‘SaaS market will see consolidation’

Customer acquisition cost is very high; it is a challenge to get funding, says Zoho chief

 

For an Indian product company that has fended off takeover bids, Zoho Corp has not made much fuss about its growth. CEO Sridhar Vembu, who said revenues were ‘in excess of $300 million’ a couple of years ago, is bracing to cross the $1-billion mark, sooner than five years from now. In an interview, he elaborates on what he sees ahead for a software product firm from India:

It is a year since you unveiled the Zoho One suite…

Currently, 12,000 organisations are paying customers of Zoho One worldwide, of which 36% are from India. The Indian IT market is not 36% of the global IT market. But for Zoho One it is, and it tells you that we are very strong here. On average, 16 of the 40 apps in our suite are being used. Six months ago, our average was at 10 apps. This shows that users are not superficially using 1-2 of our apps.

Zoho One’s pricing seems key…

It is $30 per employee per month globally and in India it is ₹1000, for all 40 apps. We want to get to 100 million users. On average, every client firm of ours would have in excess of 10 users.

We have a 40-million user base across the globe using Zoho products which includes paid and unpaid users and 20%-25% of that is in India.

You recently announced data centres India. Why is this critical for you?

The whole regulatory regime is changing. GDPR style legislation is spreading. Data localisation is becoming critical. Particularly governments, public sector entities now will be mandated not to hold data abroad. All these changes, prove that in the near future, data has to be kept in the relevant geographies… customers in Europe, Mexico demand that. So data centres in India are critical. For both regulatory and technical reasons, the Indian data centre market will grow and cloud services will become a possibility. We have two data centres in the U.S., two in Europe, two in China and two in India will be coming up soon.

You have talked about $1 billion in revenue over five years…

Now the revenue is much more the $300 million that it was when we spoke last and we are approaching the billion-dollar mark… we will definitely announce it sooner than five years from now.

At this point, what excites you? Do you have more goals?

To build a global technology company out of India. We use Samsung and Apple as the benchmark and we are not in that league yet… we have a long way to go and we want to put India on the global map in the league of technology giants for the next 10-20 years.

The mission of Zoho is to integrate India’s vast talent pool to create global products because we consume global products.

Our mission is to bring these two together by creating opportunities for them. A lot of the talent pool are diamonds in the rough, which is where Zoho University comes in and polishes them.

We take in students fresh out of 12thgrade and diploma courses. In the past 13 years, we have had 625 graduates. This year, we have 140 students. We have trifurcated Zoho University into Zoho School of Technology, Zoho School of Design and Zoho School for Advanced Study. Anybody who successfully completes the programme gets placed in Zoho.

How has software-as-a-service evolved?

The SaaS market has grown and there are a lot of challenges.

A lot of SaaS companies are not making enough money, one of the reasons being the high customer acquisition cost. In fact it is skyrocketing. This is a classic driver of consolidation and that is the change we have seen in the last two to three years. This is why the funding environment has become more challenging now, and all of this is pointing towards consolidation.

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