What Zoho is doing is the future of IT industry: Sridhar Vembu

Sridhar Vembu, founder and CEO of Zoho Corp
Software as a Service (SaaS) major Zoho Corp with products competing for various technology giants in the world, has recently launched Zoho One, an integrated suite, forecasting that the SaaS businesses are going the way towards integration of their offerings. The company, which has never raised funds from outside investors or acquired a technology over two decades of its operations, is looking at new opportunities in technology and geography, said Sridhar Vembu, founder and CEO of the company, in an interaction with Gireesh Babu. Edited Excerpts:

ManageEngine, the enterprise IT management business, was around 80 per cent of your business earlier. How is the business mix for you now?
The cloud business accounts to around 40 per cent of the business now and in about 12 to 18 months it will become the majority of our business. Our business started with more IT focus, such as systems management in ManageEngine. ManageEngine itself is stepping into the cloud with many of its offerings moving towards cloud. We will retain the brand identity of ManageEngine for the IT management part of it, but it all will be cloud driven. If people have deployed their software on cloud, we will be able to manage them too. Over a period of time, everything will be integrated. On-premise software management will continue, but we think it will become a smaller proportion of the business. The mix could be 70 per cent cloud and 30 per cent on premises business over next three years.

What are the expansion plans for Zoho?
We continue to grow geographically. We are opening a centre in Amsterdam, planning one in Singapore and others. In the immediate future, we are looking at Latin America, including Mexico, Brazil and countries like Colombia, Costa Rica and West Asia. In each place, we will have our office and we will hire a lot locally.

In India, we are growing rapidly and crossed almost 4,800 employees in Chennai as part of over 5,000 employee base. Last year we have hired more than a 1,000 engineers. In Tenkasi, in another one-and-a-half year, we will reach 350 people, more than double of our 150 people at present. In Chennai, we expect the manpower would double over next five years.

We are now looking at other States for expansion, partly also for language support reasons. Andhra Pradesh (AP) is one crucial State we are looking at. Product development and engineering will happen in India. In AP, we will start with local language support, but we will expand that into additional development centre.

What will be the structure of Zoho over next five years?
We are very good at operating multiple brands, each with a different focus. We will continue with that. As the need arises in the market place we are in, we will create additional brands over time, similar to Zoho and ManageEngine. For instance, we have a medical equipment subsidiary and each of them will have their focus. We will be announcing those subsidiaries in a month. These subsidiaries will have operational autonomy, but we are not looking at any exits or going public with them. We are investing heavily in security. Some of that will translate into products for other companies over a period of time, though we may not be able to put a timeframe to it.

What are the plans with WebNMS?
The WebNMS, which is into Internet of Things (IoT), has been folded into the Zoho CRM now. We have a major expansion plan in IoT. We have started investing in heavily, particularly in IoT combined with Customer Relationship Management (CRM). For instance, if your Air Conditioner or car come across a problem, the vendor should know immediately so that he can act faster. It is a crucial part of our customer relationship. Currently, there is no plan to go with IoT to the end customer, which is the household, but we don't know how it will develop in five years down the lane.

What are the latest trends in SaaS business?
I see a consolidation coming, partly driven by Zoho One. Customer acquisition cost is what is punishing most vendors now and the only solution is to provide more completely integrated solutions. What Zoho is doing, we believe, is the future of the industry. We are staying ahead of that curve.

When you have an over expansion, over funding, you have to have consolidation phase. We are probably entering that consolidation soon, you will see companies acquiring other companies and a lot of M&A activities. It depends also on how long the global bubble in finance, the over an expansion of money, will continue. The Federal Reserve, ECB, Bank of Japan, all are having an extremely loose monetary policy. Venture Capital ecosystem is based on this loose policies, is not sustainable. Once it gets over, it will trigger consolidation and M&A. We may do some acquisition, but we are not going to rush into it.