zoho interview - raju vegesna
They know their onions at the Crunchies, alright. From 2007's plentiful harvest of genuinely inspiring startups, Zoho was picked as the 'Best Enterprise Startup' of the year. If you're already a user, this is not likely to surprise you at all. We at CMSWire had the chance to speak with Zoho evangelist Raju Vegesna and he gave us the full organizational down-low: vision, growth, customers, future, past and present. And, of course, Google. Our conversation was long and wide-ranging; a verbatim transcript would take you, dear reader, all morning to read. So it's been distilled so that you can get a feel for Zoho from top to bottom without having to take a half-day.

Zoho Fundamentals

Zoho is a branch of parent corporation Adventnet. Adventnet, around since 1996, is a private company with over 700 engineers and has been profitable from year one. Adventnet has never raised any venture capital and is self-funded, primarily through product sales. Adventnet has several business units, and Zoho is one such. Zoho focuses on online applications, primarily online productivity applications. The first application, Zoho Writer, was released in September 2005, a period when online applications were moving towards the business space. Prior to this, says Raju, online applications had mostly focused on the consumer space (i.e.Del.icio.us and Flickr). The team gradually added more applications, making a complete suite. The Zoho focus then, as indeed it is now, is summed up by Raju: "We want to be the IT department for Small and Medium businesses which really cannot afford to have an IT person on board." Offering these applications as online services to businesses provides benefits such as lower implementation and maintenance costs.

Customer Profiles

Initially the Zoho team thought that very small businesses were going to comprise their core customer base. This is why the project was called Zoho - the name originally came from Small Office/Home Office. But such are the wonderful vagaries of business, things didn't pan out quite as expected. As time wore on it became clear that numerous individual users were signing up to use Zoho services, and the individual consumer quickly became the primary market. Then another unexpected and welcome trend: as well as soccer moms and Prius-driving Dads, it turned out that their children, teens and young adults, absolutely loved the Zoho suite. "Students live online." explains Raju. "All their work is online, and Zoho is the perfect match for the way they work." Sure enough, teachers began picking up the habit from their charges. All of a sudden Zoho had a strong foothold in schools, colleges and Universities from Albequerque to Milan. Raju estimates that no fewer than 30% of current Zoho users are students of one kind or another. This was all very encouraging. What made things even better was the next customer trend to emerge: departments in larger organizations began to adopt Zoho apps. But why? Why would organizations with IT departments and big budgets be logging on to the Zoho suite, which is designed for small ventures and for convenience and simplicity? The answer is simplicity. "It's easier to set up, say, a project management system online than to arrange things internally with an IT department, source the project management software for that division and maybe arrange things internationally. Why do all that when you can sign up with an online service and get started right away, taking advantage of other inherent benefits, like being able to access the system from anywhere etc." The upshot of all this has been yet another surprise: some Battleship-class enterprises employing thousands of people have noticed this latter trend themselves. They now wish to deploy Zoho behind the firewall (mainly for collaborative projects), taking the original product concept about as far away from its SO/HO roots as is imaginable.

Zoho Growth

"It took us one year to get the first 100,000 users. The second hundred thousand signed up in the next six months. The third hundred thousand [took] four months. Fourth hundred-thousand, two and a half months. Fifth one, one and a half months. It's growing at such a rapid pace... Now we are close to 600,000 users, and 500,000 of those came in in 2007." Raju guesstimates that Zoho will have two million users by the end of 2008.
Google's focus is simplicity. I think their approach towards Search is influencing them, with their simple home page and all; but they think less is more for Applications. We think otherwise. - Raju Vegesna

Zoho Personal, Zoho Business?

"We have 15, 17 applications, and such is the breadth of applications we have, maybe people get confused. In the next two to three months we plan to categorize them into two." There will be two umbrella brands, which Raju provisionally calls Zoho Personal and Zoho Business. Zoho Personal will contain what you might expect (if you know the Zoho range): the office apps, email, calender, planner, Notebook, Chat and whatever else they can shoehorn in there. "Zoho Personal will be free, and is going to remain free." Zoho Business will primarily cater for SMBs, and allow such organizations to move their business online and use all of the Zoho applications. This will include integration with Zoho's business applications, like CRM, Project Management, Conferencing, etc. There's a good bit more to it than that, but that's all we are allowed to tell you at present... "Zoho Business will cost around $50 per user, per year." The group will also launch a 'Zoho Education' package, probably in mid 2008.

