Zoho, Where Engineers Reign, Rewrites the Rules of Office Software

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$12 to $25 per user per month for Zoho’s version). The per-app pricing means companies can pick whatever they need. Zoho provides a console where managers can see exactly who in their organization has access to which application, and how the costs are adding up. The overall platform is designed for a la carte flexibility. “We see the Business Suite as something everybody in business would need, but with CRM or Web conferencing, maybe only 10 percent would need it,” says Vembu.

It’s as easy for customers to leave Zoho as it is to join. For the most part, Zoho’s applications use common file formats that are easy to export to competitor’s applications. “We have a comprehensive engineering vision about how to build all this, and we hope that people will find value in our vision, but we also recognize that customers want to pick and choose,” says Vembu. “We think this marketplace will have many players. Microsoft is going to be strong, Google is going to be strong. Everyone from IBM to HP to Amazon is throwing their hat in the ring. We don’t think there is going to be a monopoly.” (Vembu blogged on that final point just yesterday.)

Still, Vembu thinks some companies are better positioned for the SaaS future than others. Vembu doesn’t want to be part of Salesforce.com—he’s criticized founder and CEO Marc Benioff in public forums and has turned down an acquisition offer from the SaaS giant. And he believes that Microsoft, in particular, will have a hard time adjusting to the new realities.

“I think they are still a very desktop-centric company,” Vembu says. “Building software for the Web is a very different game. Today it would be very difficult to run Zoho’s spreadsheet, for example, on one machine, because the functionality is spread to different services that are pulled together from multiple servers. These are incompatible ways of thinking about software. But it’s not that companies can’t make the technology transition. It’s that they can’t make the business model transition and the cultural transition. Microsoft’s problem is that they are used to collecting $300 per copy and selling 15 million copies a year, and now they are coming to a world where consumers get it free, businesses pay, it’s an annual subscription, and they could leave at any time.”

The fact that customers can easily walk away from Zoho is “a feature, not a bug, of this model,” says Vembu. “It keeps us honest. Every day we have to do stuff to satisfy the users. On the other hand there is the opportunity to earn loyalty through superior execution and support.”

Vembu doesn’t claim that Zoho has all the answers, or that its engineers are smarter than everyone else’s. And there are plenty of hot software areas where its developers haven’t ventured—the company isn’t trying to build a social networking system that might compete with Facebook or LinkedIn, for example, or a file sharing system that might compete with Box.net or Dropbox. But Vembu is clearly not afraid to listen to his engineers’ creative ideas, and to graft on new businesses when he sees new opportunities.

“We think that [Saas] is going to be the future,” he says. The global market for AdventNet’s original product, WebNMS, amounts to perhaps $100 million, he says. For ManageEngine, perhaps a few billion. But for the Zoho suite of Web apps, the possibilities are “much broader”—Vembu projects that 30 to 40 million business users around the world will be logging on to Zoho daily by 2015, and 100 million by 2020. “That’s why the name of the company is now Zoho.”

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Wade Roush is a freelance science and technology journalist and the producer and host of the podcast Soonish. Follow @soonishpodcast

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