Interview with Zoho President Raj Sabhlok

Few companies can claim to match the breadth of services offered by software firm Zoho. The California-based cloud computing specialist features a broad collection of products, ranging from customer relationship management (CRM) software to an IT management platform to various office suite services.

This vast scope of services may perplex the technologically challenged (including yours truly). But in an interview with Bizceed, company president Raj Sabhlok claims it is this diversity that distinguishes Zoho from the competition.

“We pride ourselves on giving customers a one-stop shop of integrated applications,” he declares. “Companies can get virtually every application they need from Zoho.”

Zoho’s unique product represents one of many characteristics of its pioneering approach to business.

Empowering companies through software synergies

The interview begins with Sabhlok, in his own words, overviewing Zoho’s history and purpose. Founded in 1996 as a network management provider for large corporations, the company has evolved into a multi-enterprise cloud computing firm. It is composed of three flagship businesses: Zoho.com, best known for its cloud-based office suite; ManageEngine, an IT management software platform; and WebNMS, which develops telecommunications software.

Sabhlok joined Zoho as president in 2010. A longtime friend of CEO and co-founder Sridhar Vembu, he was attracted to the company’s pioneering cloud-centered business model and Vembu’s obsession with perpetual product development.
In his words, Zoho’s advantage originates from its trailblazing foray into cloud computing and service integration. The company began development of cloud technology, which permits users to access a service or information anywhere with an internet connection, all the way back in 2004.

All of Zoho’s products can be utilized through an integrated network, enabling users to attain a software synergy of sorts and increase productivity.

Helping David take down Goliath

Basic versions of all products can also be used for free, with incremental subscription fees corresponding to scope of use and sophistication of the tool.

Sabhlok takes pride in how Zoho has empowered startups. “Right from the start we arm these startups and entrepreneurs to compete with the best,” he boasts. “We really bridge the gap between the David and Goliath. Everyday we hear about startups that threaten major firms and they’re doing it through technology.”

Adopting a marathon approach to growth

Zoho’s appreciation for the little guy corresponds with what Sabhlok describes as an almost naively altruistic approach to business. Eschewing fast and easy venture capital funding or breakneck profit growth, the company has adopted a marathon approach to growth since its founding in 1996.

In contrast to many software companies who spend up to 60% of revenue on sales and marketing, Zoho spends less than 20% on such activities. This allows them to heavily invest in software development.

“One of the key differences between Zoho and any other tech company, namely software companies, is our maniacal focus on development,” says Sabhlok. While this may limit short term growth, he believes it leads to a superior product that nurtures customer loyalty and long term profitability.

Strong rebuke of venture capital

At this point our conversation segues into Zoho’s rejection of venture capital funding and Sabhlok’s business philosophy. Zoho’s decision to shun VC funding was a deliberate decision to maintain corporate autonomy. This move, he claims, enabled their long-term success.

“There’s a number of trappings to VC backed ventures,” he notes. “You end up focusing on the wrong things. You focus on what does my building look like and do I have the cool space. And you spend your money on the high flying salesman who’s looking for the next payday.”

Sabhlok’s antipathy to VC funding essentially boils down to three main points. First, he believes that many venture capitalists aren’t qualified to dispense managerial advice, claiming “they don’t have much operational experience or expertise in many areas where entrepreneurs work.”

Sabhlok supplements this claim with a hypothetical anecdote about Zoho’s business evolution. The company’s origins lie in IT management, significantly different from its current diverse portfolio of services. According to the Zoho president, his firm’s transition into cloud computing in the early 2000s would’ve been rejected by investors due to its significant divergence from the core business.

Second, venture capitalists often want their money back within 5-7 years. This may not align with the amount of time required by some companies to grow sustainably, forcing them to fast-track their development. “How can you grow a company to last when you’re working with a deadline of 5-7 years?” asks Sabhlok.

Third, most software companies require minimal external funding due to their nominal fixed costs. Why accept money that you’ll have to repay with add-ons if it’s not necessary? This brings to mind Airbnb’s decision to accept $1.5 billion in VC funding last June. The company’s costs should be limited considering all of its business is conducted online and doesn’t require heavy investment in fixed assets. Now it’s saddled with a significant debt that may not have been necessary. As Sabhlok notes, entrepreneurs often pursue VC funding for the sake of validation and not necessarily for practical purposes.

Nevertheless, he concedes that in some cases, VC funding may be necessary. Companies that require heavy investment in plant, property and equipment (PPE) and research and development (R&D) are justified in proactively seeking investment. Yet he strongly advises against software firms accepting VC noting, “there’re very few software applications that can’t be built on a budget.”

Sticking to the fundamentals

Our conversation concludes with Sabhlok offering words of wisdom for entrepreneurs. His message echoes the KISS approach to which he attributes Zoho’s success.

“Keep it simple,” he says. “Focus on what’s important and don’t fall into the trap of trying to over-market. If you pick the right market and build the right product, you have a really good chance of being successful.”