Zoho: Thriving Amid the Giants

http://bits.blogs.nytimes.com/2009/08/26/zoho-thriving-amid-the-giants/

by terpua • 17 years ago

94 56 17 years ago

bits.blogs.nytimes.com

edw519• 17 years ago

Part of the opportunity for Zoho lies in differentiation. It has 19 online productivity and collaboration applications, including customer relationship management, project management and invoicing. So it only competes head-to-head against Google with five offerings.

So what exactly differentiates Zoho? The breadth of its product line? That doesn't sound like much of a differentiator.

Or is there more that this article doesn't mention? Any special processes, APIs, or features? It's relationship with VARs?

It must have a great differentiator to have $50MM in revenue without funding. It's just unclear from this article exactly what that differentiator is.

sp332• 17 years ago

I think by "differentiation" they meant "diversification."

terpua• 17 years ago

Looks like they have 2 other product divisions. What would be nice to know is how much of the $50M can be attributed to zoho.com.

http://www.zohocorp.com/

SamAtt2• 17 years ago

We use Zoho and while I can't speak to the author's intended meaning I can tell you the two factors that keep us with them.

1. Zoho's APIs are more mature. Especially the Remote API which allows you to use the Zoho tools but keep the data on your own servers. That's something Google has no competitor for (last I checked).

2. The customer focus. The company has always been responsive to our requests and there have been occasions where they actually added a feature pretty soon after we asked for it (in fairness others might have asked for it earlier, I don't know)

It boils down to Zoho being focused on creating a great product for their customers while Google seems more interested in proving a point about online software.

onreact-com2• 17 years ago

It means you get a lot of different apps under one roof without the need to switch to other vendors for different tasks.

ryanwaggoner3• 17 years ago

But Zoho, a company based in Pleasanton, Calif., that offers similar services, is solidly profitable, with revenue of more than $50 million a year. And it has never taken a cent in venture capital or bank loans.

I would love to hear from someone more in the know on how Zoho was able to pull this off. Conventional wisdom seems to be that bootstrapping a product company to tens of millions is near-impossible. Is Zoho just a random aberration or do they offer lessons to others trying to do the same?

inovica2• 17 years ago

I think the problem these days is that there is a lot of talk, on sites such as this, that VC is the way to go. I don't think that Zoho are unique in being able to do this - I think with software/web there are a good number of companies that have managed to quietly build their business and get great revenues.

SamAtt2• 17 years ago

I could be wrong but I suspect most small companies in the United States are funded by business loans not VCs. If you have decent credit and real faith in your idea it makes sense not to give the valuable shares away.

webwright2• 17 years ago

Zoho quietly did it by getting funding from a source other than VCs. Growth like this generally requires cash.

randomwalker• 17 years ago

One thing Zoho does very differently is "outsourcing." I put that word in quotes because Zoho is partly based in Chennai, India, where I believe the CEO Sridhar is from. In fact the majority of the employees are based there, which keeps cost way down.

Now, they don't treat their Chennai office as a second-rate sweatshop to whom you parcel off grunt work and forget about it. That is a recipe for disaster. At the same time, they are very open about the fact that CS education/programming skills in India aren't nearly as good as in the U.S. So what do they do? They train their Indian programmers in house for 9 months. You can definitely take smart people without a great educational background and bring them up to speed if you're prepared to do that.

Sridhar is http://news.ycombinator.com/user?id=sridharvembu, hopefully he can give us more details and correct me if I've gotten anything wrong.

zhyder• 17 years ago

A better term for what Zoho does is "offshoring". Outsourcing and offshoring are orthogonal. It's only when the two go together that you get sweatshops.

netsp4• 17 years ago

That makes sense. But I still don't see how it adds up to a bootstrapped product company. Especially not one like Zoho (wide product range, products directly competing with major players, products in long established categories and classes).

India is one hell of a resource. It's kind of raw at the moment. IE, you can't easily just buy services there and expect good quality. Being able to make it work well could be one hell of an advantage. As you say, you can't just take elance rates and calculate what you save by producing in India. You would probably end up paying many times more to attract, train & keep the best. Could still be cheaper the California, but probably within range.

