A passage to India - the essence of Zoho
Nuanced – that is what Zoho is. And a recent, extensive visit to the operations in India provided a far deeper understanding as to the company, its management and its impact on the communities in which it operates.
Technology & applications vendor, Zoho, invited around a dozen or so analysts to their Indian Headquarters in Chennai. Billed as “Truly Zoho”, the multi-day event was intended to give us first hand access and visibility to a large swath of Zoho’s people, resources, culture, other business ventures and more. The trip included three days in Chennai and a day-and-a-half at their farm location in southern India.
The diginomica team, specifically Jon Reed, Phil Wainewright and I, has covered Zoho a lot over the years. We’ve examined:
- Its CRM products
- Its other applications
- The company’s highly differentiated business model and low-cost structure (https://diginomica.com/zoho-the-consummate-bootstrapper )
- Its staunch desire to remain a privately-held firm ( https://diginomica.com/zoho-focus-edges-and-obstacles-zoho-sneaks-erp-and-crm-players )
- Its culture ( https://diginomica.com/zohoday-2022-does-technology-vendor-culture-matter )
I reviewed a number of those prior pieces before penning this one as I hate to be redundant/boring. But, in doing so, I realized that we have reported, in detail, on a number of aspects re: Zoho that were mostly based on what executives and customers told us about. But we lacked the intense, visceral impact of seeing and living the totality of the experience until now.
Here’s that in-the-trenches view.
Urban vs. rural mix
Zoho, an Indian software firm, has a major presence in the large urban city of Chennai and is building a massive new headquarters facility there.
Locating in major Indian cities is a common growth strategy of Indian (and Western firms). These large metropolitan areas have airports, mass transit, highways, telecommunication services, etc. The infrastructure and work force are abundant in these markets. However, that may not be the case in many rural parts of India.
I’ve seen this movie before in places like Mexico. People from rural areas flood the major cities looking for a better life for themselves and their family. This even happens in the United States – not one member of my large immediate family lives in my hometown anymore. The local opportunities are virtually non-existent.
Zoho’s leadership wanted us to see that people in these areas can have a great job and a career if only a firm is willing to invest in them and their community. Zoho starts the process by building local schools (grades 1-12), teaching solid farming practices, helping local farmers improve their financial stability and get better prices for their crops, and more. Some of these students will get job opportunities with Zoho (and some Zoho employees will get to work back in these rural markets).
The key learning is that what India needs is are firms that are willing to invest in local, rural communities rather than trigger even more movement of people to its urban centers. The latter policy just overtaxes the urban cities and hollows out the countryside.
On this trip, we heard of Zoho’s early efforts to pioneer new rural footholds in places like Texas, Mexico and more. That’s the socially responsible backdrop behind a key part of the firm’s strategy. To appreciate, fully, that strategy required a journey.
The journey to Zoho’s farm began with a short flight on an Indigo ATR 72 turboprop. We landed on an airstrip far from any center of commerce or major city. It was in the bush.
From the tiny airfield, we boarded a bus. We learned that a highway we were to take was not passable due to some construction issue so we would be making the journey along a twisting, narrow jumble of country roads. Some of those roads were paved and some were two-lane, but virtually all of them were, and I mean this kindly, works in progress.
The rural infrastructure there is constrained/limited albeit improving in modest ways. The rural countryside, though, has its moments of beauty: rice fields, palm groves, water buffalo lounging in the rivers, etc. in the shadow of massive mountain backdrops.
Our bus driver, who should get a medal for his work, dodged countless herds of wild goats, loose cattle and even a spontaneous cock-fight right in the middle of the road. The bus, itself, probably needs new shock absorbers after that run. The roads were dangerous to navigate during the day and likely quite deadly to be on at night.
In a first for me, the bus pulled over at one point in the literal middle of nowhere. Adjacent to the bus was a parked van. People with the van began a fire bucket brigade of sorts to pass box lunches to the bus. Where and how this came to happen eluded me, but we did get a good bit of food out of this 3-minute stop.
We got to the farm late but in one piece. No matter the journey specifics, we were well received. I suspected we’d generate a lot of local interest as people we passed getting there looked at our bus as if they were seeing something that large for the first time. That hunch was proven out when the bus couldn’t quite navigate some of the turns including several into the ranch property without having some spotters help with clearance issues.
The Zoho farm/campus is an interesting place. There are classrooms, a basketball court, a garden for the students to tend, meeting rooms, and more. Some newer buildings are still under construction. East of the buildings are a papaya grove and livestock enclosures. Students are learning close to cattle pens, rabbit hutches, water buffalo, ducks and chickens.
The rural education initiative is for ages 3-17 and it is called Kalaivani Kalvi Maiyam (Kalaivani School). Zoho intends to add 100 more of these schools in the next 5-10 years.
Everyone there was an absolute delight to interact with. The young students put on exhibitions of martial arts, local dances, arts and crafts and more. They plied everyone with gifts and locally grown foods.
