
Zoho: Thriving Amid the Giants - terpua
http://bits.blogs.nytimes.com/2009/08/26/zoho-thriving-amid-the-giants/
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sridharvembu
It is worth elaborating on bootstrapping. When we started, the hottest tech
company in the world was Netscape, and Yahoo was still an infant. So you can
see how long it has taken us - nothing much happens to you in 1 year, 2 years
and so on. The only thing we had going was patience. It helped that I was
educating myself about Japan.

We didn't set out with the mission of bootstrapping. It was sheer necessity:
we had no big ideas (only some little ideas), and had no way of impressing
anyone to put money on us. Our very first product was this:
<http://www.webnms.com/snmp/> \- the amazing part is we still make money on
it! But sexy it isn't - a VC who stumbled on us told us "Why are you focused
on such a tiny market?"

By the time money was offered to us, we didn't need it, and we were having too
much fun building stuff to even bother pitching to VCs. We came close to a VC
round once in 2000: a term sheet was offered. There were things there I didn't
like and I was too lazy to negotiate with them, so I simply let it die.

~~~
senthil_rajasek
"It helped that I was educating myself about Japan."

What was the motivation and can you elaborate and share with us on how you did
this?

~~~
sridharvembu
I was always fascinated by Japan, particularly in the context of India . After
we started, I started looking closely at Japanese companies as role models.
They had figured out stuff over the years that is unbelievable. Even today,
there exist some technologies that pretty much only the Japanese do well (and
not only in well known industries). Take a look at this company for example:
<http://www.uniontool.co.jp/english/product_index.html>

They make drill bits for printed circuit boards, drill bits finer than human
hair, drill bits you cannot even see with the naked eye.

The magic is years and years of patient, painstaking work, with occasional
inspired leaps. That was good to know, particularly when we tended to get
bored or tired.

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ryanwaggoner
_But Zoho, a company based in Pleasanton, Calif., that offers similar
services, is solidly profitable, with revenue of more than $50 million a year.
And it has never taken a cent in venture capital or bank loans._

I would love to hear from someone more in the know on how Zoho was able to
pull this off. Conventional wisdom seems to be that bootstrapping a product
company to tens of millions is near-impossible. Is Zoho just a random
aberration or do they offer lessons to others trying to do the same?

~~~
randomwalker
One thing Zoho does very differently is "outsourcing." I put that word in
quotes because Zoho is partly based in Chennai, India, where I believe the CEO
Sridhar is from. In fact the majority of the employees are based there, which
keeps cost way down.

Now, they don't treat their Chennai office as a second-rate sweatshop to whom
you parcel off grunt work and forget about it. That is a recipe for disaster.
At the same time, they are very open about the fact that CS
education/programming skills in India aren't nearly as good as in the U.S. So
what do they do? They train their Indian programmers in house for 9 months.
You can definitely take smart people without a great educational background
and bring them up to speed if you're prepared to do that.

Sridhar is <http://news.ycombinator.com/user?id=sridharvembu>, hopefully he
can give us more details and correct me if I've gotten anything wrong.

~~~
zhyder
A better term for what Zoho does is "offshoring". Outsourcing and offshoring
are orthogonal. It's only when the two go together that you get sweatshops.

~~~
sridharvembu
An even better term for us is "and Indian company with an American HQ" - in
early days due to foreign exchange restrictions in India, it was painful to
have the HQ in India. Increasingly that has faded as India has liberalized. We
just imported a ton of Macs for our development team in Chennai; 10 years ago
that would have sucked, now it is easy.

~~~
eru
So with enough liberalizing (and perhaps more Indian customers) the American
HQ might move to India?

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sridharvembu
I am in India now, so was sleeping as this thread happened :-)

I hang out at Hacker News a lot, in fact, almost everyday I send an article to
someone or other in the company. I strongly recommend it internally - I love
HN (thanks, pg!).

