Zoho Brings a Unique Leader, Product Portfolio and Distribution Model
I had the opportunity to spend part of my afternoon with Sridhar Vembu, Zoho CEO and Raju Vegesna, Chief Evangelist. The conversation was engaging and while there is much in the way of new product innovation, you can't help but quickly realize Zoho is truly a unique software company.
In its 15 year existence the company has essentially been reincarnated three times. The current evolution —Zoho Corp — has emerged as a result of the sky rocketing growth of its 6 year old Zoho suite. The company now employs 1500 staff, almost all located in Chennai, India although corporate headquarters lies in Pleasanton, CA.
While headquartered in the heart of Silicon Valley, this emerging growth technology company clearly doesn't get absorbed in the area group think. Rather than load up on venture capital or OPM (other people's money), the company has bootstrapped its way to profitability. Rather than push 40%+ of revenues toward sales and marketing, this company's cost of sales is a mere fraction of the norm. And rather than attribute God-like bragging credentials to the company CEO, Sridhar is exciting yet humble.
Zoho now counts over 5 million users across its online product suite, and 350,000 online CRM users. Zoho offers a freemium pricing model, enticing users with a free version and offering enhanced feature sets with a fee-based product. The CRM free to fee customer conversion ranges from 10% to 20%. About 55% of Zoho's customers reside in the U.S., with the other 45% globally distributed although more heavily concentrated among English speaking countries.
Looking at what's ahead for Zoho, the company is now releasing a new version highlighted with a new user interface. The new UI takes a lesson from the B2C consumerization of IT to deliver a user experience that is simple, elegant and intuitive. The UI is very clean and will unquestionably be well received in the market.
Now that the new CRM version is released, Zoho plans to recommence expanding its business partner channel, and more so, the vertical market solutions that will originate from its channel. The Zoho CRM For Verticals program took a bit of a lull, but is back on the management agenda. The company hopes to attract ISVs and industry domain experts and empower them with the Zoho Creator Tool to adapt Zoho CRM to meet the needs of specific industries. Zoho aspires to grow their business partner contribution from the current 5% to 10% range all the way up to 35% to 40% of company revenues.
Looking further ahead, customers can expect continued product innovation, particularly in the areas of social media integration and marketing/campaign management.
Notwithstanding its CRM software competitiveness, the CRM solution is designed as part of a bigger picture. The company offers three lines of software products—business applications, collaboration tools and communication technologies. Each product line is competitive in its area, however, Zoho's strength and value proposition lies in the convergence of those three suites of productivity tools. And collectively they deliver what no single competitor offers.
Zoho is different because its leader, product portfolio and distribution are different. While not big on image, lofty statements or grandiose claims, the company clearly attracts buzz and is acquiring market share at an increasing pace. The broad product portfolio and freemium pricing model earn the company unique positioning and differentiation—a mandate in a crowded market. But as Zoho's software portfolio increasingly expands beyond the traditional CRM software market, the value-add of complimentary collaboration and communication tools are unclear. Whether the more expansive suite will dilute the most pressing CRM objectives or bring incremental business value has yet to be determined, and stands in contrast to more traditional CRM solutions that go deep rather than broad. Zoho is the first online publisher to assemble such an array of integrated products, and its success for failure may ultimately influence whether other CRM publishers create or partner with similar productivity tools providers.
Each of Zoho's three product lines (business applications, collaboration tools and communication technologies) is competitive in its area, however, Zoho's strength and value proposition lies in the convergence of those three suites of productivity tools. And collectively they deliver what no single competitor offers.