Zoho: The Little Engine That Could (Take on Both Microsoft and Google)
We all love the David and Goliath story. What about David vs two Goliaths? That is the improbable story of Zoho, the Web Office startup competing head on with both Microsoft and Google. On top of that, Zoho is from India and who ever heard of a product company from India? Indeed Zoho has only 10 people in America, yet it is winning really big enterprise accounts in head to head evaluations with both Goliaths. What's more, they have not taken a dime of external money - having bootstrapped it from the start.
At Web 2.0 Expo in New York this week I met up with Raju Vegesna, one of Zoho's founders, to find out how they're succeeding despite the odds.
Defying Conventional Wisdom
Everything about this story is improbable. And gloriously old fashioned. When I met Raju Vegesna, I kept on thinking this was some kind of time warp. Zoho has simply ignored much of the conventional wisdom. Consider:
1. Product breadth. Look at the range of products they sell. This defies the conventional wisdom that you should focus on one thing only. When I put that to Raju, he replied that the 'one thing' model "works if you are building to sell the company". That's right. The classic model is to build one product that slots right into the acquirer's portfolio. In Web 2.0, when speed is everything, even products take too long and so you just built features. The hierarchy is: features go into products and products go into companies. But Zoho is clearly building a company.
2. Building to last. Every startup says they are build to last, publicly. Nobody advertises that they are building to flip. But Zoho looks like they really are building to last. They don't have VCs on board with an exit compulsion. Nor do they need VCs. They can finance internally and make money personally the old-fashioned way, from dividends, knowing their equity value is also building every day.
3. They run their own data centers and buy all their servers. No, they don't use Amazon Web Services or even conventional hosting vendors. They run 1,000 servers in two data centers, one in California and the other in New Jersey. In a SaaS world where performance/reliability are differentiators, running data centers is a core competency. They have the cash flow to buy their own servers!
4. They charge real money for their software, with no advertising. But the price is really low. This is like WalMart. This is like Basecamp, reasonable prices for great software. That is so boring! In branded consumer goods, buying expensive conveys status. In software, buying expensive when there is an equivalent at lower cost, simply conveys a willingness to burn money.
A Serious Contender
Do you still think that Zoho cannot possibly be a serious contender? GE, after a vigorous evaluation including Google and Microsoft, selected Zoho. That is 400,000 desktops up for grabs worldwide. GE is a master at taking costs out of established processes, they do it relentlessly and continuously and they know how to evaluate and manage the risk of working with start-ups. Where GE break a trail, others are likely to follow. You can view a GE presentation about this deal here, from the recent Office 2.0 conference:
This is Part 1. In the follow-up post, Zoho Part 2: The Cookbook, we look at how Zoho works in more detail.
Image from Wikipedia
1 TrackBacks
TrackBack URL for this entry: http://www.readwriteweb.com/cgi-bin/mt/mt-tb.cgi/4939
Comments
Subscribe to comments for this post OR Subscribe to comments for all ReadWriteWeb posts
don't they have something like 700 developers working on Zoho?
Posted by: nick | September 18, 2008 6:54 PM
The mere fact that Zoho keeps coming up in various "Evaluation" blogs every now , many more times than Google Docs, is a clear indication of the popularity of this company.
I think Zoho is here to stay.
Posted by: Raseel | September 18, 2008 8:59 PM
I've been using some of the Zoho tools over the last several weeks and have been having a great experience. They are simple to use, reliable and highly flexible. I think this company is creating a lot of value and their business model is spot on.
Posted by: Billy Shipp | September 18, 2008 9:22 PM
Regarding the claim that Zoho has bagged GE in direct competition to MS and Google, here is a comment that puts this claim in perspective:
"In the interests of keeping costs down, he's also investigating the possibility of switching some users from Microsoft Word to Zoho. " (from http://www.it-analysis.com/blogs/Teblog/2008/9/home_grown_enterprise_2_0_at_ge.html)
There is a huge difference between displacing Microsoft and just being evaluated as a possible alternative for "some users" in the way stated above.
Also, what is not stated is that Google is not in the picture because they do not provide a self-hosted version of Google Apps which is what GE would require as a minimum...
Please temper your attestations with some minimal level of due diligence rather than come off sounding as a PR agency for a startup making tall claims...
Posted by: Timothy | September 18, 2008 10:58 PM
I am glad to see an Indian startup doing good in the products space internationally.
Posted by: Pramit Singh | September 18, 2008 10:59 PM
I admire Zoho for doing what they do and I certainly think the competition is a great thing.
However I'm not so sure that they're the best thing going. Their UIs are all over the place, not at all consistent. Despite its limitations, I feel Google does a better job of ensuring robustness and usability. I always get lost when I'm using Zoho because of their strange user interface.
Posted by: Jono | September 19, 2008 12:11 AM
Its the very first time that I've heard some praise of an Indian company!
