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Zoho Strategy Melds Social Responsibility, Value, and Functionality

Zoho Strategy Melds Social Responsibility, Value, and Functionality

The News: SaaS provider Zoho held its Zoho Day 2024 in McAllen, Texas, last week, where company executives laid out their corporate strategy, focusing on social responsibility, platform affordability, and simple, yet powerful, functionality. Over the course of two days, I had the opportunity to meet with executives, and better understand the company’s current position, its operating principles, and strategy for growth. This note will focus on key insights from the event, as well as my three key takeaways. More information on Zoho can be found on its website.

Zoho Strategy Melds Social Responsibility, Value, and Functionality

Analyst Take: Zoho delivers cloud-based SaaS applications, which include customer relationship management (CRM), email marketing, finance and accounting, document management, project management, and human capital management, along with roughly 50 other business-focused applications.

The company’s products are designed to support businesses in managing their operations efficiently, enhancing productivity, and improving collaboration through tight integration between the different software solutions, or via the purchase of Zoho One, a fully integrated suite that encompasses all of Zoho’s applications. Zoho also touts the ability of organizations to integrate its offerings with other third-party solutions, and generally sells into the SMB and mid-market, with the occasional foray into the enterprise space, depending on the market.

The company held its Zoho Day 2024 in McAllen, Texas, last week, where company executives discussed the company’s vision, strategy, and product roadmap. The two-day meeting also featured a number of customer panels, which focused on how Zoho products and services are being deployed across a range of customer types and scenarios and illustrated the key decision criteria they used to select Zoho for their application needs.

Key Insights from the Event

Zoho Prioritizing Innovation, Employee Development, and Social Responsibility

One of the overriding themes of Zoho Day 2024 was Zoho’s approach of “Embracing the Long Game,” which CEO Sridar Vembu discussed in his opening keynote. My colleague, Craig Durr, covers the philosophy behind this approach, which emphasizes strategic patience and resilience, and prioritizes innovation, employee development, and social responsibility over quick wins. Check out Craig’s excellent research note focusing on these topics.

Zoho Trying to Move Upmarket with a Targeted Approach

Most of Zoho’s client base is composed of small and midsize business (SMB) and mid-market companies, which see significant benefits from using a tightly integrated suite of applications. This approach ensures that IT resources are not wasted on months- or years-long integration tasks and allows organizations to quickly derive ROI from their technology investments. Further, because Zoho typically introduces features and functionality every 90 days, using a tightly integrated suite ensures that critical business workflows and data calls will not be interrupted as a result of these updates.

However, in a one-on-one conversation with Vijay Sundaram, Chief Strategy Officer, Zoho, I learned that Zoho is taking a different approach to selling into the enterprise segment, which has different needs, decision criteria, and procurement processes than most SMBs or even mid-market firms. Instead of trying to lead with its Zoho One, suite-based offering, Sundaram noted that Zoho is taking a far more targeted and strategic approach to growing its enterprise customer base.

Zoho is building what Sundaram calls a new enterprise layer, which consists of specific skills around messaging to enterprise customers, native demand generation, solutions consulting, and managing the sales process. This will help ensure that when there are opportunities to engage with larger prospects, the sales team has the skills and tools required to compete against other enterprise-class vendors in the market.

Similarly, Zoho is focused on ensuring that the company is addressing perceived risks that often are associated with vendors that have typically been primarily active in serving smaller customers. Sundaram noted that Zoho is addressing concerns such as the company’s ability to scale, the number of partners and strength of the ecosystem for various add-on tools and services, and, perhaps most importantly, the company’s stability and longevity.

Zoho is taking a deliberate approach to selling into enterprises, acknowledging that most large enterprises will not respond to a suite-based marketing message around Zoho One, and instead will select an app or apps (such as Zoho CRM or Zoho Desk) that are resonating with enterprise buyers, and go to market focused on these applications.

