Zoho CEO: "It will take 10 years for software in the cloud to replace offline software"

a software revolution is unfolding before our very eyes

A great deal has been already said on this blog and elsewhere on the subject of cloud computing but our meeting with Raju Vegesna, chief evangelist for Zoho and Sridhar Vembu, the firm's founder and CEO was very refreshing and led to some very interesting thoughts and visions. Zoho is a suite of applications that run over the Internet - in cloud mode - but what makes the suite stand out is that it is encompassing all sorts of domains, not just horizontal (CRM for instance) but also vertical.

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will the cloud computing industry take over from the offline industry and when?

One of the main questions which was on everyone's lips this morning was this one: will applications in the cloud be a big thing or not eventually, or just another of these missed opportunities that have been so numerous in the past of the IT market. Sridhar Vembu's response came loud and clear in a visionary statement which was most striking: "The cloud computing software industry will have the best of the offline industry but it will take 10 years" he said. He went on describing the Oriental spirit of the firm and how his vision was in the long term rather than "flipping it" (i.e. reselling quickly in Silicon Valley parlance). But "Zoho is more into the long term" Vembu added. "Zoho is not looking for investment", "it has no big ambition to take over the world, you don't have to be a Google or a Microsoft to succeed". This was a very refreshing and wise view. And he went on: "I don't believe in a Microsoft monopoly in the cloud. There will be many actors" he said. He also stated that "3 million users is enough for [them] to live!" and that "during last year's recession, [they] grew 100%"

The revenue made by the private company cannot be disclosed but Zoho is making profit and doesn't have any debts. Yet, it refused publically takeover bids from Salesforce.com and wants to remain independent although he may also be looking for partnerships.

Below is the script of that presentation, as thorough as I could make it this morning, live during that session:

Company presentation

Zoho corporation, is the new name of Adventnet (created 1996). We started small. It's a private company which never raised any money which makes it unique. The focus is entirely in the product and offering it at good prices. Zoho has gone through quite a few recessions and is indeed doing very well.

Zoho has developed and sells 35 different applications to IT populations, ranging from security to System management. As a company, 1,100+ employees and 50,000+ clients and a hundred of OEM's and partners. Zoho was launched in 2005 only but was really successful and this is why the company was renamed Zoho. Offices in several states and London but all developments are carried out in India. There is also a team of 15 in Beijing, China.

Why Zoho? Raju was looking for a simple 4 letter name and found the zoho (similar to soho) domain name for sale. He even considered buying the domain himself but got agreement from management and that proved to be a good choice. Zoho.com as a division launched in 2005 and launched as a simple application (word processor). Now 22 different applications exists, and 3 million users are using these applications. 100,000 users are being added each month at the moment so it's going up at a good pace.

The vision

Zoho wants to be one of the most innovative players in that field. Zoho is packed with engineering skills, "everyone is an engineer" in this company. 12-15 people in the US are sales, 1-2 in marketing. They have 2 data centers in the US, and 1,500 servers. Less focus on marketing but more focus on the product.

The aim is to become the leading player for small businesses in online computing. Started with SMB's but now there are already several enterprises using their applications.

Zoho competes with Google but they are also partners of them, with "Zoho for Google Apps" although they are not providing any components for Google Apps.

·         Zoho mail,

·         Word processor,

·         Document management,

·         note taking apps (like Ms one note),

·         Zoho chat as a multi-protocol IM app (based on Jabber),

·         etc. see list at http://www.zoho.com/

With Zoho, collaboration, several people can work in realtime on the same document and this is made possible thanks to the technology which has been implemented within the chat app. The locking is working at paragraph level for the word processor, at cell level for the Spreadsheet application. It would also be possible for users to work on different platforms (i.e. one user using Google docs based on Google wave and the other on Zoho and they would be able to work on the same document transparently). This particular function is being worked on. 

differentiation and know-how

·         There are other applications which Google doesn't have such CRM. Zoho is also supporting visual basic macros, which Google docs doesn't do. The technology is mostly internal and has been developed internally. Zoho has a brand like SwisSQL which understands any database language/query and execute it in the back-end. They are able to interface with all database formats. Migration tools also exist. Zoho is also a Microsoft partner.

·         Zoho search is a new product which will be launched on this very day. Zoho search.

·         Zoho is doing vertical and vertical applications, HR, CRM and therefore offers unique opportunities to cover all the possible sections of the business.

·         Zoho is not using virtualization techniques, restorations aren't used, Zoho tends to work from at least 3 copies of each file in order to boost speed. Multiple backup copies of the data is made available though in order to protect the data of the users.

·         Zoho is operation on a 24/7 model and the status of applications can be checked in realtime via http://status.zoho.com.

·         Google directs users to the nearest data centre for search, but Raju is not sure they are doing it for applications purposes. Zoho is also sending users to their centralized server.