My reaction to all of this, then, was muted (I wasn’t feeling all that well at the time) but the energy, friendliness and glee everyone possessed was, in a word, infectious. If this was the ‘cultural experience’ Zoho was shooting for, it worked. You can’t bottle this intangible group of feelings and tell others about it. It’s experiential and quite apart from what industry analysts often write about (e.g., financial results, product enhancements, management changes, etc.). This is why this piece reads more like a travelogue than a technology event recap. This is about the soul of a company and you don’t get that from recapping some professional manager’s statements on their Rule of 40 compliance.
And, there was another proof point on this culture. It was apparent to me that the grade school children there somehow realized that they were getting an opportunity to develop that maybe their parents never got. All children, everywhere, should be so happy.
The other campus
Earlier in the week, we spent three days at the Zoho headquarters in Chennai. It was in a modern building that is adjacent to a massive construction site. That site will be the new headquarters campus for Zoho.
At this operation one could see other dimensions to Zoho’s culture. This is where much of the Zoho Schools of Learning (it's for ages 17+) work occurs. Some of our meetings were in their classrooms. We saw people from Zoho’s creative arts group and even got to peruse an outdoor art gallery and music performance.
We also met with their head physician who is helping Zoho build out its own medical facilities to serve local people and Zoho staff. Capabilities pioneered here in Chennai will also go to rural locations once trained medical personnel become available.
Curiosity and innovation in non-software areas are other Zoho cultural attributes. We got a tour of their medical devices R&D (and limited production) facility. This group tries to find ways to develop specific medical devices at a form factor cheaper (and easier to use) than those currently on the market. I saw Zoho versions of COPD equipment and other devices. We also got to touch (and ride) in their off-road electric truck. That machine had a hydraulic dump bed, 1-ton cargo capacity and some slick electronics. If I heard right, they’ll start marketing it for farm (i.e., off-road) use in India and the United States.
The curiosity point needs a bit more expansion. Zoho’s workforce was keenly interested in talking with the assembled analysts. While these staff people are quite aware of the local technology space and they do learn a lot from their peers in other countries, they are, nonetheless, intellectually curious about other happenings in the tech sector.
Those same staff also are aware that their firm is different from most other software firms. At Zoho, they have opportunities to further their education, change career paths, pursue interesting assignments, etc. They also know that unlike other tech companies, Zoho has the cash reserves to avoid layoffs, isn’t subject to the whims of Wall Street, etc. I know Zoho management has communicated these data points to them but I suspect they wanted the analysts present to verify that this is indeed the case. (BTW, it is!)
More culture cues
While there’s a lot to unpack in the preceding copy, here are a few more culture tells I noticed:
- The leadership team likes to lead by example. No-one seems to be driving fancy cars and several of them rode with us on the daily buses and to the company farm/campus.
- Zoho doesn’t appear to hire many people from other software firms, especially top managers. Why? They don’t want these individuals bringing ‘best’ practices (e.g., periodic layoffs) that are contrary to the Zoho culture.
- Zoho likes to hire people who have fire in their belly, are eager to learn and are humble.
- A person’s influence in the company is not represented on an organization chart or by job titles. You have influence based on the ideas you have, the contributions you make and the way you comport yourself.
- Zoho doesn’t stick it to those employees who participate in the Zoho Schools of Learning courses. While other Indian tech companies have training programs, many of those companies charge tuition, require employees to continue to remain with the company for a time (e.g., four years) or reimburse the company for the tuition should they leave the company. Zoho actually goes a big step further and provides a stipend for those students in the learning program.
- And, one of the best programs they have involves the granting of a 3-month training program to individuals who want to return to the workforce. This includes women whose children are grown or have been out of the workforce for some time. And, of course, they can learn new technical skills during that training.
What are the Big Challenges for India and Zoho?
Zoho’s CEO believes India needs 1,000 – 2,000 Zohos to affect the changes needed to materially grow per capita income and to bring better economic parity between rural and urban parts of the nation. He’s probably right with that estimate.
Zoho’s leaders are playing a long-game strategy that is in stark contrast with the quarterly-earnings-focused business leaders that run many large enterprises. Those firms have passive investors who are free to buy/sell shares on a whim and have no operational stake in the companies they invest in. These investors (think PE firms, VCs, etc.) are all about extracting value from the company as often and as big as possible. They take the earnings for themselves but generally will invest little of these in the broader community in a material or long-term way.
Zoho is also a large enterprise. It has over 13,000 employees and operates in numerous global markets. But because it created a low-cost solution, is closely/privately held and can make outsized profits, then it can use those profits to provide societal good. Where Zoho leaders see many other firms as extractive, they see themselves as accretive to society (My term would be altruistic.). The difference in philosophies is material.
The challenges for Zoho are therefore:
- Can Zoho scale its social, environmental and other causes to affect material change?
- Has Zoho developed a succession plan for its leadership to ensure continuity in culture, ownership and societal initiatives?
- Can Zoho remain private?
- Will Zoho leaders get distracted by all of the non-application software initiatives and business lines it is spawning?
- Can Zoho adapt aspects of its culture to accommodate different countries and their demographic, economic, political and other differences?
I guess we will get answers to some of those matters at the next analyst event.