Search

Enterprising Insights: Episode 12 – Zoho Day 2024 Recap

Enterprising Insights: Episode 12 – Zoho Day 2024 Recap

In this episode of Enterprising Insights, The Futurum Group’s Enterprise Applications Research Director Keith Kirkpatrick will provide a recap of and key takeaways from Zoho Day 2024, the SaaS company’s annual analyst meeting. He will then close out the show with the “Rant or Rave” segment, where Kirkpatrick picks one item in the market, and champions or criticizes it.

You can grab the video here and subscribe to our YouTube channel if you’ve not yet done so.

Listen to the audio below:

Or grab the audio on your favorite audio platform below:

Disclaimer: The Enterprising Insights podcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Transcript:

Keith Kirkpatrick: Hello, everyone. I’m Keith Kirkpatrick, Research Director with The Futurum Group, and I’d like to welcome you to Enterprising Insights. It’s our weekly podcast that explores the latest developments in the enterprise software market and the technologies that underpin these platforms, applications, and tools. This week I want to take a few minutes to discuss Zoho Day 2024 event that I recently attended in McAllen, Texas. I’m going to go through some of the key learnings from the event and then provide my takeaways and insights into the company and the event itself. Then of course, as always, I’ll close out the show with my rant or rave segment where I’ll pick one item in the market and I will either champion it or criticize it.

So let’s get right into it. Zoho Day 2024, this event was held on February 7th and 8th in McAllen, Texas. And before we get started in terms of talking about the event, I’ll just briefly provide an overview of Zoho. They are provider of cloud-based SaaS applications, which include a number of typical business focused applications including CRM, email marketing, finance and accounting, document management, human capital management, and really a number of other tools and applications. I think they offer about 55 or so in total. Now, these products are able to be procured either individually or through the purchase of Zoho One, which is their fully integrated suite that includes all of their applications.

Now, there are a couple of key messages around these applications. One, of course, is that by purchasing Zoho One, you have a fully fledged suite that allows the seamless integration of all the different types of applications so that the data can flow from one to the other very seamlessly with very little friction at all. But recognizing that most organizations are going to use some either homegrown solutions or legacy applications, or honestly, just best of breed applications out there, they have made the Zoho platform very easy to integrate with their third party tools and software. Now, the company primarily sells into the small and medium business market and as well as into the mid-market. But the company is starting to look into jumping into the enterprise space, and I’ll get a little more into exactly what their strategy is for that.

So at this analyst day, it was a great opportunity to meet with some company executives, hear them lay out their goals, strategy, and really their philosophy behind how they operate the business. We also got an opportunity to hear from several of their customers, which is a great way to really identify which messages from the company are resonating with them, what are some of the key criteria that these customers used to say, “Hey, let’s go with Zoho,” versus another solution in the marketplace. So why don’t I get into now some of the key highlights from the event?

And the first overriding theme from the event is Zoho’s approach, which really is about embracing the long game. This is something that CEO Sridhar Vembu discussed in his opening keynote. Now, my colleague Craig Durr from The Futurum Group actually covered this address in depth within his research note, which you can find on The Futurum Group website, but I’ll just hit some of the highlights. And really what that is is that Zoho wants to obviously bring its software to the market, but it wants to do it in the right way. What does that mean? It means taking a look at the marketplace, at its customers, at its employees and doing the right thing, and that means foregoing quick profits for a longer term relationship. And that goes for its relationship with its customers to its relationship with its employees and its partners. Really the whole ecosystem. And really the way that they’re doing that is a couple of different things.

They are trying to build these products so that they can stand for long-term value, even when they’re entering markets that have been dominated by these large incumbent players like your Microsofts of the world or Googles and Salesforce and so on and so forth. The idea is that what they’re going to do is try to innovate, leverage their employees and really promote social responsibility over quick wins. So what are they doing there? Well, one thing, they are investing heavily in development resources to continually make sure that their products have the most effective and most recent technology available. I believe that they’ve committed to providing functional updates roughly every quarter or so. Because as a SaaS platform, you can’t just put in the release and then just have yearly development cycles. They’re also investing heavily in their employees as well.

Zoho is taking a very different approach in that instead of locating their offices in the top tier cities of the world, like your Silicon Valley area, San Francisco, that sort of thing, they’re deliberately targeting second and third tier cities to set up shop and recruit, basically train, recruit, and keep on local employees. And they’re doing that for a few reasons. One is the founder really believes in giving back. Instead of just having a technology organization that takes everyone’s resource to make money and never returns it, they want to actually operate very closely with the existing areas where they’re setting up shops. So for example, in the city where we actually had this event, McAllen, Texas, they’re hiring folks who are basically natives to the area. They’re setting up training resources to make sure that the people there can learn the skills they need, and then, of course, providing them with a solid career path by working at Zoho, but also by training them so that they can go on if they choose to work at other companies.

