The maverick who shuns investors

Sridhar Vembu. Photo: Bijoy Ghosh   | Photo Credit: Bijoy Ghosh

“Two men were running away from a huge bear. One man said that they both were in danger. The other merely said, ‘I only have to outrun you!’ Sridhar Vembu, Founder & CEO of Zoho Corporation, says about the much-reported attempt by Salesforce’s Mark Benioff to buy out Zoho a few years ago. “Mark told us that Google was a giant and our offerings could not compete with them. I replied that he needs to be scared of Google. I only need to do better than Salesforce to survive!”

Zoho sells software, over the Internet, as a service, also called as SaaS. With about $ 300 million in revenues, it competes with Salesforce’s customer relationship management software as well as Google Docs’ office productivity suite of tools. Speaking to The Hindu at the Zoho office on the outskirts of Chennai, K. Bharat Kumar joined Vembu for a walk around the campus still under construction. Excerpts:

You have spoken against ‘Financialisaton’. What is that?

Finance is a means of connecting savings to investments, down to its bare essentials. The banking system is all about that. We now have layers and layers between the saver and the investment. The economy has become an adjunct to finance. Maybe not fully in India, but this is true in the Western world. Investments are not purely numbers in spreadsheets and as mere Returns (RoI). Beyond money, there is also a mission and purpose in life. A belief and conviction that cannot be placed on a spreadsheet. This trend subordinates every human objective to a set of metrics, numbers, spreadsheets and RoIs, which, actually gets you get poor RoIs. This is like a Zen paradox - The more you obsessively seek happiness, you get sadness. ‘Financialisation’ is a relentless, numbers-driven game and you subordinate your soul to it. This results in relentless suffering.

Is that you why you shun investor money?

We are generally a happy company. The amount of stress in our company is relatively low, including for myself. If the employees are happy, the company is making money and the CEO is happy why would I want to change that? Zoho’s attrition, or the number that leaves the company per 100 is about 5-6 per cent, far less than the software services industry (average range of 12-15 per cent). Given that talent for Cloud-related product software is hot in demand now, Zoho’s attrition levels shine even more in contrast.

Wouldn’t venture capital have helped you grow faster?

When Facebook was born, there were probably 499 other start-ups in Silicon Valley that started alongside and did not make it. Take the example of Dropbox – it recently raised a billion dollars. Competition is intense and price of storage is falling. Even for someone who was successful and took a lot of investor money, it does not mean they will exit well. So the premise that more investor money means success is statistically untrue. If I had accepted investment funds, I may have been different but I may have been worse off too. I believe we are better off this way.

Where is the balance between purpose and returns?

At whatever point in life you are, you have to have intellectual honesty. As with everyone else, we too tie in freedom with responsibility. Our people do know that they have to produce and that if we don’t make and sell software, we don’t have food on the table. But ours is a social atmosphere. The leader of a 100-member team sits with his team. No cabins for her or him. There is a sense of purpose when doing this together.

Has anyone left citing this culture?

We have a lot of freshers – this is the only culture they ever know. About 147 out of 150 managers at Zoho have never worked elsewhere. If we want database specialists, we don’t pointedly poach. We may evaluate resumes that come to us, but we train our own folks. They like that and imbues a sense of belonging. Zoho University, where we trains employees, is one outcome of such thinking. The investment returns in the form of work ethics and the immense talent that came out of the university paid for itself. We do not look for degrees, marks or certificates. Whichever college, whichever year, you tell us what you are capable of as a software coder and we will test you for that. Sure enough we want to do good business and make money. But if we fall below a target I know that it’s despite best efforts. We don’t make life miserable for someone for this reason. Also, if someone is genuinely struggling, we do move them around in roles.

You are said to be against sales and marketing

I do believe sales and marketing add value. But it does not need to be big-bang. There has to be a balance. I wish to have software development efforts at least on par with marketing efforts, if not more. For every dollar of revenue that Salesforce makes, it spends 50 cents in marketing and 15 cents in R&D. So is it a marketing company or a software company? I’d rather give away $ 50 worth of software free to customers, than pay up $ 50 to an ad platform for a few clicks on Zoho’s ads by prospects. For many products in our suite of offerings, giving away the basic versions free has resulted in more revenues, either for the advanced versions or adjunct software that customers are happy to pay for. If you ask me for metrics as to what every dollar worth of free software gets you, there is no algorithm. It definitely pays off. Software for free helps a lot more people discover Zoho. That’s the big challenge. For any company, the fundamental problem is how does your market know you exist? It is easier for us to know what our market wants since we have an in-house sample of 3500 employees. If they don’t like an idea, we go back to the drawing board.

What if an idea fails?

It happens. More than product strategy, doing it is difficult. The first time may result in a failure. We are patient and go back to the drawing board. There are times when we have redone a product four times before introducing it.

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Printable version | Jun 12, 2021 7:11:00 PM |

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