Really love using Zoho - better than Google docs and wayyy better than Microsoft Live.
Posted by: Amit Agrawal | September 19, 2008 3:57 AM
Serious problems. For those of us who have used Zoho CRM, I will be the first to say that for anything over 1000 contacts it was completely useless. While its docs and other branches may be useful, I have never had a more frustrating customer service experience. Delayed and inadequate responses, concerns about data being lost, etc. Migrating data out was painful. At this point I've used Salesforce extensively and the difference is basically enterprise class software vs. a fly by night operation.
Posted by: Quentin | September 19, 2008 6:12 AM
Quentin, funny, we at AdventNet have over 500K contacts in Zoho CRM. Don't make it so obvious that you are a Salesforce sales guy.
Sridhar Vembu
Posted by: Sridhar Vembu | September 19, 2008 7:20 AM
Unfortunately it's useless for any serious academic work. It apparently takes nobel-prize brains to allow italics in footnotes.
But then, Google Docs, from the world-dominating company, is completely unaware that there is such thing as footnotes.
Talk about challengers to MS Office...
Posted by: camde | September 19, 2008 8:28 AM
who ever heard of a product company from India?
Check out the Forbes 400 and see how many indians there are in the top 20 with product companies from India.
Posted by: augustus | September 19, 2008 8:36 AM
@Sridhar, Sorry, there are no salesforce sales guys astroturfing tech blogs. You sound like a moron or a conspiracy nut. Salesforce doesn't need to do that to get customers. They don't even court RRW on their PR, they are a publicly traded company more than capable without resorting to BS like that. It doesn't even make sense....AT ALL.
Posted by: Tim | September 19, 2008 10:05 AM
Thanks to all who commented. I plan to do a second post that gives some of Zoho's cookbook (a term I got from Jason Fried this week at Web 2.0). I hope it will be helpful to other entrepreneurs.
One commenter (#8) said Zoho CRM is useless for more than 1,000. Zoho says not so. Is there anybody - who is not Zoho and who can reveal who they are - wish to comment based on their experience of actually using the product. At RWW we like to get to the facts and our community is the best place to get that. It would help if sign in and give a blog or some other way to identify who you are (but I understand that is not always possible for company reasons).
Re the use by GE (# 4, thanks for that link), I went solely on what the GE guy says in that video. It is a great video for understanding how large enterprises are implementing social media. GE has been at this since 2001, so tons of useful info. If you want skip to the bit about Zoho which is less than a minute out of 40 minutes you will find it around minute 17. Listen for yourself. If there is any other data publicly about that deal I would love to see it. Love to interview the GE guy, but that as they say is another story.
# 11. I think you have that wrong. If not I would love to be corrected it would be an amazing story. The Indians in Forbes 400 run services companies (work for hire stuff). Great companies (Infosys, TCS, Wipro, etc) but not product companies by any stretch of the imagination.
# 10. That sounds like a specific issue. I would be happy for Zoho to comment on whether that features exists, or if it is coming and when. Or just say "great idea". I know that companies really appreciate that kind of market feedback.
If I sound like a fan, it is simply that I know how hard this is to pull off. I am entrepreneur, I have built companies. I have huge admiration for those who succeed because I know it is hard.
So does Zoho not use AWS at all? Mr. Vembu blogged a while back that they were testing AWS in some capacity:
"A lot of the code behind Zoho services was written before Amazon web services came on the scene, yet we have found that it is fairly easy to run our applications on the Amazon infrastructure - it took just a few days to test this out."
Posted by: Anand | September 19, 2008 4:29 PM
One of Zoho's users reading this RWW article and blogging about Zoho CRM :
http://www.scriptorium.com/palimpsest/2008/09/zohoho-and-bottle-of-rum.html
Posted by: Aravind | September 20, 2008 4:08 AM
Sorry, my mistake. You can indeed edit the footnotes in Zoho Writer.
Posted by: camde | September 20, 2008 2:59 PM
@Sridhar Vembu No I do not, in any way, work for Salesforce. My experience is as a straight consumer. I am glad you had more success than we did.
Posted by: Quentin | September 23, 2008 6:26 AM
In this post on ZD Net:
http://blogs.zdnet.com/collaboration/?p=145
GE has made a statement that:
"For the record and as Dr Sukh Grewal has clearly outlined, no decision has been made on Google Docs, Zoho or any other vendor at this time, but a rigorous evaluation is taking place."
If I contributed to misunderstanding, mea culpa! I will repeat what I said in an earlier comment:
"I went solely on what the GE guy says in that video. It is a great video for understanding how large enterprises are implementing social media. GE has been at this since 2001, so tons of useful info. If you want skip to the bit about Zoho which is less than a minute out of 40 minutes you will find it around minute 17. Listen for yourself. If there is any other data publicly about that deal I would love to see it. Love to interview the GE guy, but that as they say is another story."