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Zoho talks up ‘transnational localism’ as key to success

Chris Middleton Profile picture for user cmiddleton September 9, 2022
European MD of Zoho explains where the business cloud applications company is now, and where it goes next

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(Image by Arek Socha from Pixabay )

The world has experienced crisis after crisis this decade: the pandemic, the ‘great resignation’, climate change, food and energy poverty, soaring inflation and debt, plus rising inequality, with Russia’s invasion of Ukraine stoking these and other fires. Throughout all this uncertainty, cloud platforms and applications have been a business continuity ally.

Many providers have been revelling in the spotlight of digital transformation, but others have gone about their business more discreetly. Defiantly in the latter camp is Chennai, India-headquartered Zoho, the privately held business app company that for 26 years (half of them under the Zoho brand) has avoided ‘big bread and circuses’ pizazz. Instead, it has quietly worked its way to 80 million users, 12,000 employees, and more than 50 applications, with (reportedly) 2021 profits of $240 million on revenues of $650 million.

Its low-key, off-center strategy – marketing only where necessary, and eschewing ‘statement’ city offices – has been deliberate, according to Managing Director of Europe, Sridhar Iyengar. He gave the keynote at Zoholics this week, the vendor’s first real-world London conference since the pandemic began. 

At the event, Zoho announced the opening of a new UK office, in Bletchley – not far from legendary Bletchley Park – plus several new applications. These include all-in-one workplace companion Trident (now in Beta), which allows the streamlining of business comms into a single feed, and application analytics tool Apptics (also in Beta). 

A further announcement remains confidential for now, but is likely to push the company towards greater public recognition, certainly among users for whom online privacy and search is key.

The two-day City jamboree bustled with 500 delegates, many wearing badges that advertised whether they were comfortable shaking hands, would prefer to touch elbows, or still wanted to stay 1.5 metres apart. It felt buzzy and upbeat, albeit in changed and challenging times. 

Iyengar told them:

In a sense, it almost seems like a decade since all this has happened. There's the famous saying, ‘There are decades that pass, and nothing happens. And there are weeks in which decades happen’. 

But what has all this shown us? That [people] have systems, beliefs, policies, which are very fragile. But what are the fragilities? We have globalization in an extreme form where you have a car whose engine is manufactured in Europe, the body is manufactured in Asia, and the tires in Latin America. 

Each of these suppliers is an expert, they do the best in what they do, but they have no idea of the holistic picture. With the result that if there is a glitch in the supply chain, then your entire business is affected, and you can't deliver the end product to your customers. And that's what we're seeing today in terms of delays, shortages, and disruptions.

In addition to that, you don't have the knowhow of the entire system and how it works, because you're focused on your own core competencies. All these systems are optimized for you to get the financial benefit – the focus is to increase shareholder value, but not necessarily that of an employee or a customer.

Profitability as a by-product 

So where does Zoho fit into this narrow, me-me world? In one sense by focusing on products that allow organizations to collaborate across silos of data and processes – those places where expertise typically resides but is often trapped. And in another, by being entirely focused on customers and employees rather than on remote investors and shareholders. He said: 

This is something we think about, because someone has to run a business to serve the customer. We think about this a lot because, as a company, we are bootstrapped: no external funding. 

When some companies get into a situation, their margins are compressed. If they’re a publicly listed company, their stock is going to drop. We’ve seen this in the last year: companies whose stock value has dropped as much as 70%. And we've seen it in the SaaS world as well. A lot of companies are unprofitable just because their constructions are bloated, because they're not able to spin and sustain the business. 

Typically, what happens is when companies are not well run there is a consolidation, they're forced to. So, given that we're in these turbulent times, you need to have a way to steadily navigate across them. You need a ship that is built on good fundamentals, and a good culture to last and to serve the customers and market. 

And a broader sense of purpose. It's not just about profitability, it's about what you want to do. Profitability should be a by-product of that.

He added:

Being private gives us the freedom to do something because we’re not answerable to anyone externally, except our employees and customers. 

Our customers need to be operating within a reasonable cost. If we become too expensive for our customers, we will drive them away. Our customers may not be able to survive. When our customers thrive, we thrive. That's the way we look at it. So, they stay with us long term.

Disappearing boundaries 

Iyengar described Zoho’s outlook as one of constant experimentation and “transnational globalism”: a new spin on “think global, act local”, in which the vendor owns the entire technology stack, but collaborates and customizes locally to suit the needs of individual markets. He and other speakers placed great emphasis on the fact that users own their own data and can take it elsewhere if they wish: Zoho never monetizes it or uses it to sell advertising (beyond upselling its own services).

He explained:

It’s a decentralized, distributed way of working where we would land some of our senior folk who understand the way the company thinks and works in other geographies, to build up teams and set up offices to serve the market in those regions. And this has worked successfully in the last five years.

Iyengar himself is a case in point, running the European operation after being previously based in India. 

I asked him why his speech was billed as “the next 25 years” when it was really a summary of the company’s achievements to date. So, what is next on the horizon, beyond the new products trailed by other speakers? He said:

One of my colleagues said today that the boundaries between apps will disappear. And we're seeing that. 

Traditionally, customers and organizations think in terms of silos – sales, CRM, marketing, customer support. But you have to be proactive as a business to offer superior customer experience, and you have to have the entire journey of the customer in front of you, regardless of which department you work in. 

Zoho cuts across different departments, across silos. We look at it as a platform that can be used by business to not just engage customers, but also employees, and for employees to work productively. 

It could mean that the solutions you have for customer experience have to work well with your employee engagement tool, to be something like your online office. How do you have this entire system that works together seamlessly to give your customers a great experience? That’s what we are working on.”

Transnational localism 

In July, Zoho announced a recruitment drive to bring 2,000 new employees into the business, including software engineers. Is the company ramping up for a specific project? Iyengar says: 

We have a lot of products, and now we have to translate those into how customers understand them to solve their problems. And that can't be all done remotely. For that, you need to have local teams that can work with customers and partners. There’s a vision for Zoho that has to be translated into how it's going to work, into how customers can use it. 

That's the focus behind setting up different local teams: engaging with the customer and the market to understand what they need. Sometimes it could be customizing a product to a specific region or a specific country's needs. That's the focus behind our transnational localism. Putting our roots here.

The keynote talked about a culture of experimentation, of owning the entire stack, and Zoho using it internally: a business built on its own product. And it also talked about minimal marketing, no ‘statement’ offices. But how can it compete with the showier SaaS companies which throw money at brand recognition – and get it? Iyengar says: 

That's a very valid question, and it's something we do ask ourselves. A big injection of funds into marketing can do that. But we're also looking at building this sustainably. So, for us, marketing is important, but brand visibility is difficult. It’s in a bubble, right. Everyone's pumping in money. There's a lot of noise, and for you to be heard is going to be incredibly difficult. 

But in difficult times, the message will be much clearer. We've seen the economic conditions. Irrationality is sinking and marketing spend will come down. And if you look at it, the way of adoption has typically been through word of mouth, and people discovering products. 

So, one more purpose of having a local office is to create visibility around the whole, as a brand, as a company: what we stand for, the products, and what we can solve for our customers. But in a rational and sustainable way. Splurging money, big stars and all that… that's not this.”

My take

A refreshing stance and a focus on building sustainably for the long term. However, the challenge remains: how to lure customers away from the showier brands when many people still like to join a party.

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