Cheap and Proud of It: Q&A With Zoho CEO Sridhar Vembu

Although Zoho CEO Sridhar Vembu doesn’t describe his company as the Wal-Mart of the software world, he would likely find the comparison apt.

Some vendors stand out from their peers because they were the first to commercialize a particular application; some because they were the most successful in evangelizing or educating a potential user base of the application’s merits. Some — like Zoho — stand out because they are dirt cheap.

Zoho, which offers productivity and CRM applications, is a relative newcomer to the Software as a Service space. The company proudly contrasts its wares with the pricier offerings of its competitors.

Zoho is now entering a new phase of development: integrating its various products into a suite. Still, Vembu made it clear in an exclusive interview with CRM Buyer that the company has not abandoned its early devotion to thrift.

CRM Buyer: How is Zoho weathering the economic downturn?

Because of our pricing model, we have we haven’t seen a lot of impact. We hear from customers about the economic challenges they are facing, of course, but we haven’t seen an impact in terms of revenue. Revenues have been steady, and we expect to grow this year — but our growth rate will be less than last year’s 40-percent-plus.

CRM Buyer: What are some of the cost-cutting measures you’ve taken?

We have reduced our attendance at trade shows, but that is an industry trend. In general, marketing dollars are going towards the Internet and away from trade shows. We have frozen hiring too.

CRM Buyer: How can your products help your customers’ bottom lines in the near term?

We offer what I believe is the lowest cost per seat pricing in the industry — and it is a full, rich product. This is not new pricing — it has been a consistent philosophy, but it is resonating even more in this economy. First three users are free, and the fourth user is billed at (US)$12 per user per month.

CRM Buyer: What are some of the brightest spots for your company right now?

We focus on small companies — three-, five-seat customers. But we are now seeing larger customers emerging, such as 50 to 100. Also, there is a growing recognition of the maturity of our product.

CRM Buyer: How will your company look a year from now?

We will have made more headway in integrating various components such as project management or mail or calendaring. Within a year, CRM will be an integral part of our overall workflow.

CRM Buyer: Who do you see as your primary competitor?

We see Salesforce.com a lot in the mid-sized segment. We see SugarCRM too.

CRM Buyer: Is it a challenge to compete with companies that have an established brand or name recognition?

No, companies like Salesforce.com have actually done us a favor in evangelizing the benefits of Software as a Service. All we have to do is explain why our product is better and more affordable. That is a conversation we like to have.

CRM Buyer: What is it about your product that makes it better?

As we move to becoming a more fully integrated suite, customers get even more value for their money. Our project management integration, for instance, includes that functionality in the overall suite — it is not something that has to be integrated from another vendor. That is a serious consideration with IT budgets under pressure now.

CRM Buyer: Besides the cost issue, how else do you compete with other names in this space?

We are building up our other features, such as email and calendaring. Those are a good way to get in a prospect’s door and then introduce them to other Zoho offerings.