Zoho: Coming From an Emerging Market Has it’s Advantages – Part II

My Conversation with Zoho CEO, Sridhar Vembu

In my last post, I spoke about my conversation with Sridhar Vembu, CEO of Zoho Corporation, an innovative software company headquartered in the US, but with most of their employees based in India and China.   I wrote mostly about the ingredients of the company’s success.  In this post, I’d like to delve a bit further into Sridhar’s vision and philosophy and its applicability to Latin America.

While I was speaking with Sridhar, I was reminded of John Hagel’s book, The Only Sustainable Edge.  In it, Hagel mentions two important areas touched upon by the Zoho CEO. The first one has to do with Zoho’s ability to offer customers value at an affordable cost which is in synch with Hagel’s assertion that technology innovations are opportunities to “create more value at less cost.”  Zoho’s location, recruiting, training and company culture paired with its bet on cloud computing make are certainly aligned to a goal of creating more value at less cost for their customers.  Additionally, Hagel points out in his book that managing across two cultures “can create new opportunities to enhance performance by drawing on the best of both cultures.”  Certainly, this is not news to Sridhar who lives and breathes it every day.

In Latin America, many discussions on entrepreneurship center upon the disadvantages of the region when compared to the U.S. This runs the gamut from lamenting the scarcity of investment capital; the lack of the right human capital and other ecosystem and infrastructure components that are missing. As an aside, the same day of our talk, Sridhar actually wrote a post on his blog about the VC issue. However, anyone from Latin America who could listen to Sridhar speak about his particular voyage, would actually start to feel as though companies coming out of emerging regions such as Asia or Latin America are at a distinct advantage when compared to US companies. What a great perspective!

While players such as Salesforce.com, Microsoft and Google have solid and focused SaaS offerings, Zoho has been adding applications to its suite at a blistering pace.  Though the company’s user base also continues to grow, it’s only a fraction of Google’s user base.  Sridhar has heard this observation before and I’m sure can read between the lines of the sometimes veiled (sometimes not) insinuation that this means that they will eat Zoho’s lunch some day.  Nevertheless, I believe Sridhar is correct (at least for the time being) in asserting that Google’s rising tide can lift all boats floating in the SaaS “sea” since they are helping to educate customers on the value of these new SaaS offerings.

The company is profitable and is free to follow its long term strategy.  While the Google threat (and others) will probably get more palpable as time goes by, I agree with Sridhar’s view that companies don’t get killed by competition; they commit suicide. Nevertheless, one area where I believe that the company needs to improve is in its customer messaging or marketing in general.  For instance, instead of a list of applications on the homepage, it would make more sense to quickly set up customers depending on their specific vertical or business process.  Fortunately, this is precisely one of the areas for improvement that the company has targeted and openly acknowledges that it could do better on the marketing front.

Final Thoughts

I think it’s obvious that I truly enjoyed my conversation with Sridhar on a number of levels.  He mentioned that he is quite passionate about the topic of how emerging market companies can compete with companies based in developed markets, which is also a strong passion of mine.  During our talk, I got the sense that Sridhar has a firm conviction that companies from emerging countries can truly compete on equal footing with “marquee companies” and actually possess advantages that they need to leverage.    Hopefully, at a later time, I can speak a bit more in depth with Sridhar about the topic of digital innovation in emerging markets.

As a VC in my previous life, I had the opportunity to speak with extremely intelligent and capable entrepreneurs and investors.   After my conversation with Sridhar, I’m as impressed with him as with any other person I’ve met.   Different people are remarkable for different reasons.   For instance, Google’s founders had the insight to understand the need for organizing the world’s information with the oncoming, accelerated adoption of the Internet. Even more importantly, before they fully saw how big and successful they could become as a company with an actual business model, they jumped in and started solving the problem.

Solving such grandiose and ambitious problems is something that is handsomely rewarded and rightly so.  Nevertheless, there are a number of dynamics, which are creating the need for new types of companies:  ones that offer digital innovation at a lower cost.  New technologies such as cloud computing, virtualization and SaaS delivery provide the digital foundation.  Also, as it turns out, emerging markets such as Asia and Latin America, actually offer advantages that astute entrepreneurs can leverage.  As Zoho’s trajectory points out, to execute this correctly takes a number of competencies such as a clear vision, competent leadership, focused development of human capital and above all…patience.