Zoho’s Sridhar Vembu: Tear Down That Wall.

It is a pleasure to meet you Sridhar.

Sridhar: Happy to be here.d79b72bc-c9b9-11dd-9f93-000b5dabf636.flv

Kamla: If we use the Cold War analogy with the Iron Curtain, where are we in the IT industry today? Are we close to tearing down that wall of data being locked up?

Sridhar: Yes, really the wall is about data really being imprisoned by applications. If you think about the most important kind of data they are your documents. Today it is Microsoft Office. Application really owns the data. I would like to say that data actually does not want to be owned by an application. Data wants to be free and set free and go wherever the user needs it and whichever application needs it. That is really the wall that I am talking about here. So, if your data is in Salesforce, Zoho, Google, Microsoft, or everywhere it’s the user that owns the data and they want the data to go whichever application wants to access it. They give the permission and that application should own the data.

Kamla: So where are we in terms of the cold war?

Sridhar: We still have I think a long way to go in that revolution. This whole cloud computing to me is about data and liberating the user data. It is putting the user in control of the data and not the application in control of the data. We are in the early states and this may be the first innings of a very long game.

Kamla: Talk to us about the consumerisation of the IT revolution. That is another way of describing what is happening in today’s world. A recent Gartner report said that consumerisation is the new IT civil war. You in some ways have fired the first salvo against the CEO of Sales force by writing in your blog post and asking him to tear down that wall. What prompted you to fire that salvo?

Sridhar: Yes, in that case specifically it was triggered by a statement he (Mark Benioff, CEO of Salesforce) made in their dream force conference. They said we love everybody. We love Microsoft and we actually embrace everybody and we are very open. But then I pointed out that they are not. And it is just a marketing positioning. In reality, for example, they invited Zoho and then once they realised we could be a competitive threat they locked their data out of us. They tell customers you cannot migrate data until you pay for the full contractual period -- remaining period. So those kinds of things they are doing and that is why I actually wrote that post.

Kamla: And what was his response?

Sridhar: I did not hear anything from them and I guess they said no comments. They seem to take the position that by ignoring you will go away. We are not going away. We are going to be here for a long, long time.

Kamla: Let us switch to Zoho. Describe to us the different products that you have. What are the new products that you are going to be introducing by the end of the year?

Sridhar: We have just this year, for example, we completed the office suite with a really good e-mail solution and we have a CRM, and project management. And one of our most interesting products is called Zoho Creator that allows anyone to develop applications on it. Alongside we launched Zoho marketplace. So that is really what we have done this year. Our next year’s priority is going to be around integrating all of these applications. That is the top request for our users is to integrate seamlessly. Mostly for example CRM with e-mail and office documents with CRM and those kinds of integration. We still have new products but those will all be for example CRM adding support modules those are the new things that are coming up. Really a lot of the focus is going to be on integrating these applications and to make a coherent integrated suite. So that is the part of the vision.

Kamla: What is the revenue that you are generating per month? I have heard and looked at different numbers.

Sridhar: We are a private company and that is why that is one of the freedoms that you get by not having to reveal your numbers. We are profitable. We have never raised money. We have organically grown inside. We fund all of the development ourselves.

Kamla: What about that $1 million dollar per month and more (in revenue)?

Sridhar: I just say that it is all in the right ball park but I won’t actually…because I don’t intend to give Mark Benioff any numbers to play with so…

Kamla: Well, anyway for those of you who are interested Sridhar has commented else where about how much money they do make (some ball park figure).

Tell us how did you get started with Zoho? In 1996 you started AdventNet. Just before we started this interview I got a background of how you started. It was something that you kind of discovered and stumbled upon the first product that you built. Then you went on in 2000 and come up with Zoho. How did the idea come up because the telecom bust clearly impacted you all? Tell us how the idea started?

