25 July 2017. Zoho Corporation, an information technology and business management software as a service (SaaS) developer, rolled out an operating system for businesses. It’s the first Indian software company to do so.
Sridhar Vembu, CEO and a founder of Zoho Corporation, calls Microsoft CEO, Satya Nadella, “a good man and a good friend”. But when it comes to business, they must compete. Since coming to be in 1996, how close has Zoho come to beating Microsoft?
“Satya is running a big $90 billion company… so it’s hard to compare,” said Vembu. “Definitely our product portfolio has become stronger and stack of technology is better, but we are a much smaller company. However the key opportunity is when all our computing moves to the cloud; we will see new opportunities and new players. Sure Microsoft will be a big player but they won’t be as prominent as they were in the desktop era. And we definitely have a very strong product team and line up increasing in global recognition. So we are better poised to compete.”
Over the years, Zoho has expanded its services to suit even small businesses. Zoho One, the brand new operating system for instance, encompasses 38 applications and costs Rs 1,000 per employee per month.
Vembu’s forte is product development and creating product strategy. He says he first examines a product and then the markets it could serve. “We perfect our product based on the market. It’s easier to do this first for smaller businesses, then increase the product’s technical capabilities that large enterprises may require.”
Zoho Corporation has three main divisions, ManageEngine, Zoho and WebNMS. ManageEngine is a flagship product and a major revenue generator for Zoho. Zoho is a privately held company and its revenue figures have never been confirmed publicly, but MangeEngine is estimated to earn around $120 million a year, out of the corporation’s total earnings of close to $370 million a year.
Zoho claims to spend between 35 and 40 per cent of revenue on research and development (R&D); considerably higher than the 20 per cent an IT company typically spends. A typical cloud company spends 55 per cent of its revenue on sales and marketing versus Zoho’s 25 per cent for the same.
“Each company has a market strategy, but in general if you’re very heavily sales and marketing dependent, and you don’t have sound R&D to back it up, all your efforts and investments are lost. Forget the sales spend, you end up losing lots of good sales if your R&D is not solid, since this is what will help you differentiate your product and technology. Without this, it’s difficult to build a sustainable company. So I would advise people to focus on what makes them sustainable and durable.”
Zoho, which once described California as its headquarters, now calls Chennai its headquarters. Over 90 per cent of its 5,000-strong team works out of Chennai. “The transition is simply a reflection of where the Zoho people are,” says Vembu. To Vembu, India sparkles with innovation. “It’s an ambitious set of young people coming out of colleges,” he says, “in many cases they are the second generation. Their parents were already in the IT industry, so they are more ambitious than their parents. This new generation is setting up a new wave of companies - which is good for India. I’m actually very bullish and very optimistic about India’s tech capabilities.”