Last week I had the opportunity to attend an analyst function for Zoho, makers of a multitude of business apps for businesses of all sizes. It was a day long event where company executives laid out the future direction of their products, services and corporate strategy. And even as larger enterprises are using their apps at an accelerating rate, Zoho CEO and cofounder Sridhar Vembu says it’s as important as ever to make sure they remain focused on serving the small business market that has powered the company’s growth to this point.
Below is an edited transcript of my conversation with Vembu. To see the full conversation watch the video above. Click here for a few of my analyst takeaways from the event.
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Small Business Trends: Why don’t you give us a little bit of your personal background?
Sridhar Vembu: Personally I was born and I grew up in India. I came to the US when I was 21 to go to graduate school. I finished my PhD at Princeton in 1994. Then I went to Qualcomm and I worked as an engineer for a couple of years. Since ’96 I’ve been doing this, 20 years now. This has been my life.
Small Business Trends: You’ve always serviced the small business customers but you’re starting to go upstream a bit. You talked today during the analyst summit about the importance of staying true and being able to continue to service the small business community. Maybe you could talk a little bit about why that’s so important.
Sridhar Vembu: It’s something very personal to me. I’m always thinking about my own roots as starting from zero. I’ve never forgotten that however large we grow, I still think of us as small. In fact, in many ways Zoho still operates like a small company, even though it’s actually not small at all. We have 4,000 employees. That means to me, I always ask the question, is it software I would personally use if I were an independent guy? Two person business? Is it software I would pay for?
Those are important questions to me because it’s staying true to your roots that keeps you honest. To me, taking that call from the $10 customer, is as important to me as also serving the $1,000,000 customer. If you abandon this, the software loses its integrity and purpose. It has to be useful for all. A $10 customer is important to us, that’s why we do that.
Small Business Trends: You mentioned a couple of phrases I really thought were fascinating. The Facebook economy and how that’s driving some of the approach that you’re doing with Zoho.
Sridhar Vembu: This is the number I like to quote always. Facebook has about, right now as of January of 2017, about 1.2, 1.3 billion daily active users, give or take. They do about 2.5 billion in revenue per month, approximately. It’s about $2 per active user. You know Facebook users are pretty intense, they use it a lot. They’re always on the phone uploading photos.
Spend hours on it. Watching videos. They tax the infrastructure heavily. I would say that people tax the Facebook infrastructure much more regularly than any kind of enterprise software that I know typically. Nobody uses any software as much as they tend to use the social tools. Facebook and WhatsApp, they’re always on it.
It’s fascinating that they’re able to not only service all these users but actually make money doing so. Not just make small amounts of money, Facebook actually prints money as I like to say. That’s Facebook economics, where $2 a month they’re able to serve users profitably. I don’t know any enterprise that can adjust to that economics but I believe that’s where we are heading as a world. This is the consumerization of IT to me, that the kind of Facebook economics comes to dominate how enterprise software and enterprise infrastructure is given out. AWS has proved that that’s the direction it’s heading.
Small Business Trends: You mentioned AWS. Amazon is another company that you seem to track and look at how they do things. How is Amazon changing things and what lessons can small businesses learn from what Amazon has done?
Sridhar Vembu: First thing is the way that they have democratized mass markets and infrastructure. We know that they’re a $10, $12 billion run rate and started from zero and grew so fast. They sell compute by the hour; now per minute pricing, more and more. That’s pretty incredible; five cents, 10 cents, 20 cents. These added up. Initially I remember when they were launching it. The prices were so low, people thought they wouldn’t make any money, but there’s lots of money there. In a sense they dispatched a lot of traditional enterprise vendors because of their pricing model and their “easy to do” business approach. That’s something that’s a lesson for any business. Be very accessible. Keep your pricing model very simple and very customer friendly. Those are the big lessons I draw from it.
Small Business Trends: You’ve been servicing small business customers for decades at this point. How have small businesses changed, and how are they dealing with the modern environment of the Facebook economy we’re talking about?
Sridhar Vembu: First, tools like Facebook and WhatsApp, everyone knows them. Even the small business born this year, they are much more digital natives. They know about this. That’s a generation thing. That actually helps us because then they can come online, they discover Zoho and they sign up.
Familiar world for them. The concept of you sign up and install apps on your phone. It’s the same paradigm that they’re already used to following. That’s something huge now. Then of course there’s a big base of traditional businesses that are being dragged into it as well. That’s also because of the demographic shift in their workforce. They have the new millennial generation join the work force and they are much more digital savvy. That’s also helping us. That’s how I see that situation.
Small Business Trends: Peer out to the future a little bit. What is Zoho going to be focusing in on? How is it going to impact your current small business customers and small businesses in the future? Because it seems like the business models for small business are changing as rapidly as the technology is. How does Zoho play a role in that?
Sridhar Vembu: Actually I always like to quote the example of the person who does my garden work for me. This person today still gives me an invoice on paper, monthly. In five years I can envision everything will be done through mobile app, including the invoice from his phone, generated from his phone. My payment will be made through my phone. No other transaction of any kind happens. All of the exchanges happen through our apps installed on our phones. Maybe there’s some issue he wants to find out, I’m at work. Just forward those messaging that way. Everything will happen that way. I approve a project, let’s say he needs to fix our sprinkler system. He just sends that quote right there and I approve it, he proceeds, he invoices me and I pay.
All the transactions should happen at that level. I think about how this technology applies there; and what kind of price points are relevant. That’s where the Facebook economics is important because this person is not going to pay $200 a month. Maybe he’ll pay $5. That’s what we are going for.
Small Business Trends: Tell people where they can learn more about Zoho and all the products you have. Too many to list right now, but where can they learn more?
Sridhar Vembu: On our website of course is a starting point. We have a lot of resources and we work with, of course, our partners to make sure they can explain, they can help if they need more hand holding. We are also investing a lot in the Zoho University for customers where they can learn about things, videos, material and searching material. It’s not just how to use the product, but it’s also the concepts behind it. For example, a very small business figures out what is a sales opportunity or a pipeline? How do I manage these things? These concepts? That’s what our educational mission is going to be.
Small Business Trends: It’s funny. We’re in 2017, you would think … Sometimes we live in a bubble. We think everybody knows about this stuff, but …
Sridhar Vembu: There’s still a lot of people who actually don’t. I myself, before I started the business, I had no concept of what’s an opportunity, what’s a pipeline, what’s a quote. All of those, I had no idea. I am a PhD in engineering, I don’t know any sales technology. Actually after only hiring the first one or two sales people, I figured out there is something to it, I have to learn. That’s how I figured it out.
This is part of the One-on-One Interview series with thought leaders. The transcript has been edited for publication. If it's an audio or video interview, click on the embedded player above, or subscribe via iTunes or via Stitcher.
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