The ‘customer engagement’ SaaS market is becoming increasingly crowded and competitive. Software that covers sales, marketing, CRM and service desk are frequently being lumped together under the banner and there are dozens, if not hundreds, of companies out there fighting for market share.
However, one fast growing vendor, Freshworks, which is now approaching 10 years old, is becoming more vocal against its larger competitors, which dominate. The company, which has traditionally fared well in the SMB arena, carried out some interesting marketing stunts at both Salesforce and ServiceNow’s annual user conferences in the USA last year (the former involving a blimp flying over the Moscone).
Interestingly, Freshworks began based out of the Chennai region in India, unlike most of the SaaS vendors in this market, but has seen most of its customer base come out of the USA and Europe (accounting for two-thirds, approximately). It has since expanded its geographical footprint with a base in San Bruno, California, and was recently valued at $1.5 billion.
As Freshworks continues to expand and go after more of an enterprise client base, I got the chance to sit down with CEO Girish Mathrubootham, who explained how the business is better serving its larger customers.
Mathrubootham actually started the company after a ten year career at Zoho, one of the Freshwork’s competitors, having identified there was an opportunity to incorporate social media support into the customer support desk function. A decade ago, this was less of a reality than it is now. He said:
“This was something that I was able to sense was changing in the world of customer support. Companies had so much power over the customer, they wouldn’t do the right thing. But by being able to take on the company by a social channel, when it impacted the brand, it forced them to do the right thing.”
Mathrubootham explained that Freshworks (or Freshdesk, as it was called then) grew quickly and had gained itself 100 customers within its first 100 days of operating. It then went on to gain 200 customers within the first 200 days. He explained that the company’s customer base has largely always been international, despite starting in India.
“Fundamentally, one thing that is very different about Freshworks, compared to most other companies, is because we started in Chennai we figured out that there weren’t many customers in Chennai we could sell to. So we were international from day 1.
“Our first customer came from Australia. Our first six customers were from four different continents. We have close to 200,000 customers now and they come from more than 126 countries.”
Going up market
Last year Freshworks revealed that it had crossed $100 million in annual recurring revenue - which is still a fragment of some of its larger competitors. However, its customer base is still two thirds SMBs. But Mathrubootham states that this is “shifting and changing” and the company certainly has its eyes on the higher end of the market.
To support this, Freshworks has split its operations between SMB and enterprise clients. Mathrubootham explained:
“In the early years, the entirely org was entirely focused on one motion, which was very transactional and high velocity selling. Because when a customer is paying you $200 a month they don’t really expect a lot of hand holding. But in 2014 we realised we had 1,500 customers that were not necessarily SMB customers. And we were closing all this business from our Chennai office.
“That’s when we realised the product was winning larger customers, but we were only getting very few leads. Because these companies don’t go online and search, they are used to being sold to. Also, we realised we were not providing a differentiated experience.
“Someone that is paying you $10,000 a month wants to be treated differently to someone paying $100 a month. So we created what we call a twin engine model. So we have a SMB engine and then we have a large company engine. It’s almost like running two businesses for us. The sales team is different, the marketing team is different, we have a customer success team. We also realised that some of the product needs were unique, so we actually started building a team around that.”
What’s the USP?
Given the crowded market, I was keen to find out from Mathrubootham what he perceives Freshwork’s uniqueness to be. Why would a company choose Freshworks over some of the other players, including Salesforce or ServiceNow?
There were two elements to the CEO’s response. Firstly, he believes that Freshwork’s early development focus on user need and usability has served the company well, particularly as it moves upstream towards a larger client base. He explained:
“I used to work on the front line, so I know what it really takes for an agent to really get the right answer and solve a customer problem. One of the USPs for our product is that we are built for the end-user, not for top-down consumption. When you’re a Salesforce selling to a Fortune 500 company, you’re probably selling to the CEO or the VP or the CIO. Then those decision makers look at software that has all the analytics built in and so on. No one cares about the user of the software, the front-line support person, or the sales person. Does this software make their life better?
“Because we started with an online business model, they’re finding us online, within the first minute they have to like what they see, otherwise they will close the browser and go. Most of our design and product philosophy was about, how do you make the software aesthetically beautiful? How do you make it intuitive so users can do it themselves? Most of the stuff should work out of the box without requiring expensive consultants to come and work on it.
“Today that still remains as the USP for us. When we saw that a lot of the bigger companies were coming to us, we were surprised that a lot of them liked us for the exact same reason the SMB customers liked us. Because they have been burnt in the past by years of implementation, or needing to sign an SoW to make a simple change.”
Secondly, Mathrubootham states that he’s “personally excited” about what Freshworks calls ‘360’ - which is essentially what the market and other vendors call ‘customer 360’ or a ‘360 view of the customer’. It’s a well trodden marketing term that has been pinned as the holy grail of customer service and support, but ultimately fails a lot of the time because of siloed information, disparate systems and fractured culture within an organisation.
However, Mathrubootham believes Freshworks has been focused on this from day one and that its integrated technology suite removes the integration nightmare for companies looking to have a central view of a customer’s data. He said:
“When the iPhone launched, Apple did not invent a single new chip. The iPhone was launched with commercially available chips on the market. They just created a new product by assembling these off the shelf stuff and created a new product experience. When technology evolves over time, someone can come along and create a new product experience.
“What’s happening in the world of CRM? We started off with Salesforce automation. If you’re a support manager, you use a help desk where you can use emails, phone calls, from customers. Then later on you had marketing automation. So, what we’ve ended up doing is cutting down the customer into multiple silos. So, the customer’s information is sitting in five different databases that don’t talk to each other.
“Then you have all these companies talking about creating a customer data platform, where you can tie all this together through an integration cloud, or expensive consultants who can construct a view of the customer. That’s fine for the large enterprise. But what if there’s an iPhone moment in business software?”
“All this technology exists for a company to come along and create a new experience, where the customer doesn’t have to do the plumbing. That’s our vision. We have the technology to manage the customer across the entire lifecycle of the customer.”
There’s a lot of good ideas coming out of Freshworks and Mathrubootham seems passionate about user experience and the company’s focus on outcomes. That being said, he’s also aware that the problems the company has been solving are much easier for an SMB than they are for an enterprise. Unfortunately, enterprises have inherently more complex challenges to solve (often because of legacy).
For instance, Freshwork’s approach to 360 may fall down given that very for enterprises go for a rip and replace - they may have already even invested in multiple SaaS vendors, which is why they focus on integration. Mathrubootham is relying on the fact that this concept of ‘customer 360’ is also being amplified by Freshwork’s larger competitors, which he claims aren’t really able to solve it. An opportunity?
I also had a discussion with the CEO about its AI investments, which also sound promising. Freshworks isn’t investing in a platform for a platform’s sake, but is rather using its data and automation to solve use case problems across multiple areas of the customer engagement function. That’s smart.
I think where Freshworks needs to improve its approach is offering a viewpoint that no other vendor in the market is. What’s your core purpose and what future problems are you solving for companies? We will be watching with interest.