And they really feel strongly that that is the right thing to do to create a workforce for the future where it is not just about trying to set up shop in a Silicon Valley area and then try to draw the best and the brightest from all over the world, because that really only benefits a few. Their plan is to locate in different I guess what they’re terming is rural, but really they’re second and third tier metropolitan areas. They’re just trying to set up shop there, attract local talent, and then hopefully develop a workforce that will stick around and then, of course, help seed other growth within that area to possibly even create new markets for their software.

Now, the other thing that they’re doing is developing these things that they’re calling Zoho Schools. And really that is, again, this training program where they bring people in, they provide them with an education to handle this type of work. And again, in some cases, it will be free. In some cases, they will actually pay a slight wage in order for these people to be trained so that they can actually have a strong workforce. And that is really unique in the world. A lot of times when this happens, it’s almost like you need to come to our school and then you need to make a commitment. Zoho is not doing it. They believe that the people coming in are so appreciative that they will out of a sense of responsibility will usually work with Zoho. So I think it’s a really interesting program and really feeds into their idea of transnational localism in that they’re setting up shop in these different communities to really grow the entire industry, not just them, but the entire tech industry. So Craig has a lot more detail into that, so please check out his piece on futurumgroup.com.

Now, another key interesting learning I have from the event is that Zoho is primarily thought of as a vendor to the SMB and mid-market companies out there. And clearly they certainly benefit from Zoho’s approach. Zoho offers a very tightly integrated suite of applications. It doesn’t take a lot of IT resource or time to make sure that when you’re using that integrated platform, that your CRM talks to your contact center software or that your marketing software can be integrated very easily. And that is a great approach for a smaller business that is looking to get up to speed very quickly and quickly derive ROI from their technology investments. Whereas a challenge, of course, is when we’re looking at larger organizations where you have a greater number of decision makers. You have more of a siloed approach because, of course, your divisions may not just be marketing and sales.

There might be a bunch of different marketing departments or a whole bunch of different sales organizations, and it’s harder to generate consensus across those divisions, so marketing and sales and accounts payable, finance, all of that. It’s hard to get agreement to purchase one single suite. So what they’re doing is they’re taking a much more targeted approach to the enterprise market. First of all, what they’re going to do is create a new enterprise layer. And we’re not talking about software here. We’re actually talking about developing specific skills to prepare the organization to sell to enterprise customers. So it’s going to be focused on identifying ways to properly message to these enterprise customers. It’s going to be about learning how to actually do real solutions consulting, how to manage that sales process.

But the goal is to, of course, make sure that when you do have sales opportunities with larger prospects, the sales teams have the skills and the tools that are required to really adequately compete against other enterprise class vendors that have been in the market for quite some time. And of course, one of the other things that Zoho is really trying to do is make sure that they have a strategy to address the real and perceived risks that often are associated with vendors that have been primarily active working with smaller organizations. So we’re talking about addressing concerns such as the company’s ability to scale or the number of partners or the strength of the ecosystem for things like add-on tools and services. And of course, most importantly, they want to be able to address the company’s stability and longevity.

Now, I think while the company certainly has to address the messaging here, Zoho has the foundational pieces in place today. We look at the facts. Company’s been in business since 1996. It operates now in more than 150 countries. They have more than 750,000 customers and 100 million plus users. So that’s really an example that this is not a fly-by-night, super small organization. They’ve been around. And again, it looks like they’re trying to play the long game. Now, in terms of the Zoho Marketplace, this is the marketplace that hosts third party capabilities, so AI tools. It offers strategic partnership support and industry and region specific solutions. This marketplace is growing very quickly.

I think it’s been a 10x increase in users over the past four years, which brings it up to around a million users. And I think within that marketplace, they offer more than 2,000 applications. So I think the building blocks are there. It’s just a question of making sure that they figure out how to message to enterprises and then work that sales process, because it is a different animal than selling it to SMB or even mid-market. Now, another thing that really came out of this meeting is their messaging around being flexible and affordable. I think that’s really important for the company. The market is very, very crowded for these type of applications. But flexibility, and what we’re talking about there is I was sitting in some customer panels and several customers pointed to the ability to say, “Okay, I want to bring in Zoho to be my new CRM by having flexible license terms.” It’s not that everybody has to migrate over and use the product immediately from day one.

