Zoho is one of those rare enterprise software companies that remains as mysterious as it is successful. Yes, they've now got 45 million users, and annual growth rates of 35 - 40 percent.
But you won't spot celebrities and motivational speakers running Zoho's keynotes. Instead of wooing Silicon Valley, Zoho is building a new headquarters on 375 acres in Austin, Texas:
"Austin's next tech HQ: Software maker Zoho bringing hundreds of jobs to site near airport" https://t.co/GmrRJgW6yg
-> cool to see the mayor of Austin to kick off Zoho user event to discuss the news - Zoho relocating headquarters to Austin#Zoholics19 cc: @austintexasgov pic.twitter.com/6j4TIuyJwV
— Jon Reed (@jonerp) April 9, 2019
And, no pre-IPO speculation either:
Zoho CEO on being privately owned and not subject to stock market volatility on SaaS companies - we will survive the present bubble too -
"We have built this company to survive bubbles"
"We don't carry Wall Street on our backs"
-> don't hear that everyday#zoholics19 pic.twitter.com/rPHi4xGC9u
— Jon Reed (@jonerp) April 9, 2019
Now, Zoho's mystery is starting to take shape. With Zoho's hire of ace communications maven Sandy Lo, Zoho is opening up in new ways. This year, for the first time, analyst and media types descended on Zoho's annual Zoholics user event, joining a record 1,500+ attendees.
Zoho exposed their executive team to the topical roulette of probing analyst questions. After a candid group discussion with Zoho CEO Sridhar Vembu, I had a 1:1 chat with Vembu on where Zoho goes from here - and why Zoho has no interest in an enterprise future that puts technology ahead of people.
"Hey Zoho - do you want to be an ERP company when you grow up?"
In my first review of Zoholics, Brian Sommer and I kicked around the question-du-jour, posed by fellow analyst Cindy Jutras. But I didn't provide the full rundown on that exchange, and Twitter let me hear about it. So here it is, starting with Cindy Jutras:
There are other companies that have smaller footprints of applications than you that call themselves ERP. Two questions: Why don't you? And do you want to be an ERP company when you grow up?
The first part of Vembu's answer comes down avoiding the negative side of ERP's connotations, as in clunky, unfriendly to use, expensive, hard to implement, and a perception of underperforming for the amount of money spent. As Vembu put it:
That's a good one. After 23 years, it's still hard to grow up. To some extent, the ERP thing is tied with freedom to use, and expensive. So that term carries a little bit of baggage. We prefer "the operating system for business." That's our preferred way of describing it.
Yes, this is partly a marketing game. But Vembu insists there is more to it:
On some level, these are marketing buzzwords we created, right? So we prefer this, because we want to be different - in both the way that we think about ourselves, and the way the customers think of it. We want to be easy to use.
Mobile and cloud are forcing the issue:
Everyone of us is using two operations systems. Right now. There's one on your desktop and one on your phone. So every business should have an operating system. But yes, Zoho does substantially overlap with ERP, and the overlap is increasing.
But we hope that this focus on usability, and user experience, and of course the business model and the non-extracting model with customers definitely stand out.
But that begs the follow-up question: does Zoho have the core of ERP functionality? We can debate what ERP means today, but the classic definition of ERP has a bill of materials at its center. Analyst Josh Greenbaum, who probably even dreams about ERP from time to time at this point (so do I Josh), asked the question: does Zoho have a bill of materials? A manufacturing bill of materials, an engineering bill of materials. Do you see a home for that in Zoho? Vembu responded:
Of course. We look at our finance suite. There is an inventory module that is moving towards all the manufacturing, MRP, all of that is actually coming back. Some of it is already there, but it's being expanded.
Ultimately, it's about data models. And we are probably at a few thousand models now. Probably at 50,000 models, it's very global in scale. So we are rapidly gaining those models as we speak.
Zoho versus competitors - what lies ahead?
The other burning question on analysts' minds: where do we place Zoho in a competitive context? You can't help but ask that question when Zoho's partners told us they are seeing companies like NetSuite in deals more often. How does the 40+ apps in Zoho One fit into the market? Especially on the heels of the Zoholics announcement of Zoho's first vertical solution: Commerce. Or, as Brian Sommer inimitably put it to Vembu:
You've gotten a lot more depth that comes along with the commerce side. This really puts you guys in a lot more head-on attack mode for NetSuite and a few others. I'm just kind of curious for your perspective on the competitive frontier. How are you going block efforts from those firms who are gonna try to smash you down?
But Vembu wasn't taking Sommer's "Art of War" cheese:
Look, there's a lot of opportunity in this business. A lot of people have made money, a lot of people continue to make money... We have a really incredible opportunity ahead of us. We see that. And so we are going to execute on that.
Vembu doesn't fret about competitors, but he does sweat customer feedback. As he told us:
The customers are telling us we're doing something right. As I walked the hallways, I asked the customers, "What are we not doing right? What product is failing you?" I took notes on that too.
We're in a strange era of enterprise cooptition. Witness Zoho's partnerships with erstwhile competitors Google and Microsoft, including Satya Nadella on the Zoholics keynote stage. Zoho may be pitching Zoho One's integrated "suite" capabilities. But Vembu acknowledged today's market is often best of breed:
We do provide a full suite. That doesn't mean everyone will adopt the full suite. People will pick and choose. We have, what, fifteen vendors with booths that all integrate? Some of them actually compete with our products. But we don't mind that. They're not invisible here.
To get a handle on Zoho's future, we have to consider the vertical-or-horizontal question. Vembu acknowledged they have internal debates on where the best mix is between the two. For clues on where the vertical play might lead, we'll need to track the adoption of Commerce Plus for the commerce vertical.
International presence is another question - I expect my colleague Stuart Lauchlan may have something to say about that after spending the day with Zoho in London today. But it's worth noting that Zoho's international expansion even outpaces their U.S. growth, with affordable pricing and cloud/mobile accessibility credited internally as the drivers.
We also delved into the potential future of Zoho as a business network, not just a software company. This quote from Vembu sets the table:
There is a philosophy where software is eating the world. But it disappears into the world where it's the blood circulation. It powers everything, but nobody makes money directly out of software. It's actually a possibility. We have thought about this. We actually are thinking about that world where in ten years we won't sell software directly at all.
Vembu sees Amazon as a classic example of this: a dominant software company that doesn't sell software. Perhaps that adds another dimension to my colleague Phil Wainewright's Zoho CEO - Amazon is coming to enterprise software.
What should those who didn't attend Zoholics take away?
Ultimately, we are about creating a very human company. A company that cares about people holistically. Its customers, its employees, its partners, the whole ecosystem.
Technology matters, but to only to a point:
Technology is a means to it. I implement technology for a living, but I actually don't overvalue it. In fact, when I go into an organization, first thing I say whenever I talk to a CEO or COO is: "I cannot promise miracles to your organization. Technology is really good, but it's only a technology, only a tool. How you use it is up to your organization." That's the message I would say.
Zoho University warrants a mention here also. How many enterprise software companies are actively solving their own talent problem by significantly expanding their base of qualified applicants, as opposed to bidding wars for access to the same demographically-limited pool of elites?
Zoho knows they won't get to Vembu's stated goal of 1 billion users without even bigger evolutions in product and brand recognition. But Vembu won't see it as failure if Zoho's growth slows - as long as they don't turn their backs on the principles that got them this far.