Analyst(s): Keith Kirkpatrick and Alex Smith
Publication Date: February 13, 2025
Zoho opened its ZohoDay conference with an overview of a key strategic shift. The company, which primarily had served small- to mid-market firms, has been making a concerted effort to target and engage with enterprise customers in a land-and-expand motion. Zoho says its unified data platform, orchestration layer, and more than 55 pre-built applications will serve as the foundation of an enterprise-grade application platform.
What is Covered in this Article:
- Zoho’s ZohoDay event highlighted its enterprise market focus, emphasizing an enterprise-grade platform with a data layer, orchestration layer, and over 55 applications. It includes robust data security controls and low-code, no-code tools for customization.
- Zoho introduced Zia Agents, AI agents designed for use across its platform, enhancing user experience and functionality.
- While Zoho has a strong presence in the SMB market, offering competitively priced applications with embedded AI features, there are concerns about its opportunistic sales strategy and its need for a more focused approach to enterprise sales and customer segmentation.
- Zoho has seen its business through partners grow, as it manages a complex ecosystem spanning different disciplines, geographies, and customer segments.
The News: Zoho opened its annual ZohoDay event with an overview of the company’s focus on the enterprise market. The company discussed its enterprise grade platform, which encompasses a data layer, orchestration layer, and 55+ applications, and is augmented by robust data security controls and low-code/no-code tools to permit customization of apps and workflows. The company also provided details on several enterprise customers that have successfully used Zoho’s applications. And, of course, not wanting to be left out of the party, Zoho announced Zia Agents, its AI agents that can be utilized across the entire Zoho platform.
Zoho Aims to Replicate its Success in the Enterprise
Analyst Take: Zoho has established itself as a major force within the small-to-medium business market. The company offers more than 55 business-focused applications, which sit on top of an enterprise-grade orchestration layer and data platform, which are rounded out with enterprise security features. Zoho apps arguably have the best value in the market; its products are priced far more attractively than comparable apps, and AI features are included within the license fee. The company’s focus on transnational localism, where it operates in second- and third-tier markets, allows it to be very competitive in markets that are seen as secondary to many other competitors. It also allows Zoho to attract and retain talent all across the globe.
While Zoho is now making a concerted effort to make deeper inroads into the enterprise market, there may be some limitations to its approach, which essentially seems to be based on opportunistic customer acquisitions. The strategy essentially seems to be focused on using customer case studies to demonstrate competency, and then relying on large enterprise customers to land on one application, see its value, and then hopefully expand to additional applications.
The challenge with this approach is it is not a true strategy or sales motion for generating enterprise business. Relying on an opportunistic sales approach is neither scalable nor efficient, and although the company has stated that generating enterprise sales will be a long-term approach, I have additional reservations about the company’s endeavors in this market.
The biggest challenge that Zoho will face is that it is perceived as a value-oriented vendor in the market. While enterprise buyers certainly care about controlling costs, they are more concerned about security, scalability, reliability, and ease of integration with other applications and systems. That’s not to say Zoho isn’t able to address those concerns – it has leading technology after all – but its long history serving small and medium businesses can obscure these capabilities. It is a common challenge faced by technology companies moving from the smaller end of the market to the enterprise.
It is also worth noting that mid-market and enterprise customers were lumped together as one target group, which raises concerns around the company’s understanding of the unique issues faced by each market segment. The former may be more attainable, given profile similarities with smaller customer segments. Overall, Zoho should be hyper-focused on the segments it wants to win, and ensure it develops a go-to-market strategy that addresses those segments.
Its Partner Ecosystem Is Becoming a Key Part of Its Growth Plans
Like most software companies, Zoho is seeing its partnering activities become more mature and essential to its growth. Its indirect business has grown to now account for over a third of its overall revenue (up from around 10% of revenue a decade ago). The allocation shift shows that indirect is growing faster than direct, suggesting a rapidly maturing partner ecosystem as well as a growing appetite from within Zoho to leverage its community. It claims to be increasing its incentives that it puts into the channel, with a focus on growth driving activities.
Its partner base is over 2,000 strong, and is highly varied in terms of domain expertise (given Zoho’s portfolio breadth), geographic footprint, and industry focus. Given Zoho’s success in many emerging markets, it has leant into relationships with key local and industry-specific players in order to win key customer accounts (for example, in Middle East markets where it sells to government-backed industries). But it also maintains traditional partnerships in the IT distribution space including Ingram Micro, Redington, and SiS Distribution, particularly in certain geographies such as Asia Pacific and Latin America.