Zoho is being flexible with charging for licenses so they can add on as the company feels comfortable and really lets users or lets the employees start to get comfortable with the software over time on their own terms, at their own pace. This is a real differentiation in the market because it shows again that Zoho is taking a long game approach. They’re not expecting to generate or they’re not pressuring their customers to automatically sign up as many seat licenses as possible to generate quick revenue. They really want their customers to become comfortable and familiar with their platform. So again, once they start become comfortable with one application, then they’ll move to the next, and hopefully move to the next. It’s that traditional land and expand strategy. But again, they’re doing it on the customer’s terms, which really that message is really resonating.

The second thing, of course, is, and I can’t believe I’ve gone this long without mentioning it, it’s their approach to AI. Right now Zoho is embedding generative AI within the cost of the user license. This is to encourage utilization and familiarity with the technology and really helping to demonstrate how generative AI can improve business outcomes. Now, it was said though that in the basic editions of let’s say Zoho CRM, that one may not include generative AI technologies or capabilities at this point, but the advanced edition certainly do embed generative AI across the application without any additional fees. Now, that’s the way it stands now. Of course, everything is subject to change, but I do believe that it is a great strategy to, again, differentiate themselves from certain other vendors out there that might be charging a premium for access to generative AI tools.

And of course, yes, things might change. But while this is the case, it’s certainly a message that is going to resonate particularly with SMBs and mid-market companies that are very, very cost conscious, but even some smaller enterprises or larger enterprises that may have to worry about a large number of users trying out generative AI is certainly a message that is worth amplifying. Now, finally, I want to get into some of my key takeaways from Zoho Day beyond just getting a chance to meet the executives and talk to customers, which are great. I just want to highlight a few things.

Clearly, Zoho is playing the long game here, and I believe that customers will benefit. They’re not taking the approach of let’s bring every available dollar from every customer at every touch point. By doing this, they’re building credibility, trust, and goodwill as an industry partner to its customers. And that is a real key factor in many customers that I spoke with at the event to go with Zoho. It wasn’t talking about, well, they had this feature or that feature or this capability, or I saw on the roadmap they’re going to have this. Yes, those things are certainly important, but in a sense, they’re table stakes. Everybody is doing incremental updates to technologies and feature sets. What not everyone is doing is taking that long view, that long range approach about trying to really do right by these customers, meet their needs, help them along the way, be a little bit more flexible. And that really is something that is resonating with the market and it’s a good thing to see, particularly as Zoho starts to move into the very, very crowded enterprise space.

Now, second part, of course, is looking at their messaging around social responsibility and this transnational localism. Now, it’s certainly an inspiring message. I think there’s a lot of really positive things I hear about the strategy. Certainly going into a region that may not be thought of as a technology center, training workers often for free and really developing a workforce that is essentially where they’re operating, it’s a great way to create more opportunity and also it’s an opportunity to develop new sales markets. Now, the interesting thing here is that, and I talked to a couple of executives about this, it also seems like it’s a great strategy for maintaining or controlling costs. If you’re trying to let’s say hire a bunch of developers, hiring them from McAllen, Texas, the labor cost is going to be less than if you were operating out of say Cupertino or something like that. There’s just that economic arbitrage that will occur.

And yes, I believe they’ll be able to reap some rewards at least for some time in terms of having lower labor costs and just generally lower operational costs. I think some of the programs that they’re doing in terms of trying to work with some of the local folks in communities, I think they have a program for bringing women who were mothers back into the workforce, is certainly admirable. The fact that they are taking that approach of being very socially responsible is really interesting. However, I am not so sure that that is going to move the needle when it really comes down to generating new business opportunities, particularly with enterprises. I think they’re going to be leaning into the more traditional check boxes of resiliency, scalability, security, those types of things. I think the social responsibility stuff, it’s sort of a nice to have, but isn’t a must have. And I think as the company starts to move up market, they may want to de-emphasize that messaging. And in talks with one of the strategy folks, I do think they understand that is going to be necessary in order to really compete against some of the large entrenched players.

Now, another thing that I think is really important is as they continue on trying to serve their SMB customers and their mid-market customers, it’s really to lean into and amplify their messaging around value. There’s a second thing I heard from their customers is that Zoho really offers a lot of product at very reasonable price. And I think particularly now, you can’t ignore that. You look at the cost of SaaS applications, particularly for some of the larger vendors, and it’s really high, and it can be a real challenge for many organizations to manage those costs, particularly as they want to scale and to add additional users. And then if you add in the potential additional cost of generative AI, the cost of certain business central applications that incorporate AI, the cost can really spiral out of control.