Sridhar: We had a successful business by 2000. We were doing really well in the telecom market. Then the whole bust happened. It is even more severe than the housing (market). The bust in that specific market …I mean something like 90% of the companies vanished in that market. Those were our customers. So by around 2002-2003 those were tough years for us. Fortunately during the bubble we had made money. We had good cash and we had good engineering resources here, but what we were seeking was a new market opportunity. We decided this market is not going to recover in any sensible timeframe and we had to do something else. So, basically it was a reboot time and Zoho was one of the things that we came up with. In fact we had come up with 2 or 3 different ideas at that time and all 3 of them were fairly successful. Zoho was one of the most successful of that whole episode. It was the most visible.

Kamla: Elsewhere in another interview you had mentioned that you had to reinvent yourself 3 or 4 times. But talking to you it seems difficult to believe that you had to spend time reinventing 3 or 4 times. You seem like a very logical person, who goes through in a very methodical way -- why a certain company should start or not. Listening to your story again before the interview where you had talked about how Zoho started. What is it that you did to reinvent yourself those 3-4 times?

Sridhar: Yes, the first reinvention. I did my PhD in Princeton. If you had asked me in 1993 what I really wanted to do in life I would have said that I want to become a faculty member in some leading university. That would have been my dream job. So that was the first in 1993-94. I went through a phase where I started to recheck my assumptions, my priorities and I just decided I did not like the work I was doing. I did not like that academic style of research and writing papers that were mostly meaningless, but for publishing consumption and sort of marketing your work. Stuff that I did not like. That was the first reinvention. That was gut-check time in 1994 spring. Infact I had a faculty job offer and I had rejected it. This was actually in Australian National University. I was all set to go to Canberra in Australia. After Princeton it’s a great university in Australia. And in 1994 spring I decided I am not going there and I decided instead to go to Qualcomm to take up a job as an engineer in their CDMA group. So that is a complete change from what I was thinking. It startled my advisor. He thought that he was all set to go it was all ready and then I said that I changed my mind and I am not going.

Kamla: Why? Walk us through your reasons. How did you convince yourself?

Sridhar: I felt that the style of research I was doing…it was in engineering. Technically it was supposed to be engineering work, but was really highly mathematical abstract work. Increasingly I felt that the mathematical models were out of touch with reality. Because we were supposed to be analyzing mathematical models of engineering systems and in this case communication systems. I started to feel that these models were getting out touch with reality. Slowly people were going into remote branches of the knowledge tree and then at one point you realised that this has no touch with reality and you just walked off the cliff and people don’t know it. So this were my feeling in 1993-1994 and I decided I need to go to the real world and do real engineering in a company that is doing real products and I would get back to the real world. That is how I felt. That was really my feeling. And I did not want to continue in that line and school and train other students to be doing the same kind of stuff that I was doing. I sort of religiously said that I don’t believe in this anymore. So it was a kind of religious conversion episode -- to move from an academic world to the engineering real world, shipping products. That is how I ended up in Qualcomm and that was my first reinvention. What it taught me is to always challenge my assumptions periodically. To think what am I thinking today that I would change a year from now or 2 years from now.

Kamla: So that was your first reinvention. What were your second and third reinventions?

Sridhar: Then I left Qualcomm in 1996 and that was really nothing to do with the work. I loved Qualcomm. It was a great company and I got excellent experience. I still have a lot of friends from there. But I decided I wanted to do something in India. My brother was there with me in Qualcomm. He is actually one of the co-founders of Advent Net. We were talking about how something big is about to happen in India in software. We wanted to be a part of that. Now remember this is reinvention because what I was doing in Qualcomm was CDMA wireless technology and nothing to do with software per se.