To answer some of the questions: Zoho Corp used to be known as AdventNet. It
was bootstrapped from the beginning (1996). Zoho is the latest and the fastest
growing division; while we do not reveal our revenues, all I can say is that
we are very happy where the Zoho division, as well as the whole company, has
gotten. We have solid profits, which we invest in doing interesting new
things.

Bootstrapping works, but you have to be very patient. It has taken us 13 years
to get here. The fun part is that we now have the human capital as well as the
financial capital (the first part is more important) to do a lot of
interesting things, and we don't have to worry about VCs or Wall-Street (not
that there is anything wrong with them ;-))

On the product side, Zoho has been evolving rapidly, reaching that polish and
maturity in stages. If you had tried us 2 years ago, I wouldn't blame you for
giving up on us. We are far, far better today - one proof point is that our
company, of about 1000 people, has moved to Zoho almost entirely. There are
some small bits and pieces that are not on Zoho, but by end of 2009 everything
should move. The tools we use extensively within include Mail, Office suite,
CRM, Project Management, Meetings, Creator ... just to give an example, we run
well over 100 web meetings a day on Zoho Meeting ourselves. We used to pay
WebEx about $25-30K per month, and our usage on Zoho Meeting would cost us
about $3-4K if we were to charge ourselves. I say that to explain why we have
paying customers.

Why the diversified suite? It is not only diversification, it is also a source
of differentiation. We believe we can create very compelling integration
scenarios that bring substantial productivity increases. One recent example is
our Zoho CRM + Mail integration, which has sold over 1000 customers in the 8
weeks or so it has been released. You will see many more such things rolled
out, partly addressing the criticism that it has been a fragmented suite.

So how do we do it? Silicon valley style flexible culture mated with Japanese
style patient engineering. There are huge lessons to learn from Japan's post-
War leap. As one example, Japanese companies (the giants of today) always had
a train-your-own-talent policy. Their colleges most certainly didn't do it -
for the most part, college in Japan is considered relaxation time before the
real work begins. We dispense with what I believe to be non-essential parts of
Japanese experience, like the rigid discipline, substitute it with silicon
valley style flexibility.

The one achievement I am proud of is not a product or technology: it is our
"University" (as we call it) where we recruit and train 17 year olds - the
typical school leaving age in much of India. About 100 of our 1000 employees
have come from that program now, and it is growing fast. Longer term, we
should get 30-50% of our talent pool directly out of high school.

I have written extensively about it. Let me summarize: I do not believe in
college. I believe most real education happens in the work-place, an
observation Peter Drucker made originally. I regret going to college myself -
we would have been 10x bigger if I hadn't gone to college, so that is my
opportunity cost. I probably wouldn't have if I had grown up in America.

Sorry for the long comment. I wanted to answer all the posted questions in one
shot.

~~~
ryanwaggoner
Thanks so much for posting all this awesome info...very inspiring.

 _we would have been 10x bigger if I hadn't gone to college, so that is my
opportunity cost._

Can you elaborate on this a bit? Are you saying that your growth curve was
shifted back by n years (and you'll be 10x in n years), or that it was
fundamentally changed as a result of going to college?

~~~
sridharvembu
Mix of both. Growth curve shifted back n years (in my case 8 years - I did a
PhD too, whose main utility was in coming to the US and then realize that PhD
was a waste of time - all I can say is that I am a bit slow!). And those were
some of the best years, so there is a fundamental change in the growth curve
also.

The thing I most admire about America is the can-do spirit. I am sad that the
education system in America is "Asianizing" rapidly, in the spirit of "We have
to compete with the Chinese/Koreans/Indians ..." That's not what got America
to where it got - it was the can-do "hacker" ethic, and the climate of freedom
where that ethic flourished.

~~~
ilovecomputers
"Asianizing?" I go to UCI (second year is coming up) and I'm not familiar by
what you mean by that. Sure we have a sizable Asian population here, but the
UCI system does have a climate of freedom though not as much as UC Berkeley,
maybe that's a good thing.