As it pursues an enterprise push, it has also highlighted the importance of formulating relationships with the Global Systems Integrators, and has called out that community specifically as a core part of its partnering focus. It has established some relationships with many of these players, including TCS, PwC, and Deloitte (to name a few). In addition to the critical role these organizations play in many enterprise software environments, Zoho also believes it will have a degree of proximity advantage as many of the GSIs are based in its home market of India. Even for GSIs that are not headquartered in India, all have a significant talent pool there.
GSIs have become high on the priority list of many partner organizations across the vendor landscape. This community is extremely large (from a headcount and reach standpoint), and undoubtedly offers access to the most lucrative accounts across the globe. But navigating these highly decentralized organizations is complex, and often consumes numerous resources. Zoho may find alignment with GSIs as it builds out its own Enterprise Business Services (EBS) organization; it is likely that it will staff that organization with individuals who have worked in the GSI landscape. It can also take learnings from other successful GTM initiatives. For example, Zoho has long run an affiliate program in its SMB business. This program, via affiliates, has converted thousands of customers without Zoho paying an associated sales commission. These types of programs, although different in the enterprise, can prove useful when enabling and evangelizing a partner community that focuses on the service opportunity rather than the sales transaction.
Zoho has also leant into marketplaces as a way to add value to its customers. The Zoho Marketplace has over 2,500 applications that integrate with its various products and platforms. The expansion of this ecosystem undoubtedly creates more value, stickiness, and incentives for customers to adopt Zoho solutions (as well as for partners to promote it). A successful marketplace strategy is as much a product-oriented one as it is a GTM story. But in addition to building out its own marketplace, Zoho should pay increased attention to the hyperscaler marketplaces, which are becoming increasingly important in the world of software procurement. The three leading hyperscalers have a combined $400 billion of committed customer spend; some of that can be used on third-party software via their marketplaces. Many software companies have realized that and have leant into their marketplace relationships. This includes startups looking to scale, mid-sized companies meeting their growing demand, and even the largest software companies in the world. For example, both Salesforce and ServiceNow have made big investments into the AWS marketplace in the past 18 months, with the former reporting multiple large-scale deals in recent earnings calls. Hyperscaler marketplace should be a central part of Zoho’s strategy as it targets the enterprise.
Lots of Changes Ahead for Zoho
Zoho has established itself as a disruptive player in enterprise software. It has the geographic reach, the portfolio breadth, the engineering capability, and a successful track record of operating performances (both revenue and profit growth). It has even replicated this success in the IT administrative world with its ManageEngine business (which may become closer to the core Zoho business in years to come).
But the company is at a crossroads. It is still looking to establish a new CEO and it is taking on a big task in tackling the enterprise market. As it lays the foundation for its next chapter, it has an opportunity to rethink its enterprise sales strategy, focusing on the things it does well from a functional and operational perspective, and downplay the elements that constrain it to being a provider solely capable of working with small to medium businesses.
What to Watch:
- Zoho has yet to name a new CEO; it will be interesting to see whether new leadership brings about any distinct changes in culture or approach at the company.
- Zoho will need to pivot to an actual enterprise sales strategy to generate a repeatable sales motion for engaging with and closing new enterprise customer sales.
- Zoho’s foray into AI agents is not surprising, and it will be interesting to see if they are able to leverage their all-inclusive pricing model to drive sales.
See the complete press release detailing Zoho’s Zia Agents on the Zoho website.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other insights from The Futurum Group:
Zoho Launches Low-Code IoT Platform with Industry-Specific Solutions
Zoho Announces Revamped Version of Zoho Analytics
Zoho’s Business Impact: From SMB to Enterprise
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.
Alex is Vice President & Practice Lead, Channels & Go-to-Market at the Futurum Group. He is responsible for establishing and maintaining the Channels Research program as part of the overall Futurum GTM and Channels Practice. This includes overseeing the channel data rollout in the Futurum Intelligence Platform, primary research activities such as research boards and surveys, delivering thought-leading research reports, and advising clients on their indirect go-to-market strategies. Alex also supports the overall operations of the Futurum Research Business Unit, including P&L segmentation, sales and marketing alignment, and budget planning.
Prior to joining Futurum, Alex was VP of Channels & Enterprise Research at Canalys where he led a multi-million dollar research organization with more than 20 analysts. He played an integral role in helping the Canalys research organization migrate into Omdia after having been acquired in 2023. He is an accomplished research leader, as well as an expert in indirect go-to-market strategies. He has delivered numerous keynotes at partner-facing conferences.
Alex is based in Portland, Oregon, but has lived in numerous places, including California, Canada, Saudi Arabia, Thailand, and the UK. He has a Bachelor in Commerce and Finance Major from Dalhousie University, Halifax Canada.