Kamla: And India became one of the big countries for CDMA…

Sridhar: Yes for CDMA later. But in 1996 we decided my brother decided to return to India and I decided to come to Silicon Valley to figure out something in software. Really, we didn’t have a concrete idea of what we would do, but we knew we wanted to do it in India and that was really the situation and that was kind of a reinvention. I left my job and came here to Silicon Valley and for the next 6-9 months I tried out various things, wrote some code, met people. I did not have a focus but that is how I met Tony Thomas, co-founder and we started interacting with him. We had a product and I started to be a part time sales man for the product. That was again a reinvention because I am an engineer by training. I had nothing to do with sales. I had never gone on a sales call ever. So I printed out a business card and said I am going on a sales call and that is how it led me to become the CEO of the company later. Because other guys and the engineers said you are the sales guy and you become the CEO of this company. You are the one who can go and sell now. So, in 1999 I became the CEO of the company.

Kamla: During the course of your discovery in the late 1990s when you were with AdventNet and you made the first product...you also tried raising money through VCs. Tell us what happened? What is it that you can tell other entrepreneurs who are looking to build companies and probably don’t have the money, but they have a vision and have an idea. What should they be doing?

Sridhar: We didn’t try to to raise money, but we would get approached by a VC. We would have a conversation and then that will tail off because they would decide it is not very interesting.

What we are doing was in a very niche market, which at one time I estimated the market size to be $2 million. That clearly was not interesting and the moment we say it they would just walk away. That actually was an instructive moment for us because we realised that $2 million was great for 4 guys doing something, but it is not interesting for VCs. So what I would tell entrepreneurs, who are addressing a small market maybe just doing it yourself, bootstrapped with a small budget is a good idea. Then you can actually build something of value just like we have done. Expand it, expand it and expand it in an organic way. That is the path that people should consider.

Kamla: So you probably got a lucky break. Here is something I want to run by you. You are a math buff and you love to look at patterns. When you look at your own success and the success of Zoho do you think of yourself as an outlier as Malcolm Gladwell (Outliers, 2008) talks about in his new book? He says that successful people don’t do extraordinary things. They get lucky breaks or their timing is good. They generally put in about ten thousand hours of work in their field. And then there is the cumulative experience and timing factor. What do you have to say about this?

Sridhar: I wouldn’t call ourselves … not in the way Malcolm Caldwell describes as outliers. I would call ourselves as a moderately successful company. Definitely there is a lot of time and effort that went into it. For example, I personally didn’t know anything about software as of even 1996 when I left my job in Qualcomm. I had written some programmes, but I really don’t know about software and shipping software for a living. The 10,000 hours is really true, I didn’t go to business school but to engineering school. (Learnt) All of this by doing and figured it out as we go. Develop software. We put bugs. We analyzed why that happens. Figure out a better way to build software. Then in 2003 … how to build web services, as opposed to packaged software. That is again a new lesson that we learnt. Definitely Gladwell has a point there that is persistence, sticking with it, putting in a lot of time, thinking about it, trying different things and along the way the breaks happen .. if you are doing it . When the breaks happen, you recognize it and seize it.

Kamla: So the one factor that I left out in the case of Zoho is the lucky break. In your case the lucky break could have been the growth of the internet and the evolution of what is now been called the Web 2.0 and the various tools. Zoho is everywhere you go on the internet …you know you guys are everywhere.

Sridhar: We are not quite everywhere. We would like to be everywhere. Definitely we are riding a wave of adoption. It helps that Google is evangelizing it, Salesforce is evangelizing it and we are saying the same thing. I truly believe there is a lot of opportunities here and lot of competition, hich is why sometimes when people say Google is going to crush these guys or Microsoft is going to crush these guys …what they don’t realise is that this is a 10-15 years transformation. There is going to be a lot of companies that are still to be born in this business. And that is why I am confident that we will have our share in this pie.

Kamla: Building a company is not an easy task; it is a very tough task. On top of that building a product company is even tougher when actually the company is based in India. You described Zoho as an Indian company with a skeletal staff here in the US.

You can read about Sridhar Vembu’s answer to this question and others in Part-2 of the interview.

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