Basically what I am saying is this: You can probably save a lot and still get quality by being exceptionally good at producing in India. Sounds like Zoho is. But that still doesn't bring your costs down by enough to give a competitive edge to a product company. If you are a service business, cutting production costs (without harming quality) to 60% is a massive edge. If you are a product company, does that still apply?

Side note: It sounds like Zoho's important "technology" is knowing how to produce great quality products in India. I wonder if that is technology another company would pay to acquire. How much would it be valued at?

- update: - I have just read some of the other comments and found a link that sheds some light on my questions, I think. The product company / service company split is far to simplistic. Zoho sees itself as a business software company. An area where (apart form MSFT's monopoly), margins do count and success is not binary. Getting employment costs down and productivity up, even marginally, can make a difference here. I recommend reading the blog post.

http://blogs.zoho.com/uncategorized/why-we-compete-with-goog...

markbao• 17 years ago

Because it was created under the server/network enterprise IT management company AdventNet (which now changed its name to Zoho Corp., and AdventNet's stuff is now under ManageEngine.)

So basically, some intrapreneurship happened, funded by the company.

The CEO's on here, so he probably can give you a better idea.

aditya• 17 years ago

Zoho grew out of parent AdventNet (now Zoho Corp) which has been around 13+ years. They became successful selling server and network management software and then started up multiple divisions of which Zoho is the most recent (and glamorous).

More here: http://blogs.zoho.com/general/so-whats-in-it-for-zoho

vchakra• 17 years ago

The statement is misleading, because it does not provide the revenue splits. My assumption is that the Zoho side of the business (web 2.0) is responsible for less than 10% of that money, if that.

Also its easy for a particular part of the business to be the fastest growing business if it starts out close to zero.

I'm not trying to put down what Zoho has accomplished (brand awareness in a crowded field, as well as competing with the big boys), but merely point out that people should not assume that they are making a ton of money on their web 2.0 stuff.

senthil_rajasek2• 17 years ago

perhaps this post by Sridhar would throw some light as well...

http://blogs.zoho.com/uncategorized/why-we-compete-with-goog...

inovica2• 17 years ago

I think its great that these guys appear to be genuinely interested in building a company rather than building it quickly to sell it. I haven't used any of their products, but this article has prompted me to give them a go

zzzmarcus• 17 years ago

Over the last few years I've tried their products out now and then. I'm always disappointed with how little unification there is when moving from one app to another. The design (both UI and UX) always feels a sub-par to me as well. I've never been able to stick with any of their products for longer than a month or two without giving up in frustration.

Apparently a lot of people feel differently though.

onreact-com2• 17 years ago

Yeah, that's why I use Zoho only occasionally, but I still prefer them compared to Google for privacy reasons and Microsoft (for the high price and annoying interfaces) products and even the bloated Open Office suite.

sridharvembu12• 17 years ago

We plead guilty to having a fragmented suite - that was the price of rapid evolution. But they are coming together nicely now. Check in on us every few months (seriously!). We hope to surprise you.

zaidf2• 17 years ago

Very 'on message' piece: it's clear to HN crowd that most of Zoho's monkeymakers are non-web2 tools yet it is also clear Zoho wants more focused media for their web2 stuff and they are getting it.

sridharvembu12• 17 years ago

I am in India now, so was sleeping as this thread happened :-)

I hang out at Hacker News a lot, in fact, almost everyday I send an article to someone or other in the company. I strongly recommend it internally - I love HN (thanks, pg!).

To answer some of the questions: Zoho Corp used to be known as AdventNet. It was bootstrapped from the beginning (1996). Zoho is the latest and the fastest growing division; while we do not reveal our revenues, all I can say is that we are very happy where the Zoho division, as well as the whole company, has gotten. We have solid profits, which we invest in doing interesting new things.

