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Zoholics 2024: How the Company Models a Different Path to Success

Last week I attended my second Zoho event, the customer and partner-centric Zoholics. Zoho sure is a different kind of company – in a good way – and for more on how and why, here’s an excerpt from my writeup for their analyst event in February 2024:

A better way to view Zoho is as a SaaS platform provider, offering a modular suite of highly integrated applications that can easily mix-and-match for just about any scenario. CSO Vijay Sundaram explained that their flagship offering – Zoho One – supports over 50 applications, covering the gamut of business needs, including Customer Service, collaboration, email, Sales, Marketing, HR, Finance, Legal and Business Intelligence. Most customers deploy Zoho as a suite of solutions, with 60% using over 20 applications, and only 1% of these customers are using less than 3.

Austin was the host city for Zoholics and as a music fan and foodie, that’s definitely my kind of town. And as a dedicated food fan -- Zoho has a pretty interesting recipe for success, and three complementary ingredients stand out. This isn’t a typical tech company, and as they continue posting strong results, there just might be something here the rest of us can learn from.

 

Ingredient #1: Innovate – But Be Discriminating About the Pace and Focus of Change

It’s unrealistic for Zoho to keep pace with the endless tsunami of features that Zoom and others keep adding, and perhaps that’s the point. The PBX always touted its supremely rich set of 800+ features, but in reality, most enterprises used a few dozen at best. Today’s UCaaS vendors are locked in an arms race to add more features, but again, how much utility is this really bringing? Multitasking has its limits – aside from being overrated – but really, how many features can a person use during their workday?

I don’t have statistics to validate the take-up rate for all these new features, but I suspect it’s quite low for most of them. In my view, having the greatest number of new features isn’t the only measure of innovation, and it’s a very US-centric way of looking at things, where bigger is always better. If you recall, Zoho is Indian-based, and the Zoho Way isn’t modeled on the US Way, at least in this regard.

As the slide below shows, Zoho now has over 55 apps – which is not the same as features to be fair - and Chief Evangelist Raju Vegesna noted how they continue adding at a steady pace year after year. In absolute terms, this number won’t keep Zoom up at night, but Zoho does keep evolving, showing that innovation is core to their DNA. It’s also worth noting that the adoption of these news apps seems pretty high – at least what we saw from an audience poll – and I would contend that higher adoption of smaller set of new capabilities is just as strong an indicator of innovation as low adoption of hundreds (or thousands) of new features.


 

Ingredient #2 - AI – the Zoho Way

Just like every vendor has to keep innovating, they all need to have an AI story. The story with Zoho is that AI is not their big story. Yes, Zoho is doing good things with AI, but they’re not AI-first or AI-only, and there was no talk about going all-in like we’re hearing from others in this space.

They do everything based on four principles which drive what the applications do and how their platform operates – apps must be contextual, truthful, private and offer end-user value. To articulate that, Raju identified how those four tenets apply to Zoho’s AI work, as per the slide below. Being contextual has to do with AI being able to draw or infer key data points from across the organization to support a specific query or use case. Each of Zoho’s 55+ applications have its own data set, and the value of AI comes from being able to work across all of them to help workers get the best inputs to be more productive.


The other three tenets – truthful, privacy and value – are consistent with how other vendors are talking about AI. For Zoho, all of these tenets warrant more discussion, but I can only cover so much here, with two in particular.

First, their view on privacy was refreshing to hear. Using very practical language, Raju stated that “privacy is the price we’re paying to browse the Web”, and “the price we are forced to pay to use AI”. That’s a pretty fair statement, as the Internet truly has become the gateway for how we work as cloud and software define how technology is both built and consumed. With the dark side of AI overshadowing so much of the good side, this brings us to Ulaa, Zoho’s own web browser that supports all the leading operating systems.

Zoho and Google often draw comparisons thanks to their similar suite of apps, and it’s easy to see how Ulaa could be perceived as competing with Chrome. But that’s not the idea – Ulaa has phishing detection embedded into the browser to protect our privacy so we can get more of the good experiences from AI. There’s a bigger security tie-in with Ulaa as well, mainly around making the Zoho platform easier to use, but that’s a topic for another time.

One more important point about privacy that I liked hearing from Zoho - “we don’t ever monetize your data – you pay us to use your data, but we won’t monetize it.” This is a major way for how Zoho is not like Google, and reflects their view that privacy is a “fundamental human right,” and on that basis, they are not in the business of selling your data. Amen.

Secondly for Zoho’s AI tenets, their take on value stood out for me – “the best AI is when you don’t know you’re using AI.” That’s always been my view, and the less vendors talk about AI as a topic and the more they focus on solutions for business problems, the faster AI will be adopted. This is another example of how they’re using AI strategically with customers, rather than touting how AI-first they are. For Zoho, “AI isn’t an upsell opportunity – it’s core to the offering.”

 

Ingredient #3 – Staying Private, Also the Zoho Way

With many players in our space struggling financially, there’s nowhere to hide. With Microsoft becoming so dominant, the strong are becoming stronger, and the margin of error for everyone else only becomes smaller. Furthermore, with AI changing everything so quickly, the all-in strategy can be very risky, at least until AI shows real ROI with customers – but that’s an if, not a when.

Not to be bleak here – I’m very much a fan of companies going public – but in this climate, there’s a lot of upside for remaining private, especially if you can afford to do so. Zoho very much fits that bill, and I think it’s a key ingredient for their recipe for success. Their financials weren’t discussed at Zoholics, but we saw enough of that at the earlier analyst event to know they’re on solid ground. There’s no need or pressure on the company to go public, and why change up the recipe if the customers keep ordering from your menu?

This is where CEO and co-founder Sridhar Vembu does his best talking, and coming back to principles, the company rightly takes pride in operating profitably, but what really matters is what you do with those profits. Having freedom to do things their way means investing in areas they believe will be the most impactful. They could try to accelerate growth or consolidate the market via acquisitions, but they have other priorities that better align with their principles.

The main one would be getting closer to the customer, and Sridhar emphasized how they’re investing in resources to do this, both in terms of new hires and building a stronger local partner ecosystem. When it comes to business principles, the customer comes first, and clearly Zoho views customers as their most important asset. They know where their sweet spots are – mainly SMB and mid-market - both in terms of building out the right offerings, along with supporting customers to ensure they get full value from Zoho One, their flagship product.

Another tangent would be their many initiatives to create economic opportunity for rural communities, especially in the developing world. Zoho may be a global company, but also Ghandi-like in terms of operating locally. This calls for a separate article altogether, but in my view, truly sets Zoho apart from everyone else in our space. Zoho may be a software company first and foremost, but in many ways, it’s a means to an end.

 

Coda – when in Austin…

Zoholics was a great opportunity for analysts to get company updates along with the latest news – and yes, there was news – but there’s more to life than productivity, CRM, AI and security. As mentioned, Austin is my kind of town, and perhaps fun is another ingredient for Zoho’s success recipe. We had our share of that, with an outing to the renowned Franklin Barbecue, and a nice spot of live music, Austin-style. Second helpings – any time!




This post is written on behalf of BCStrategies, an industry resource for enterprises, vendors, system integrators, and anyone interested in the growing business communications arena. A supplier of objective information on business communications, BCStrategies is supported by an alliance of leading communication industry advisors, analysts, and consultants who have worked in the various segments of the dynamic business communications market.