We have seen more rapid cloud adoption post pandemic: Zoho CEO

The software-as-a-service (SaaS) market, as per Gartner, is estimated to grow to $104.7 billion in 2020 as companies shift from on-premises license software to subscription-based SaaS models, as well as adopt new software collaboration tools during the covid-19 pandemic. Texas-and Chennai-headquartered Zoho Corp. has emerged as one of the major privately-held SaaS companies globally riding on this surge in demand. The company is aiming to touch the 1-million customer mark and further expand its market in India. In an interview, Sridhar Vembu, founder & CEO, Zoho talks about the changing trends in the industry, areas of focus, and expansion strategy. Edited excerpts:

Which markets are you focusing on now? How much will India contribute?

We have over four lakh customers worldwide right now and we are seeing rapid increase in customer count. We will probably add another one to one-and-a-half lakh more clients in the next 12 months. So we are approaching and going to target a million-organization mark in the next 2-3 years, of which, we would expect India to account for 20% of our customers, from about 12-13% today. The rest is split globally among North America, Europe, Latin America, Middle East, Japan, China, all over.

Has your expansion strategy changed post covid?

We always had this plan of rural expansion but the pandemic has just accelerated this. It has now become a strategy for us. We are opening smaller rural offices everywhere. In fact, even in the US, we are in the process of opening up rural centres. I personally don't like to expand in major cities because of the congestion, cost of living, real estate prices and all of that. One rule of thumb I use is that our employees should be able to live well on their salary. That's an important criterion for me to decide where I locate the office.

Do you see consolidation in the SaaS space?

The market is quite fragmented with too many players in too many subdivisions and a lot of them are venture capital (VC)-funded. You have an extraordinary explosion of venture funding, that is keeping a lot of companies afloat, and who are otherwise not profitable. During the early pandemic period, there was a wave of consolidation but thanks to the easy money policies, the availability of venture capital is still very high. So, the amount of capital going into these is keeping the market forces operating, as unprofitable players continue to receive funding. Eventually, rationalization has to happen because there has to be a limit on the number of SaaS tools a typical company can use. That’s why consolidation becomes inevitable.

How has the pandemic impacted your business?

During the first one or two months, we saw some amount of slowdown but by May-June timeframe, we started to see some of the growth return. By September, we have actually been doing well. Things have come back to normal with the opening up of countries including India. We have seen a more rapid cloud adoption post pandemic. We are definitely in a growth cycle but the main concern is how the global economic landscape will look like. So those factors are the long-term challenges. Our business is doing well.

How has Zoho evolved in terms of its enterprise software offerings?

Enterprise software categories are slowly merging. For example, CRM (customer relationship management), which was traditionally considered front office and included functions like sales, marketing, and customer support, is now called customer experience platform. Similarly, ERP (enterprise resource planning) was traditionally called back office and included production, factory automation, materials resource planning, accounting, HR and all of that. But these distinctions in categories are slowly going away because you want to link the entire chain of workflow. So Zoho is evolving from the front office and moving towards the back office, and then evolving into adding ERP functionalities progressively. So that is how the whole thing is evolving right now. In 5-10 years, I believe we will have a unified software that runs all aspects of our business, which is why we call it the operating system for business.

Any plans of filing for an IPO and raising funds?

We have no IPO plans. We will stay private. As far as VC money is concerned, we don't need the money, so we avoid it. We continue to be profitable and grow profitably. In another 6-12 months, we will probably cross the 10,000 employee mark at current growth rates. Currently, we have around 9,000 employees globally.