New Age Company of the Year: Zoho, a different kind of Indian start-up

Zoho Corporation has used its engineering capability to build a truly world-class product

Zoho Corporation, a software-as-a-service (SaaS) major, is an aberration in the start-up world. It has not only built the business organically but stayed away from investors. It will also be the only India-based SaaS player to have crossed $1 billion in annual revenues.

Zoho is also an example of true engineering capability that has built a world-class product. Staying close to its roots, it has tapped into rural India to build a talent pool which fuels the company’s growth and the founder’s determination to be laser-focused on profitable growth.

In an old media interview, Sridhar Vembu, the company’s founder and chief executive officer, had said Zoho’s genesis lay in the question why India produces talent for export but not a home-grown tech powerhouse.

Zoho’s journey began in 1996, as AdventNet. The decision of the founders not to take money from financial investors is understandable. But they have held on to this strategy, even as several companies within their own segments began raising funds and valuations.

Shailesh Kumar Davey, Zoho’s co-founder, recalls that in the early 2000s, the founders turned down an offer from a venture capitalist who offered them $10 million for a 5 per cent stake in order to fast-track growth in the network management segment. “We believed that we had to stay private and grow at a pace which we felt was right, hence we did not take the offer.”

Davey adds: “While we had no idea if we were doing the right thing, we doggedly chose to remain bootstrapped, primarily to retain the freedom we had in business decision-making. We wanted to grow as an engineering-focused company and continue investing in long-term R&D efforts, which we felt would not be possible if we brought investors onboard.”

Even now, he explains, the company’s R&D spend is three times its marketing spend. That is the other differentiator: “Our frugal marketing spends have enabled us to maintain sizeable cash reserves to tide us over hard times.”

As mentioned, unlike its peers in the Indian SaaS ecosystem, Zoho has built its product road map on its own, rather than through acquisitions. The company started building its Cloud software suite for businesses in the early 2000s, and now offers over 55 solutions that run on a unified technology stack built entirely from scratch — from apps and platforms to network and data centres.

“Our focus is and has always been on building products from the ground up, and remaining organically profitable. This is how we have grown in the last two decades and will continue to in the years to come,” says Davey.

The product focus has allowed the company to capture market share in the global and domestic markets from competitors. Its finance platform has grown 50 per cent year-on-year in the international market, led by Zoho Books, while the India market grew by 80 per cent in recent years.

The company is seeing uptake of its products across categories, with the top five offerings in India being Zoho One (an operating system for business); CRM Plus (a customer experience platform); EX, led by Zoho People (a human resource management platform); Zoho Workplace (an enterprise collaboration platform); and the finance suite led by Zoho Books (a GST-compliant accounting software).

The company believes that R&D is the biggest part of its growth story. “Our R&D focus in the coming years will be to further unify our technology stack so that we are able to elevate the user experience,” said Vembu at a media event. “We will add 100 more network points of presence around the world in the next five years for enhancing network access. We are also working on adding Indian language support for our AI and blockchain technology for universal validation. Our focus will be on technologies that businesses — regardless of their size and location — will be able to use securely.”

While announcing the $1-billion achievement, Vembu warned that the current macro uncertainty was impacting SaaS players too, but said he was confident that Zoho’s vast portfolio would aid growth.

Davey believes digital adoption will continue in spite of macroeconomic uncertainties. “Small businesses will look to go digital, while large enterprises will seek unified digital platforms that offer better value along with ease of use and can easily interoperate with their legacy systems. We believe Zoho’s wide range of offerings are customisable, extendible, and integrable, and our strong network of extensions (via Zoho Marketplace) will resonate well with customers, as they optimise for value,” says Davey.