Bootstrapping works, but you have to be very patient. It has taken us 13 years to get here. The fun part is that we now have the human capital as well as the financial capital (the first part is more important) to do a lot of interesting things, and we don't have to worry about VCs or Wall-Street (not that there is anything wrong with them ;-))

On the product side, Zoho has been evolving rapidly, reaching that polish and maturity in stages. If you had tried us 2 years ago, I wouldn't blame you for giving up on us. We are far, far better today - one proof point is that our company, of about 1000 people, has moved to Zoho almost entirely. There are some small bits and pieces that are not on Zoho, but by end of 2009 everything should move. The tools we use extensively within include Mail, Office suite, CRM, Project Management, Meetings, Creator ... just to give an example, we run well over 100 web meetings a day on Zoho Meeting ourselves. We used to pay WebEx about $25-30K per month, and our usage on Zoho Meeting would cost us about $3-4K if we were to charge ourselves. I say that to explain why we have paying customers.

Why the diversified suite? It is not only diversification, it is also a source of differentiation. We believe we can create very compelling integration scenarios that bring substantial productivity increases. One recent example is our Zoho CRM + Mail integration, which has sold over 1000 customers in the 8 weeks or so it has been released. You will see many more such things rolled out, partly addressing the criticism that it has been a fragmented suite.

So how do we do it? Silicon valley style flexible culture mated with Japanese style patient engineering. There are huge lessons to learn from Japan's post-War leap. As one example, Japanese companies (the giants of today) always had a train-your-own-talent policy. Their colleges most certainly didn't do it - for the most part, college in Japan is considered relaxation time before the real work begins. We dispense with what I believe to be non-essential parts of Japanese experience, like the rigid discipline, substitute it with silicon valley style flexibility.

The one achievement I am proud of is not a product or technology: it is our "University" (as we call it) where we recruit and train 17 year olds - the typical school leaving age in much of India. About 100 of our 1000 employees have come from that program now, and it is growing fast. Longer term, we should get 30-50% of our talent pool directly out of high school.

I have written extensively about it. Let me summarize: I do not believe in college. I believe most real education happens in the work-place, an observation Peter Drucker made originally. I regret going to college myself - we would have been 10x bigger if I hadn't gone to college, so that is my opportunity cost. I probably wouldn't have if I had grown up in America.

Sorry for the long comment. I wanted to answer all the posted questions in one shot.

brezina• 17 years ago

Thanks for commenting Sridhar - congrats on all of the success - i love seeing success derived from long term commitment.

netsp4• 17 years ago

I have been thinking a lot lately about Indian professionals moving back home. I always thought that India's catch 22 was loosing the better (or at least better educated) talent.

What do you think about returnees? Resource, potential talent pool? Too many hang ups (salary expectation, etc.)?

sridharvembu12• 17 years ago

When I was in IIT in the late 80's, the hot topic was brain drain out of India. So it is interesting we are talking about returnees now. As the Indian economy liberalizes, talent naturally stays home to pursue opportunity. In any case, India could export a lot of talent, and still not run out (!) - so I never worry about the "drain" part.

On returnees, it is harder the longer someone has been out of India. Two of my brothers returned and they are doing really well (both start-ups http://vembu.com and http://gofrugaltech.com ), but they didn't stay in the US much at all.

My advice: if you are returning, assume that you never left. Lower your expectations (in every way), you will find it easy to exceed them. Traffic is chaotic, civic administration sucks, water problems and so on. But there is something else to India ... the interesting part for me has been that in such poor surroundings, I have always enjoyed a very intellectually stimulating atmosphere. I still can't explain that part.

zaidf2• 17 years ago

It'd be really educational if you can roughly share how you scaled the company employee-wise over time? ie. when did you you go from 1 to 10 to 100 to 500 to 1,000 employees?

sridharvembu12• 17 years ago

Very organic ... 5 after first year, 100 by 4th, 350 by 7th, 1000 by 13. Steady stream of recruiting over time, no huge bump, except in year 2000, when our revenue tripled, thanks to that bubble. But even in that year our headcount did not keep up with revenue - we simply weren't set up to recruit like that. So that was a very stressful year. Then we had many years of stagnation, as the bubble burst and we had to find new things to do. Zoho eventually came out of that period of stagnation and misery.

ryanwaggoner3• 17 years ago

Thanks so much for posting all this awesome info...very inspiring.

we would have been 10x bigger if I hadn't gone to college, so that is my opportunity cost.

