The pandemic saw the un-bundling of the physical office, driving innovation in digital communication and collaboration tools that stand up to remote working environments. An ongoing return to the office has seen many of the standalone tools businesses relied on in the past acquired and incorporated into broader suites.
Today, as business growth continues to slow, companies at every level are experiencing revenue and margin pressures. One consequence is that these pressures have accelerated demand for lower cost, consolidated digital workplace suites that tie together chat, virtual meeting, email, presentation, file storage tools, and several others.
More so than other business categories, mid-market and enterprise companies face the dilemma of whether to choose a best-of-suite strategy over a best-of-breed strategy for collaboration and communication adoption. Suites are offered by many of the largest workplace suite providers, who built their reputation and entered the market with one or a handful of collaboration tools. In other words, their brand is office software, and they've earned customer trust by successfully developing strong products in this category. Another reason for adopting a best-of-suite approach is the universal nature of the tools themselves — everybody in an organization uses email, chat, word processor, file storage, etc. Having related applications natively integrated, sharing an easy-to-use, easy-to-learn interface, is supremely valuable, particularly for tools being used daily and by employees with varying technical know-how.
Customers do, however, shy away from suites in many cases, owing to increasingly strong API integration advancements, which make interoperability between best-of-breed applications more seamless and powerful. APIs have also reduced the cost, time, and expertise of IT for system integration. Then there's the issue of vendor lock-in. Contracts for suites can be lengthy and costly and under-perform, with certain apps in the offering going largely unused. Add to that, with a larger portion of the workforce using multiple tools from a single vendor, migrating away from that vendor, if so desired, will be expensive and require significant effort. All this, in part, explains why so many larger organizations are hesitant to adopt a platform approach or a best-of-suite strategy across the board. More often than not, deep trust in a single vendor is simply not there.
Nevertheless, APIs can still be used to integrate suites with third-party applications. And given the credibility and sophistication of top offerings, unified workplace platforms are breaking through this best-of-breed mindset, which is encouraging for the future of other suites whose adoption may be harder earned upmarket.
The Zoho Workplace team has taken this mission to heart. We are fueled by the ambition of deepening the collaboration and communication integration into Zoho One's 55+ business applications. We believe that adoption and migration is best driven by the ability to embed system-wide services like AI/ML, analytics, data cleansing, unified search, and others across a broader set of tools, touching a bigger portion of business functions.
In the wider market, while organization-wide unification among suites may be the goal of some vendors and the dream of most customers, there are variables slowing the breadth and depth of solutions in the market today. Here are some of the factors which may impact customer adoption of best-of-suite collaboration and communication platforms.
The state of SaaS
The vast majority of SaaS vendors aren't making enough money in an industry that remains overcrowded with standalone tools; where customer-acquisition costs are too high; and when the current funding environment has slowed investment considerably. Without money to grow, the many thousands of single product SaaS vendors will look to be acquired by technology companies adding breadth to their portfolios. This has caused a bifurcation in the industry, with big tech gaining market share by its ability to drive revenue through product breadth and depth.
In tech, the product diversification playbook for decades has been reliant on acquisitions. Today, the target companies of those acquisitions are the same SaaS companies referenced above, whose growth and progression have been stymied by slowed funding from investors. This leaves the rare cash-rich, large tech buyers with fewer and fewer viable companies to acquire, creating an arms race over the best-of-the-best.
At the same time, we're seeing large-scale layoffs across the tech industry, often of personnel absorbed through acquisition. These layoffs indicate, at least to some extent, that many companies are being cautious, training their eyes on future movement in the economy. This, combined with a shortage of viable products in the market, has created a fatigue in acquisitions, which leads to more holes in consolidated suites on offer.
What is the real business value of broad and deep products and vendors? For customers to reap the maximum benefit of system-wide services like AI/ML, analytics, data cleansing, unified search, and others, consolidated suites need native integration with other business-critical solutions, be they CRM, marketing, or accounting tools. Native integration of apps and services creates business context, allowing users to pull data across multiple apps and departments from a single interface. The fewer homegrown or thoroughly incorporated products a vendor can offer, the more difficult it is to integrate third-party solutions seamlessly and without causing silos, system inefficiencies, or redundancies, even as API integrations improve.
With broader workplace suites gaining ground, the next fight for market share by vendors is depth of integration. This places a challenge to vendors — is it possible to build a set of related applications and enable seamless integration of that suite, but within a larger business toolkit?
Again, looking at digital workplace software, the vendors offering the best value to customers and finding the most success in the market today operate highly diverse and deeply integrated portfolios that go beyond collaboration and communication tools. There are, of course, exceptions to this, but conditions in the market today are forcing the commodification of individual apps into suites. What customers have to say about it depends largely on the interoperability of those suites with the rest of their business software ecosystem. Part of the reason workplace suites are seeing more adoption than others is again this birds of a feather idea; all the tools share a common purpose and similar functionality with widespread adoption and use. The suites are being developed by vendors with a proven track record in this highly competitive area, allaying business fears of being locked into a set of tools their employees may not know, use, or like.
Whether through in-house product development, tighter third-party integrations, more consolidated suites, or an uptick in acquisitions, vendors with the resources and desire to grow and connect their diverse offerings will drive the most interest and adoption from businesses. Exiting the pandemic, this is what customers wanted, and entering a possible downturn, this is the value they need right now.
Vendors must invest in deep foundations to sustain growth, and by pushing unification in their workplace software, they're positioning themselves to become entrenched in the way customers are doing business. This mindset rewards depth over breadth, deep context over shallow connections, and lasting solutions over quick fixes.