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BUSINESS INDIA uTHE MAGAZINE OF THE CORPORATE WORLDStart-up

He is accountable to no one.He is a man with lots ofchutzpah. He has shunned

venture capital. He entertains noplans to take his company publicand couldnt care less about the WallStreet. He dares to take on big playerslike Microsoft, Google and Salesforce.com and he does this with productsbuilt in India. Meet the inimitableSridhar 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 wasdetermined not to be among them.Thanks to his determination to suc-ceed, Zoho is fast becoming knownfor its business, productivity andcollaboration applications at pricesthat show his nerve to take on com-petitors. Customers use Zoho appli-cations online to run their businessprocesses, manage their information

and be more productive withouthaving to worry about expensive oroutdated hardware or software.

Zoho is emerging as a top playerin the CRM (customer relationshipmanagement) market, dominatedby the likes of Salesforce, Oracleand Google for enterprise comput-ing. According to the recent Gart-ner report, Market Share Analysis:Customer Relationship ManagementSoftware, Worldwide, 2012 the CRMmarket experienced 12 per cent

growth in 2012, which is threetimes the average of all enterprisesoftware categories.

Being a privately-held company,Vembu shuns any talk about revenueor evaluations, but market sourcesestimate Zohos business to touch$200 million this year, while it hasbeen unofficially evaluated at over$1 billion in worth. The companyhas around 1,800 employees (about1,700 in India; 100 in USA, Chinaand Japan) and it is growing rapidly.

Spurred aboutentrepreneurshipVembu was always passionate aboutbuilding products that would make adifference. After obtaining his B.Techin Electrical Engineering from IIT,Madras, and a PhD in Electrical Engi-neering in 1994, he served as sys-tems design engineer in Qualcommin wireless communications from1994-96. Spurred by a passion to playa role in the emerging technology

industry in India, he reinvented him-self as a software entrepreneur. Withthe support from his brother, whowas also employed with Qualcomm,and who wanted to return home toIndia, Vembu stayed in Silicon Valleyto set up the foundation of whatwas to be AdventNet. The com-pany specialised in NetworkManagement.

In 2001-02, even thoughthe network business had ahuge meltdown during the

downturn, and many compa-nies took significant hits, Advent-Net managed to keep itself afloat.The company really exploded in theopen when it set up Zoho.com, ata time when Cloud computing wasgaining momentum and offered B2Bapps directly to end-users.

In 2009, the company was renamedas Zoho Corporation, and it createdthree business divisions: Zoho.com,a broad suite of online productivity,collaboration and business applica-

tions for businesses, which currentlyhas 8 million users; ManageEngine,which provides ITmanagement soft-ware, has over 70,000 customers;and WebNMS, a network manage-ment suite has 25,000 Tier I carrierdeployments.

In taking on the $4.7 billion CRMsales market dominated by giantslike Oracle, Salesforce, Microsoftand SAP, Zoho already has 8 millionusers across the world who rely on itscomprehensive suite of applications

and a growing number of small andmedium sized businesses are openingup to it.

On a growth trajectory, Zoho hasmore engineers than any other cate-gory of employees, whereas its clos-est competitor, Salesforce has a largersales team vis--visnumber of engi-neers. The companys flagship prod-

uct, Zoho.com is providing stiffcompetition to Microsoft Officeon demand, which means for itsonline services.

Building and integratingThe first product launched on Zoho.com was an online office application,Zoho Writer. Seeing early success ofits online offerings, it increased focuson Cloud-based applications, whichare becoming an alternative for manytoday as they drive away the burden

Taking on the big boysHow a plucky startup is finding ways to thrive against muchlarger competitors like Microsoft, Oracle and Salesforce.com

Vembu:

believing in

a bottom-up

approach

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BUSINESS INDIA uTHE MAGAZINE OF THE CORPORATE WORLD Start-up

of hosting, managing, maintainingapplications. 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 offeringfirst level of integration across all itsservices with a single sign-on facil-ity. Since then, it has quickly movedto provide what it calls, Contex-tual Integration, which means thatZoho products try to anticipate allthe possible touch points/overlapsthat exist among products. Zoho hasintegrated over 15 business applica-

tions within the Google Apps Mar-ketplace; an online one-stop storefor tools to integrate business appsjointly. In this online shop, Zohois the largest vendor in the GoogleApps marketplace.