~~~
sridharvembu
I meant mostly at the high school level. Particularly in the "high end" school
districts. Loads of home work, drills, competitive test taking ... because,
you know, the Chinese/Koreans are all "way ahead" and score so well in
international competitive examinations. I would ignore those examinations
(frankly I would ignore the spelling bee too!) but newspapers love such stuff,
and scare the middle-class with "we are falling behind the Asians".

College hasn't gone Asian-style yet in the US.

The reason I bring that up is that due to the way the Indian IT sector works,
we don't get the best test takers (they are grabbed by the big brand name
service companies). So we get people who generally did't do well in various
kinds of tests. I count that as a blessing :-)

~~~
ajju
Agreed.

As an aside, I am impressed that someone who went to an IIT (and so had to do
well in the most competitive exam in the world) sees the dark side of these
tests.

Interestingly, India just scrapped competitive exams for 10th grade (CBSE)
which is a great first step.

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inovica
I think its great that these guys appear to be genuinely interested in
building a company rather than building it quickly to sell it. I haven't used
any of their products, but this article has prompted me to give them a go

~~~
zzzmarcus
Over the last few years I've tried their products out now and then. I'm always
disappointed with how little unification there is when moving from one app to
another. The design (both UI and UX) always feels a sub-par to me as well.
I've never been able to stick with any of their products for longer than a
month or two without giving up in frustration.

Apparently a lot of people feel differently though.

~~~
sridharvembu
We plead guilty to having a fragmented suite - that was the price of rapid
evolution. But they are coming together nicely now. Check in on us every few
months (seriously!). We hope to surprise you.

------
zaidf
Very 'on message' piece: it's clear to HN crowd that most of Zoho's
monkeymakers are non-web2 tools yet it is also clear Zoho wants more focused
media for their web2 stuff and they are getting it.

------
edw519
_Part of the opportunity for Zoho lies in differentiation. It has 19 online
productivity and collaboration applications, including customer relationship
management, project management and invoicing. So it only competes head-to-head
against Google with five offerings._

So what exactly differentiates Zoho? The breadth of its product line? That
doesn't sound like much of a differentiator.

Or is there more that this article doesn't mention? Any special processes,
APIs, or features? It's relationship with VARs?

It _must_ have a great differentiator to have $50MM in revenue without
funding. It's just unclear from this article exactly what that differentiator
is.

~~~
SamAtt
We use Zoho and while I can't speak to the author's intended meaning I can
tell you the two factors that keep us with them.

1\. Zoho's APIs are more mature. Especially the Remote API which allows you to
use the Zoho tools but keep the data on your own servers. That's something
Google has no competitor for (last I checked).

2\. The customer focus. The company has always been responsive to our requests
and there have been occasions where they actually added a feature pretty soon
after we asked for it (in fairness others might have asked for it earlier, I
don't know)

It boils down to Zoho being focused on creating a great product for their
customers while Google seems more interested in proving a point about online
software.

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kalyan
I am not sure if dissing (college) education all together makes sense. I am
sure you can claim to have learnt a lot of allied "subjects" during your
education including teamwork, competing, leadership, analytical thinking,
synthesis of data, risk taking (maybe) etc. But I do agree that education
(whether American or Asian) should give students room to develop the above
while learning core subjects for it to be holistic. It should not purely rely
on it being rote based.

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techhacker
Here is another interview of vembu (from India perspective)
[http://www.pluggd.in/indian-startups/interview-with-
sridhar-...](http://www.pluggd.in/indian-startups/interview-with-sridhar-
vembu-founder-of-zoho-indian-startups-590/)

------
rams
Sridhar, What does Zoho mean ? Folks here in Thiruvanmiyur don't seem to
know.:-)

~~~
sridharvembu
We were hunting for a domain in 2003 for our new initiative. We tried
variations of SOHO (small office home office). Zoho happened to be up for
sale. I was reluctant to shell out the $5K (I am cheap), but Raju Vegesna,
persuaded me we should buy it. He was right.