While the company certainly needs to address the proper way to convey the messaging to enterprise prospects, Zoho has all of the foundational pieces in place today. The company has been in business since 1996, operates in more than 150 countries, and has more than 750,000 customers and 100 million-plus users. The Zoho Marketplace, which hosts third-party capabilities, such as AI enablement, strategic partnership support, and industry- and region-specific solutions continues to grow, with a 10x increase in users over the past four years, reaching more than 1 million users and more than 2,000 apps.

Flexibility and Affordability Are Paramount to Zoho’s Differentiation

Another key element of the Zoho experience is the flexibility provided by Zoho to its customers around software licensing, negotiation, integration, and the use of generative AI. Several of Zoho’s customers pointed to the company’s flexibility around licensing, allowing organizations to onboard users and teams at their pace, without driving up costs.

Furthermore, at this point, Zoho is embedding generative AI within the cost of the user license itself, to encourage utilization and demonstrate how the technology can be used to improve business outcomes. Although Dilip Nagarajan, Head of Product, Zoho CRM, told me in a one-on-one briefing that while the most basic editions of Zoho CRM may not include full generative AI capability, at this point, the Advanced Editions of the application will embed generative AI without any additional fees.

For SMBs and mid-market companies, messaging around flexibility and affordability should be amplified, as well as the platform’s ability to integrate with other third-party solutions. Even though many of these types of organizations may seek to standardize on comprehensive suite of applications, most companies are still tethered to third-party applications due to departmental or leader preferences, or the real and perceived challenges of undergoing a migration of all systems and applications at one time.

Key Takeaways from Zoho Day 2024

Zoho Day 2024 was a great opportunity to better understand the company’s current and future strategy, and many of the insights and proof points I cannot yet share, as the details are not yet public. However, I left the meeting with these three takeaways:

  • Zoho is playing the long game, and its customers should benefit: By resisting pressure to wring every available dollar from every customer, the company is building credibility, trust, and goodwill as a true industry partner. Several customers specifically mentioned that it was Zoho’s willingness to be a solid and fair partner, that drove them to select Zoho over other vendors. Furthermore, the company’s messaging around benefits to the customer, rather than the endless feature-set checklists, should reassure customers that Zoho is focused on their ROI and results, not bells and whistles.
  • Zoho’s messaging around social responsibility and transnational localism is inspiring, but I question whether it really moves the needle among prized enterprise buyers: Zoho highlighted its strategy of locating operations in various smaller cities and rural areas, with a goal of driving more opportunities for workers in these traditionally underserved areas. The company also operates various training programs, including programs that aim to help women return to the workforce, as well as worker training programs that do not require them to work for Zoho upon completion. These are all admirable initiatives which likely will improve the lives of workers in these regions, while also opening up new business opportunities. However, as Zoho attempts to move further upmarket and target ever-larger enterprise customers, I am skeptical that this messaging will factor into the decision to purchase in all but a very small percentage of cases. As the company develops its enterprise messaging strategies, the company should lean more heavily into the company’s strong operational history, growing partner ecosystem, and customer testimonials around the company’s ability to serve as a trusted technology partner.
  • Zoho’s Value Messaging Cannot Be Ignored: In hearing and speaking with Zoho’s customers, the most common decision criteria I heard revolved around value. This is especially important for Zoho’s SMB and mid-market customers and prospects to hear, particularly as many of the stalwarts in the market are increasing prices, either among the base licenses, or through the addition of generative AI functionality, which may be priced separately.

Beyond basic per-seat licensing pricing, the ability to deliver an integrated platform that requires far less IT implementation, integration, and customization work is paramount for organizations seeking to streamline their application stack, and exercise cost discipline. Zoho would be wise to lean into and amplify this messaging, particularly as its application suite has demonstrated that it can handle today’s customer requirements from a technological perspective. While there may be some apprehension around being perceived as a value play in the enterprise space, reinforcing other key enterprise must-haves—scalability, resiliency, and stability—should help offset any concerns around the term “value.”

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.

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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.

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