Can you elaborate on this a bit? Are you saying that your growth curve was shifted back by n years (and you'll be 10x in n years), or that it was fundamentally changed as a result of going to college?

sridharvembu12• 17 years ago

Mix of both. Growth curve shifted back n years (in my case 8 years - I did a PhD too, whose main utility was in coming to the US and then realize that PhD was a waste of time - all I can say is that I am a bit slow!). And those were some of the best years, so there is a fundamental change in the growth curve also.

The thing I most admire about America is the can-do spirit. I am sad that the education system in America is "Asianizing" rapidly, in the spirit of "We have to compete with the Chinese/Koreans/Indians ..." That's not what got America to where it got - it was the can-do "hacker" ethic, and the climate of freedom where that ethic flourished.

rams2• 17 years ago

"I do not believe in college" - Wow that's refereshing to hear from the founder of an Indian startup/company. I seriously believe the degree/pedigree obsession is dragging down business in India. What's even better is to wake up and read something like this about a company that is short drive from my home.

sutro• 17 years ago

Mr Vembu, sir, you are an inspiration.

ajju2• 17 years ago

Sridhar, do you have any links to more information about Zoho's University, the curriculum and so forth?

I shared a very similar education experience (Engineering in India, Masters in the US) and ended up with similar sentiments about how useless college education in India is and a (heretofore passive) interest in how to improve it.

However, I think college in the US CAN be a valuable experience, especially at the better schools, simply because of the freedom to explore, take courses in any department and also because of the generally better quality of instruction. Would you agree?

Jaskirat• 17 years ago

Very Inspiring & Interesting! Aside from that fact that I regret my college education , I think quality education (not the grade of anna university affiliated colleges :() is nevertheless an important phase of life.

sridharvembu12• 17 years ago

It is worth elaborating on bootstrapping. When we started, the hottest tech company in the world was Netscape, and Yahoo was still an infant. So you can see how long it has taken us - nothing much happens to you in 1 year, 2 years and so on. The only thing we had going was patience. It helped that I was educating myself about Japan.

We didn't set out with the mission of bootstrapping. It was sheer necessity: we had no big ideas (only some little ideas), and had no way of impressing anyone to put money on us. Our very first product was this: http://www.webnms.com/snmp/ - the amazing part is we still make money on it! But sexy it isn't - a VC who stumbled on us told us "Why are you focused on such a tiny market?"

By the time money was offered to us, we didn't need it, and we were having too much fun building stuff to even bother pitching to VCs. We came close to a VC round once in 2000: a term sheet was offered. There were things there I didn't like and I was too lazy to negotiate with them, so I simply let it die.

senthil_rajasek2• 17 years ago

"It helped that I was educating myself about Japan."

What was the motivation and can you elaborate and share with us on how you did this?

sridharvembu12• 17 years ago

I was always fascinated by Japan, particularly in the context of India . After we started, I started looking closely at Japanese companies as role models. They had figured out stuff over the years that is unbelievable. Even today, there exist some technologies that pretty much only the Japanese do well (and not only in well known industries). Take a look at this company for example: http://www.uniontool.co.jp/english/product_index.html

They make drill bits for printed circuit boards, drill bits finer than human hair, drill bits you cannot even see with the naked eye.

The magic is years and years of patient, painstaking work, with occasional inspired leaps. That was good to know, particularly when we tended to get bored or tired.

rams2• 17 years ago

Sridhar, What does Zoho mean ? Folks here in Thiruvanmiyur don't seem to know.:-)

sridharvembu12• 17 years ago

We were hunting for a domain in 2003 for our new initiative. We tried variations of SOHO (small office home office). Zoho happened to be up for sale. I was reluctant to shell out the $5K (I am cheap), but Raju Vegesna, persuaded me we should buy it. He was right.

kalyan• 17 years ago

I am not sure if dissing (college) education all together makes sense. I am sure you can claim to have learnt a lot of allied "subjects" during your education including teamwork, competing, leadership, analytical thinking, synthesis of data, risk taking (maybe) etc. But I do agree that education (whether American or Asian) should give students room to develop the above while learning core subjects for it to be holistic. It should not purely rely on it being rote based.

techhacker• 17 years ago

Here is another interview of vembu (from India perspective) http://www.pluggd.in/indian-startups/interview-with-sridhar-...

Zoho: Thriving Amid the Giants

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