We will not be listing; we like our freedom: Zoho Corp President

Interview with Raj Sabhlok

California-based Zoho Corporation, a software firm with major development operations in Chennai, has recently integrated its offerings under ManageEngine, the comprehensive information technology (IT) management software, and Zoho.com, an operating system for business, to address the changing market requirement. Raj Sabhlok, president of Zoho Corporation, tells Gireesh Babu about the company's plans in terms of its product offering, its rationale for abstaining from inorganic route, among others. Edited excerpts:

Zoho has recently integrated its ManageEngine and some of the products in Zoho.com. What was the idea behind it?

With technology increasingly intertwined with the business, in the past couple of years, there are more technologies in the form of applications to run various activities. The question is how do you connect these technologies with the legacy systems where there are a lot of data that need to be integrated. Companies require to secure the technology and are trying to secure it quickly. IT is getting pulled back into the picture to help support these business-technology decisions. That is the basis of ManageEngine getting closely knitted with Zoho or any application. 

In Zoho.com, our cloud business applications, we want to offer every application functionality a business would require. We have customer relationship management applications to address the sales team, human resource applications for the HR teams and finance applications. We also cover IT, with help desk, mobile device management, monitoring applications, etc. Those are all ManageEngine applications marketed by Zoho. Conversely, ManageEngine has started selling marketing applications. IT requires specific support for the business they are into. We brought business intelligence and analytics tools into ManageEngine. There is a very synergistic technology sharing going on.

Do you also see a change in your customer profile?

We have a lot of small and medium businesses (SMBs) today. Larger companies are figuring out the value proposition behind both ManageEngine as well as Zoho, and we are having more purchases from larger companies. ManageEngine is probably on an adoption curve by larger companies than Zoho. What we call SMBs are around 200-1,000 employees. But at Zoho, the SMB could be a solopreneur, a freelancer or a 10-person company. Five to 10-people organisations are their sweet spot. But in the past years, it has gone up to 25-50 people organisations and today, 80% of its business is from this segment. Larger companies with more than 1,000 people have also started to buy from Zoho. ManageEngine today has 65% of the Fortune 500 companies as its client. Zoho is just making its way to address those large companies in the world. We have made this transition to be equally appealing to larger and smaller companies. For ManageEngine, around 50% would be the SMB of the larger scale, and the rest of the 50% would be of large business.

So, what is the way forward in terms of integration?

We are coming up with an offering where we make all the Zoho products under on umbrella called Zoho One. It will be incredibly inexpensive for both small businesses as well as the large businesses. We are making it somewhat of a utility for a low price; we are going to make all Zoho products available to everybody within a business. You will get our entire suit, supposedly, for $10 per user per month for a small business, which will be a standard edition and $30 per user per month, an enterprise edition for larger businesses. We make it mandatory to be licensed for everybody in the customer enterprise. Zoho One is slowly coming out and it should be fully out by the end of this year. It may cannibalise certain customers or in a short term, we may stand to lose but in a long term, it will be good for both Zoho and the customer. I think it is going to rapidly grow our customer base. Currently, there are over 1,20,000 ManageEngine customers and on the Zoho side, there are around 3,50,000 paid customers.

Zoho has never acquired a company. Is that a policy decision?

If you look at most companies that have around 4,500 people and 80-90% research & development (R&D), they would never be all under one roof. They are scattered in different parts of the world, wherever they have acquired a company. We think it is an incredible challenge to bring them together, not only to manage them, but also to get products. We know how challenging when it is all under one roof, but it gives us a strategic advantage to have everybody under one roof. There are pretty good chances that the product will die after it is acquired since the acquirer cannot fully integrate it with the rest of the suit due to various reasons. We are a homegrown company, hiring very young engineers, or even people straight out of high schools and train them in Zoho University, to grow with the company. If we acquire a company, the people may not fit into our culture. That is the reason why we rarely hire people over five years of experience.

Around 40% of our revenue is reinvested into development, while an average tech company on the high-end spend 10% of their revenue on R&D. We spent less than 20% of the revenue into sales and marketing while most of the others spent over 50% on sales and marketing.

Zoho has never raised any investor money. Would you list the business in future?

We will not be listing, it is not of our interest. We only want to answer to our customers and our employees. We like our freedom. We have four to five different businesses; such as agriculture, medical software, medical device start-ups within our company, and if we raise funds, we cannot have that freedom. Those are for profit, commercial concerns, with its own management team and support organisation, but part of Zoho.