So the fact is that Zoho’s commitment to making a very, very useful functional product at a reasonable or with really value oriented pricing is a really good message that the market needs to hear. And not just the SMB and mid-market, but also enterprise customers as well. I don’t know if they want to lean into that as much because there is always that fear of being labeled a value player. But if you look at all of the functional aspects of their product and their platform, they certainly have all of the technology that is required to really meet or even exceed some of the functions of some of the other larger vendors out there. So I think it will offset any concerns around this notion of being a value player.

So finally, I mean and obviously I thought it was a great, very well done event in terms of making sure that we were able as industry analysts to get the questions we had answered, we also had some great networking opportunities there to talk with other folks in the industry. And at the end, it was certainly a great little jaunt there down to the SpaceX Center down in Boca Chica, Texas. We got to see what Elon Musk is doing with all of those rockets in the SpaceX program. So that was a nice little interesting treat to end the day. So I really appreciate all of the folks at Zoho for making that possible, and certainly they’re a company to keep an eye on as we go throughout the year.

So now we’ve come to the last part of our show here, and that is the rant or rave section. And today I have another rant. So after leaving this analyst day, I hopped on a flight. Two legs, had to go from basically South Padre Island back to Dallas, where I hopped on a flight expecting to get home at a reasonable hour. But unfortunately, there was a delay. There was something wrong with our plane’s co-pilot’s oxygen mask that wasn’t working. So we had a bit of a delay, probably a half hour, 45 minutes while they tried to troubleshoot the problem, and then they had to go get a new part. They came back again, put in the part, something still wasn’t working. And the pilot, to his credit, did let us know what was going on to the best his ability.

And finally, the decision was made that we needed to switch planes. Now, unfortunately, when we did switch planes, we’re now about two and a half hours delayed. And of course, our flight was now more crowded because some other folks hopped on our flight as well. So we had a much more crowded flight home. Now, the real rant is not that. There’s nothing you can do about delays related to equipment and safety. I have no problem with that. The rant I have is that this morning I opened up my email and I got an email from this particular airline asking for feedback about my flight. And the problem was it was a very generic outreach saying, “How was your flight?” And given the amount of information that is available today and the systems that should be in place on the backend, it is amazing that they did not acknowledge that the flight I was on had a delay in their outreach to me.

It seems that a very standard feedback request just really missed the mark when you consider that they could acknowledge very simply and say, “Mr. Kirkpatrick, I saw the flight that you’re on from Dallas to LaGuardia had a delay. We’re very sorry about that. Can you please provide us with additional feedback on your experience?” Very simple, not hard to do with today’s technology. And I think they really missed the boat there to create a more personalized experience, which is what everybody is talking about and every organization is really striving to provide. Because ultimately, if they’re just asking for very standard feedback and don’t link my feedback to an event, it’s going to be that much harder to really develop future insights based around each individual customer’s experience. Because if let’s say I fly with them again and I have another problem, well, there’s a pretty good chance I will never fly them again and they won’t know why unless they’re able to link all that data together.

So that’s my rant here. It’s, again, not about the delays themselves, there’s nothing anyone could do about it, but really on the backend. And I’m sure my colleague Sherril Hanson would have plenty to say about that as well in terms of making sure that any kind of ask for feedback is properly linked to whatever customer interactions or experiences have been previously.

Well, that’s all the time I have today. I want to thank you everyone for joining me here on Enterprise Insights. I’ll be back again next week with another episode focused on the happenings within the enterprise application market. So thanks to everyone for tuning in and be sure to subscribe, rate, and review this podcast on your preferred platform. See you next time.

Author Information

Keith has over 25 years of experience in research, marketing, and consulting-based fields.

He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.

In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek, CNBC.com, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.

He is a member of the Association of Independent Information Professionals (AIIP).

Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.

SHARE:

Latest Insights:

The Futurum Group’s Guy Currier provides his insights into the advancements in the creation and operation of applications and their foundational data, along with AI, showcasing the rapid progress being made in cloud and application development.
Kubecon and the Vendors Lay Out Strategies for Driving AI
Camberley Bates, Vice President at The Futurum Group, covers the pressing issues of memory constraints and highlights from Memcon 2024.
Empowering Developers with Advanced AI Capabilities and Enhanced Data Analytics Solutions
Paul Nashawaty, Practice Lead at The Futurum Group, provides his insights on the transformative impact of Google's Data Cloud innovations and the implications for developers and enterprises navigating the evolving landscape of AI and data analytics.
Navigating the Future of AI: Analyst Perspectives on Google’s Latest Innovations and their Impact on Developers
Paul Nashawaty, Practice Lead at The Futurum Group, provides his insights into the transformative impact of Google's AI announcements at Google Next and their implications for the future of AI development and adoption.