Where's the Money Coming From?

From the couple of products which Zoho actually charge for. Its CRM application, for instance, has a number of thousands of paying users. Zoho Projects also pulls in hard cash. Zoho CRM is free for the first three users and then costs about $12 per user per month for extra users. This is cheap compared to leading rivals like SalesForce. Raju is more than confident that his product kicks those guys out of the park, regardless of price. But then he would say that... Projects and CRM, and presumably Meeting (which is also revenue-generating), will not be part of the basic Business package, and will cost extra.

Are you Going to Advertise Users to Death?

Zoho doesn't currently embed ads in its SaaS products. And going forward, this is unlikely to change... much. "We might consider some kind of sponsorship going forward..." but Raju insists that this would be of a subtle, non-intrusive variety, and that there are no particular plans even to succumb to this. Indeed he is extremely dubious about the willingness of customers to stick around if they are bombarded with ads, reserving a particular distaste for contextual advertising as far as Zoho is concerned: "We hate banner ads, we hate contextual ads. We don't think people will stay with these ads."

Dealing with Rapid Growth

The rapid growth of Zoho hasn't given the organization the problems you might expect, owing largely to the looming presence of parent company AdventNet. "Zoho is an engineering-driven organization", says Raju, the single largest group of workers outside software development seems to be in security (more of that later). But the skill-set of other AdventNet workers and Zoho workers is 'largely interchangeable': AdventNet people can be drafted in to put out any fires caused by an exploding user base. Anyone following Zoho over the past few months can not fail to be impressed with the sheer speed with which the range of products has grown (not to mention the quality and innovation of the products themselves). In this case, at least, having a larger organization to lean against seems to have been a tremendous aid to rapid growth. These guys seem to have cracked it. But that's the end of the CMSWire Business Lecture for today...

The Engineering Team

... is "small" and "excellent." Nuff said. But we have to give these guys a wave.

Security, Disaster, and Infrastructure Scaling

Zoho has had to scale infrastructure 'drastically', and this has been a challenge. The group now has "close to 500 servers here in California, and in about a month we will be adding 300 servers in New Jersey." New Jersey will make disaster recovery better, for some arcane reason not entirely grasped by this server-side dufus. Your data is already safe and replicated multiple times, in multiple places. And yes, there is already disaster recovery. But the Jersey expansion will enable 'online disaster recovery', meaning that you won't even experience server down-time in case of disaster at the Cali data centres. Or something.

Zoho, Are You Better Than Google?

"I would say yes. There are a few places Google is better than us, and there are a few places we are better than Google. But if you look at the big picture, the focus is different. Google's focus is simplicity. I think their approach towards Search is influencing them, with their simple home page and all; but they think less is more for Applications. We think otherwise. When you upgrade from one application to another you expect more features, not less. If you buy a cell-phone, you expect the next cell-phone to be better than the previous one. We believe in feature-rich software. Are we better than Google[Apps]? From a business sense, definitely. And we innovate faster, definitely. Every month we make at least 8-9 major updates."

Are You Fishing for a Buyout?

"We have had several offers at AdventNet over the years. And even for Zoho, in the past two years, we have had offers. But we are having fun, and the good news is: we control our fate. There's no VC investment here, we are being profitable, and we are here to stay. And we really want to make a difference in the online world. I mean, don't you think it's ridiculous that you pay more money for the software than the hardware? You can go out and buy a laptop for $400, and you can't even get Microsoft Office for that amount! Software was supposed to be a commodity by now, and it's not the case. We think that software should be commoditized, and we are really going at it! And we really want to build a good product organization that brings down software costs in this market. At this point, I would say we are not for sale. We will get offers, but we are in it for the long run. But in business, you should never say never."

Zoho - It's a Wrap

Zoho provides an ever-growing suite of online applications providing a collaboration platform for small and medium sized businesses. Think Google docs with a lot more range and quite a bit more style. There's word-processing, spreadsheets, presentation, chat, database tools... ah hell, you'll just have to go visit them to see the whole range. Plus there are APIs, do-hickeys for iPhone and Facebook, and more. Signing up is free, and you can get stuck straight into your online application straightaway (three, at the last count, of the apps have charges attached for multiple users - more details above, if you weren't paying attention). Go to Zoho for a closer look.