·         Zoho focuses entirely on businesses, as shown in the Search project. Search (https://search.zoho.com/searchhome) is referred to as "actionable search": http://search.zoho.com. Supports emails, contacts, documents (all types). It's only online search through Zoho documents and doesn't encompass local desktop search. If your email is on gmail or outlook (for enterprises), Zoho search will not include that in the search. Zoho allows actions on these applications (opening apps right from the search engine). The application (e.g. e-mail) will be launched right from the search windows. This is why it is called actionable search. contextual actions are also proposed to the user (e.g. displays docs I shared with a user to whom I had sent an email). So Zoho goes and searches through applications, regardless of where the information is.

·         All applications are available in other languages, most in 15 languages, all applications are available in major languages (such as French). Translations are performed by users themselves and they can be corrected by users if they so wish (this is applicable to users for themselves).

·         Zoho email is compatible with Gmail, Outlook and Exchange therefore bringing corporate mail in the cloud without having to migrate.

·         Zoho also allows you to import all documents from Google into Zoho. All modules can be backed up in Google and imported in Zoho. This has to be done manually.

·         No plug-in is required, all is javascript based. Works very well on all browsers, best on Chrome and Firefox and Safari.

·         Most cloud players are moving from application to platform but Zoho is still focusing on applications because they think there is still a strong requirement. The first need of SMB's is something that is affordable, i.e. $10 per user per month. "All successful platforms are successful because of apps! first you succeed with the apps and then it becomes a platform")

·         Zoho needs to stay humble ("it's part of our Indian heritage"), we are trying to remain humble.

How will Zoho compete? what makes Zoho different and what is the company's strategy

·         Zoho can do contextual integration that others can't do. The one differentiator is that contextual integration concept. One focuses on the workflow rather than on the implementation. with the cloud, the data is liberated and data is no longer a slave to the application. The data is produced with an app but is available across all other applications. a doc is created with the word processor but is available within the CRM suite for instance. The vision is that usage will migrate onto seamlessness and the trend will be to get rid of that link to applications.

·         Mobile is a key part of the strategy. Iphones and Android are key parts of the Zoho strategy.

·         Offline work? some applications are being offered but it's not used very much although you need to have it. Users are requesting it although very few (less than 100,000 of them have ever used it). Imap is also a must-have but no more than 10% of users are using it. An html 5 compatible offline version will also be made available.

·         "Cloud adoption is moving from the bottom up" says Sridhar Vembu

Workflow integration and scripting capabilities

·         Zoho creator is very popular and allows to add logic to the environment. Scripting is also allowed to be exported via python or .net (working on the latter) and can be re-used outside of Zoho. The scripting is standardized at intermediate layer so that one can deploy the script in Google App engine (based on Python). The programming language could even be localized.

·         The CRM is built on the same foundation

·         This platform is meant for the tailoring of Zoho and link to third party platforms.

·         Users are also given the right and means to escape certain Zoho functions, they are not trapped within the Zoho suite.

Business focus

·         all apps have a flavor of enabling businesses. Traffic is flat on weekends. This is what the company is looking for. Zoho is a tool for business with a focus on SMB.

·         The entire problem for SMB's is the lack of resources, but as business grows, scalability is an issue. "We started our business with off the shelf software such as Quicken" and we are using enterprise software and our productivity went down. The cloud will make scalability possible, "it will grow with you".

·         Vertical focus: we are still very horizontal but we will reinforce verticalisation (packages for doctors, packages for insurers etc.

·         R&d is very important at Zoho and a lot of investment is made in that. Zoho aims to address data explosion in a creative way and a lot of R&D is prepared in that respect.

zones for growth

·         Approximately 50% of users are from English-speaking zones, not just the US. China is not included because it's handled by a separate company (due to the great firewall issue namely).

Partnerships

·         1&1 are very strong in Europe and they are helping us understand Europe. They understand the market very well, they have 3,000 people in Karlsruhe. You can expect many common announcements with 1&1 soon.

·         a NTT partnership in Japan has been announced, some work has been done with Swisscom and you can expect more announcements with telcos in the future.

·         Salesforce wanted to acquire Zoho some time ago but Zoho is not interested in "flipping it" (i.e. reselling quickly). But Zoho is more into the long term. Zoho is not looking for investment. Zoho has no big ambition to take over the world, you don't have to be a Google or a Microsoft to succeed.

Free vs. pay for use

·         Everyone has 2 sides: professional and personal. People test and buy. Approximately 5-10% of the users become pay-for use users and "it's a good conversion rate".

·         The ratio of Sales and Marketing expenses vs. R&D expenses is lower for Zoho (more effort on R&D than companies such as Salesforce for instance). The ratio is close to 1-1 at Zoho. By using the try and buy model

·         Zoho has 400 employees (the whole company is 1,100) but Salesforce is 3,000 big.

·         Zoho thinks it's an R&D game and that will be beneficial in the end according to Sridhar Vembu.