Zoho succeeds because of itsaffordable subscription-based pric-ing model. Consider the price of itsflagship CRM service, which is freefor startups and individuals, startsits paid services from $12-35 peruser. Comparatively its closest com-

petitor Salesforce offers the sameservices starting from $25 to $250per user, even though it has a $5plan that is limited to ContactsManager application.

Zohos growing might indicatesit is helping its customers generatemore 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 systemSalesforce to Zoho CRM. Annual cost

for Salesforce was $1,600, but cost forZoho is $300.

Focused on thriftVembus strategy for success is nothard to decode. Since early days,Zoho has been operating on a boot-strapping budget. Take the strategyof Salesforce that recently acquiredExactTarget, a Zoho competitor, forawe-inspiring $2.5 billion. Sales-force, which has nearly 10,000employees, will add another 1,600

employees of ExactTarget after the

acquisition, while all of Zoho Corphas about 1,800 employees. Thecomparison couldnt get starkerwhen Zoho is already beating Sales-force on Internet reach, on the sheernumber of new organisations sign-ing up for their platform monthafter month.

Being cost conscious and frugal inrunning their development centre ispart of its vision of hiring locally todesign global products says Vembu.The company has set up Zoho Uni-

versity, a unique education-basedemployment model that does notfocus on college degrees, but recruitsbright students from neighbourhoodschools in Tamil Nadu into theirlearning program.

Students are provided with alaptop, unlimited Internet access,free meals and a small monthly sti-pend. Those who undergo the rigor-ous 18-month training are absorbedinto Zoho, and given salaries that areat par with degree holders from the

IITs and other engineering institutes.Over 200 employees out of Zoho Uni-versity constitute its total strength of1,700 skilled professionals in India.Vembu confirms that his uniqueengineering-centric model will bethe road ahead for the company.

Vembus frugal tactics have helpedhim avoid venture capital, which hesees as interference and a constraint.If a company can do without VCmoney, it certainly should, hereflects. If we had taken VCfunding

initially, I dont think Zoho.comwould have been born. He has beenso successful in rebuffing attempts toinvest or buy out his company thathe unhesitatingly averted SalesforceCEO Marc Benioffs offer to buyoutZoho for an undisclosed amount.

With no plans to sell his com-pany, Vembus only focus is to buildextraordinary products at costs thatwould make his competitors quiver.Also, the company has been smartin investing profits from the sales ofone product to build another, a pro-cess it has repeated to its advantageand stayed sustainable.

India offers growth potentialZoho is viewing the India marketwith enormous interest. It is much

more than Zohos developmentcentre. Already there are two mar-ket trends emerging one is thatCloud applications are penetratingthe Indian market and second is aninteresting combination of Cloudand mobile apps tendency takingoff. Considering that a mobile phonehas limited capability to process a lotof information, it becomes dynamicwhen combined with cloud apps andthis holds great potential for Zoho.Doubtless, this could be Zohos firing

salvo in the battle for dominance inthe Cloud apps arena.

Zoho is trying to tap the smalland medium businesses (SMBs) mar-ket through various channels. AtZoho, we believe in the bottom-upapproach. We serve small businessesfirst and eventually bubble up ser-vicing larger companies, empha-sises Vembu. Zoho applications areoffered directly via Zoho.com as wellas through its chain of partners inthe Zoho Alliance Partner Program.

The company aims for 10 per cent ofits revenue to come from India.

Looking ahead, Vembu saysgrowth will be fuelled by the breadth,depth and affordability of its pre-in-tegrated applications. Rivals havelearnt not to take his threats lightly.Perhaps, Zohos tactics can be an aptlesson for entrepreneurs who cantafford to go up against establishedbrands and could learn what it takesto 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 softwarespending by vendor

Adobe3.1%

Salesforce.com

VerintSystems

2.4%

Amdocs

2.3%

14%