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ZohoDay 2024 - a rocketing fast de-brief

Brian Sommer Profile picture for user brianssommer February 13, 2024
Summary:
diginomica was well-represented at last week's Zoho gathering in Texas. Here's my summation of what we saw and heard.

zoho

Last week, SMB vendor Zoho held its annual ZohoDay analyst event. The event is, contrary to its billing, more than a day. Here’s my attempt to compress three days of news, content, etc. into one concise piece, read on.

Here are the notable bits from Zoho’s annual analyst event. 

  • The company is doing fine. Management shared all kinds of metrics around revenue, customer growth, etc. with everything coming up roses. Growth is huge, churn is down, etc. 
  • The company now has (by my count) almost four dozen offices or data centers globally. They also have affiliates in 140 countries. This is definitely a global technology firm. 
  • Management wants to play the long game – This is something Zoho executives pointed out that few tech players get. 
  • Zoho’s social programs are still a focus for the company and employees. We got updates on their Rural Revival efforts, Zoho Schools of Learning, and, their Marupadi program to help women re-enter the workforce.
  • Sustainability was a key topic. The company has a 12MW solar power generation site alone with an additional 7MW due to come online soon. 
  • One interesting metric they discussed was revenue concentration. The idea is that a vendor that has too much of their sales revenues focused in one location may be problematic. For instance, a tech company that gets, for example, more than half of its revenues from just the United States is either a new U.S.-based startup or one with a pricey cost structure that is unattractive in other countries. I’ve written about Zoho’s remarkably low-cost solutions and how other vendors should learn from this.   (Here’s an 8-year old piece on Zoho’s extraordinary economics that’s still very relevant today
  • Customer demand for private cloud versions of Zoho is growing. The driver behind this appears to be the desire of customers to keep their data private and not co-existing within the same environments of other customers. But the real concern is that proprietary data of one firm could be used in the training of AI models/tools/etc. by other customers or competitors. Customers have no problem using general purpose external data (e.g., weather forecast information) but definitely draw a line at competitors potentially benefiting from their proprietary data.
  • Zoho laid out four kinds of ‘Intelligence’ needed in today’s technology. They believe businesses need: artificial intelligence, business content, contextual intelligence and decision intelligence. As a consequence, companies will want/need different amounts of each throughout a business process. Software vendors will need to tailor the specific tools (e.g., RPA, chatbots, narrow language model, large language model, etc.) & content (e.g., training databases) for each business problem or sub-process being addressed.
  • Smarter, AI powered applications shouldn’t cost more. In a departure from many of their competitors, Zoho doesn’t see that the addition of some AI capabilities (e.g., a chatbot) should trigger a price increase. They have placed the AI technologies in their products’ infrastructure layer and make these capabilities available throughout the product line. 
  • AI should deliver a 10X improvement in the speed, quality and cost reduction in software development.  Other software vendors will concede that AI tools can write huge amounts of code, debug it and test it. But they don’t seem to think that this code that they get for free should cost customers less than what pay for today.  Zoho is already selling its suite for around $9.99 per user per month. The question isn’t how much lower Zoho can reduce their costs but rather: When will other mainline vendors figure out how to create low-cost solutions?
  • AI is to software development today like the mechanized textile factories were to a farmer’s loom or spinning wheel. The latter was part of the industrial revolution while the former is a digital revolution. AI could have (and likely will have) a destabilizing effect on old processes, moribund businesses, etc. The reach of AI into technology firms may be one of the most impactful. 
  • Zoho has already had some success attracting larger SI’s to its partner ecosystem. Analysts, myself included, want to see proof in future briefings that the SI’s will, in fact, honor and respect Zoho’s culture, ethos and low-cost/high-value approach to client service.
  • Expect these SI’s to retain and monetize any product extensions, AI tools, etc. that they develop for customers. Whether these will be available to other Zoho customers via Zoho’s Marketplace is unclear for now. 
  • These new SI’s are a key component to Zoho’s move upmarket. This will likely be a long, gradual climb into ever greater sized customers. Yes, Zoho already has a few mondo-sized customers but the capture of more firms like these may depend on more powerful functionality in more modules. 
  • Zoho Payroll continues to expand. The application is currently available in the US and India. Tax filing functionality for some US states is still being developed.
  • Zoho had approximately 25 customers present for unscripted panel interactions with analysts and influencers. diginomica’s Jon Reed (who never met a case study he didn’t love) was ecstatic. All analysts, I believe, appreciated the unscripted part of this. More vendors should note how worthless a customer panelist is when they get asked questions like: “So, tell us the top 22 reasons that made your firm choose our award-winning, industry-leading, cutting-edge solution! And, don’t spare the hollow platitudes and faint praise!!!”  A hat-tip to Zoho for making this happen.
  • Franchisees are becoming a key customer segment for Zoho. 
  • Zoho Start, a set of applications to help startups get established, is in Beta mode now. Its functionality is currently limited but will soon expand.
  • Zoho created a Non-Banking Financial Corporation (NBFC) in India. This will enable the firm to assist customers in a variety of commerce transactions.

My take

  • Zoho has a lot of moving parts. The purpose of this piece is to give readers a taste for the enormity of the product line, the global reach of the firm, and some of the cultural aspects that uniquely define Zoho. 
  • I wanted more product information while other analysts have been craving customer access in prior events. That’s okay for me for this year. Fair is fair. But, next year, I’ll be focusing hard on the ability of all of Zoho’s numerous applications to solve the real, complex problems of larger customers. 
  • Why did so many (about 140) analysts and influencers attend this event? Zoho’s a different kind of software firm. It’s privately held, bootstrapped, and massively profitable while simultaneously offering a set of extremely low-cost solutions. A deep dive into Zoho is very helpful in exposing critical structural, ethical, financial and other differences between Zoho and the usual suspects in ERP and enterprise software sectors. Plus, this is a vendor you have to experience to really understand them. 
  • But why was this held in McAllen Texas? Zoho moves around its events to its different offices. Zoho has a presence in McAllen (and also in Austin and other Texas locations). A recent event of theirs was held in Chennai. I appreciated being in McAllen (it’s close to my home turf) and it also allowed a large number of us to visit the nearby SpaceX operations in Boca Chica. 

Maybe there is a bit of rocket science in the apps software space after all….

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