We are approaching the one million-organization mark in 2-3 yrs... we would expect India to account for 20% of our customers, Sridhar Vembu, founder and CEO, Zoho
The software-as-a-service (SaaS) market, according to Gartner, is estimated to grow to $104.7 billion in 2020 as firms shift from on-premises licenced software to subscription-based SaaS models, as well as adopt new software collaboration tools during the covid-19 pandemic. Zoho Corp., based in Texas and Chennai, has emerged as one of the major SaaS companies globally, riding on the 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 and CEO, talks about the changing trends, areas of focus, and expansion strategy. Edited excerpts:
Which markets are you focusing on? How much will India contribute?
We have over 400,000 customers worldwide right now, and we are seeing a rapid increase in customer count. We will probably add another 100,000-150,000 more clients in the next 12 months. So we are approaching and going to target the one million-organization mark in 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, the Middle East, Japan and China.
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 rural centres. I personally don’t like to expand in major cities because of congestion, cost of living and real estate prices. 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-funded. You have an extraordinary explosion of venture funding that is keeping a lot of companies afloat, who are otherwise not profitable. In 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 company can use. That’s why consolidation becomes inevitable.
During the first 1-2 months, we saw some slowdown, but by May-June, we started to see some of the growth return. By September, we were actually 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. These are the long-term challenges. Our business is doing well.
How has Zoho’s enterprise software offerings evolved?
The 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 and HR. But these distinctions are slowly going away because you want to link the entire chain of the workflow.
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.