 25 different online services. Vembu emphasises that customers benefit most when products are inte- grated and it does this by offering first level of integration across all its services with a single sign-on facil- ity. Since then, it has quickly moved to provide what it calls, “Contex- tual Integration,” which means that Zoho products try to anticipate all the possible touch points/overlaps that exist among products. Zoho has integrated over 15 business applica- tions within the Google Apps Mar- ketplace; an online one-stop store for tools to integrate business apps jointly. In this online shop, Zoho is the largest vendor in the Google Apps marketplace. Zoho succeeds because of its affordable subscription-based pric- ing model. Consider the price of its flagship crm service, which is free for startups and individuals, starts its paid services from $12-35 per user. Comparatively its closest com- petitor Salesforce offers the same services starting from $25 to $250 per user, even though it has a $5 plan that is limited to Contacts Manager application. Zoho’s growing might indicates it is helping its customers generate more value with its products. Affirm- ing the savings of using Zoho crm, Craig Donnelly, ceo & founder, Vir- tual Assistant Technologies says, “We just migrated our crm system Salesforce to Zoho crm. Annual cost for Salesforce was $1,600, but cost for Zoho is $300.” Focused on thrift Vembu’s strategy for success is not hard to decode. Since early days, Zoho has been operating on a boot- strapping budget. Take the strategy of Salesforce that recently acquired ExactTarget, a Zoho competitor, for awe-inspiring $2.5 billion. Sales- force, which has nearly 10,000 employees, will add another 1,600 employees of ExactTarget after the acquisition, while all of Zoho Corp has about 1,800 employees. The comparison couldn’t get starker when Zoho is already beating Sales- force on Internet reach, on the sheer number of new organisations sign- ing up for their platform month after month. Being cost conscious and frugal in running their development centre is part of its vision of ‘hiring locally to design global products’ says Vembu. The company has set up Zoho Uni- versity, a unique education-based employment model that does not focus on college degrees, but recruits bright students from neighbourhood schools in Tamil Nadu into their learning program. Students are provided with a laptop, unlimited Internet access, free meals and a small monthly sti- pend. Those who undergo the rigor- ous 18-month training are absorbed into Zoho, and given salaries that are at par with degree holders from the iits and other engineering institutes. Over 200 employees out of Zoho Uni- versity constitute its total strength of 1,700 skilled professionals in India. Vembu confirms that his unique engineering-centric model will be the road ahead for the company. Vembu’s frugal tactics have helped him avoid venture capital, which he sees as interference and a constraint. “If a company can do without vc money, it certainly should,” he reflects. “If we had taken vc funding initially, I don’t think would have been born.” He has been so successful in rebuffing attempts to invest or buy out his company that he unhesitatingly averted Salesforce ceo Marc Benioff’s offer to buyout Zoho for an undisclosed amount. With no plans to sell his com- pany, Vembu’s only focus is to build extraordinary products at costs that would make his competitors quiver. Also, the company has been smart in investing profits from the sales of one product to build another, a pro- cess it has repeated to its advantage and stayed sustainable. India offers growth potential Zoho is viewing the India market with enormous interest. It is much more than Zoho’s development centre. Already there are two mar- ket trends emerging – one is that Cloud applications are penetrating the Indian market and second is an interesting combination of Cloud and mobile apps tendency taking off. Considering that a mobile phone has limited capability to process a lot of information, it becomes dynamic when combined with cloud apps and this holds great potential for Zoho. Doubtless, this could be Zoho’s firing salvo in the battle for dominance in the Cloud apps arena. Zoho is trying to tap the small and medium businesses (smbs) mar- ket through various channels. “At Zoho, we believe in the bottom-up approach. We serve small businesses first and eventually bubble up ser- vicing larger companies,” empha- sises Vembu. Zoho applications are offered directly via as well as through its chain of partners in the Zoho Alliance Partner Program. The company aims for 10 per cent of its revenue to come from India. Looking ahead, Vembu says growth will be fuelled by the breadth, depth and affordability of its pre-in- tegrated applications. Rivals have learnt not to take his threats lightly. Perhaps, Zoho’s tactics can be an apt lesson for entrepreneurs who can’t afford to go up against established brands and could learn what it takes to be a winner. u S h a s h i B h a g n a r i Others 39.7% SAS 2.2% Nice Systems 2.5% Oracle 11.1% IBM 3.6% Microsoft 6.3% SAP 2.2% Market size in 2012: $18 billion (12.5% growth over 20111) Worldwide CRM software spending by vendor Adobe 3.1% Sales Verint Systems 2.4% Amdocs 2.3% 14%