Zoho: The Startup That Took on Google and Microsoft
Zoho CEO and Founder Sridhar Vembu.
CREDIT: Photo Courtesy of Zoho
Sridhar Vembu, the founder and CEO of Zoho, doesn't have much use for conventional wisdom. Conventional wisdom in the software world says you don't plant your flag in the very heart of a domain lorded over by industry goliaths such as Microsoft and Google. But that's exactly what Vembu did.
Zoho began rolling out its suite of web-based no-cost and low-cost business applications in 2005. At that time Microsoft Office stood astride the corporate world as the linqua franca for businesses large and small. Software-as-a-service (SAAS) was still in its infancy, hoping to gain traction with users trying to get their heads around the concept of cloud computing. The doomsayers made the easy call and predicted Zoho's demise.
Zoho survived and SAAS began to acquire a healthy fan base that Microsoft seemed to largely ignore. That wasn't the case with that other software goliath, Google. It launched its own online package of business applications called Google Docs in 2006. The doomsday chorus tuned up. That chorus hit full voice last year when Microsoft announced that Office 2010 would offer free online versions of Word, Excel, PowerPoint and OneNote. They were wrong again.
Being a contrarian has paid off.
Zoho is profitable with annual revenue of more $50 million and more than 3 million users. It has financed its growth (100 percent annually) without bank loans or dipping into the venture capital market. How did Vembu pull that off?
“We knew it was going to be tough,” Vembu told BusinessNewsDaily. “It’s clear now that business software is moving online.” He knew that Zoho had the right product and the right philosophy to succeed: Produce elegant software at affordable prices and provide service with a smile.
"It's high value, better support and lower cost," he said.
Vembu believes that the breadth and depth of Zoho's products is a key differentiator. Zoho offers a comprehensive suite of more than 20 web-based applications for businesses that range from word processing, spreadsheets and email to web conferencing, customer relationship management (CRM) and databases. Nobody offers that wide a range of capabilities. Not Microsoft. Not Google.
Unlike many software companies, Vembu said, Zoho prizes interoperability, the ability of Zoho's software applications to play well and integrate with others, including competitors such as Google and Microsoft.
"We make it easier for our customers," he said. Zoho Calendar, for example, works with third-party online calendars such as Google Calendar and Microsoft Outlook.
Software doesn't get any more affordable than "free." Vembu said that Zoho offers free personal versions of all its business-oriented applications such as CRM. There are monthly fees for professional, business and enterprise versions. The professional version of Zoho CRM, for example, costs $13 a month per user.
Zoho will always offer free tools for customers, Vembu said. "The product is doing the marketing for us. Free is a way for us to lower our marketing costs." Most of the paying accounts are generated from users who have sampled Zoho's capabilities for free, he said.
Lower cost is about more than initial investment, Vembu said. Updating software when new versions are released is a major cost for IT departments. "Microsoft is still stuck in big releases," he said. Because Zoho is web-based it is able to bypass the "version" trap that drives up software costs.
Continuous improvement is the company's north star. "We make small incremental changes, many of them under the hood," Vembu said.
Service with a smile for Vembu is all about listening to the customer. "It's a two-way conversation," he said. "We have an instantaneous feedback loop." That comes from an online feedback form that feeds user comments directly to product managers and engineers, enabling them to fix bugs and add features on the fly.
Vembu doesn't aspire for Zoho to become a category killer that eliminates all competition; he has praise for Google and Microsoft and believes there's a place at the table for all of them. He's more concerned about what is happening inside his own house than trying to second-guess the competition.
"We don't really obsess a lot about Microsoft," he said. "If there's anything I've learned from my years in the tech world is that companies don't get killed by competition. They usually find creative ways to commit suicide."