Zoho Corporation cancels bonuses, but avoids any layoffs due to Covid-19

In view of dip in US GDP, the company has prepared itself for a larger hit on its business

Software-as-a-Service (SaaS) major Zoho Corporation has said that it has cancelled bonuses for its employees and may go for a pay cut if required in future, but will not at any cost lay off staff. The company's CEO Sridhar Vembu said the SaaS industry will see some much-expected consolidation with the Covid-19 crisis, adding that economic recovery would be slower going forward.

While the United States, which accounts to about 45 per cent of the company's business, has seen a 30 per cent drop in GDP owing to the pandemic, some of the larger organisations seeking savings at this time have been switching over to Zoho from other SaaS players. Given the likely impact of the virus on GDP, the company has prepared itself for a larger hit on its business.

"The impact of Covid on our business is not as bad as we feared, though we are still in April. I have prepared our staff for a very tough time ahead. We have cancelled bonuses, which is normal in such times, but we have not pruned salaries. I have told employees that we may have to be prepared for a pay cut though we are not there yet. I don't know whether we will be there in three or six months, nobody can predict anything. But at any cost we want to avoid layoffs," said Vembu.

He was speaking to reporters after announcing Swadeshi Sankalp initiative with products designed to help the education and government sectors during the time of Covid-19. The products include the Zoho Classes app, which enables schools and colleges to connect with their students online.

The recovery in the economy may not be V-shaped or U-shaped, and is likely to be prolonged considering various systemic issues that have emerged. This could lead to consolidation in SaaS, which is already overdue. There are far too many players with far too many subscriptions.

Vembu said these issues already existed, but have been exposed now. SaaS players with strong balance sheets, and who have full control of their expenditure wil survive this. Zoho will be a neutral observer in this consolidation, since it doesn't want to go out and raise funds to make acquisitions in the current scenario. The firm is reorienting its products towards changes that are taking place now.

Even when the curbs are lifted and offices reopen, Zoho is likely to continue a 50-70 per cent work-from-home policy as a precaution, as the Virus is not going to go away so quickly.

"We are going to ask our employees to exercise judgement in coming to the office. The office may remain open only for 30 per cent of the working days. Alternatively, 30 per cent of the people will attend office on any given working day. The question is if they are going to work from home, should they be close to the office in Chennai? We are actually planning two rural offices and in next six months to a year, we will have many more," he added.

 

The company is adding another 500-600 employees and will probably end the year with a headcount of 8,300-8,400. Almost 99 per cent are working from home.

Almost 90 per cent of the company's revenue is from overseas at present. Five to seven years back, exposure to India was almost nil. But in the emerging new world, it is a worry. The company is trying to improve its domestic market penetration. The mix between overseas and domestic exposure in terms of revenue could change to 50:50 or 70:30 over a period of time.

Zoho Classes, which is currently offered for early access, will integrate various aspects of the education system, including teachers uploading courses, live broadcast of classes, sharing of assignments and collecting responses. Institutions are also allowed to collect fees and sell merchandise such as school supplies through the mobile app. The firm has also announced offering Zoho ShowTime with Zoho Classes. Besdies it will soom offer Zoho Meeting to governments for online discussions. The Karnataka State Council for Science and Technology is already using this product.