Zoho, an unassuming success story

I am late to the party on this one but hey, it is better late than never!  In talking to Sramana Mitra recently, the profilic writer and thought leader on entrepreneurship in Silicon Valley, I discovered Zoho.com and their whole slew of applications.

Apparently you can log in to Zoho.com using your Google Docs account.  They offer free access to a bigger collection of Office-type applications than Google, including mail, word processing, presentation and spreadsheet.  In addition, they also offer polling, web conferencing, CRM, etc for both personal and professional use (at a fee obviously).

What intrigued me the most is the story of how the founder, Sridhar Vembu, runs the company.  I have not met the guy personally but would love to some day, because he is showing the software business a different way to run the business and is very successful at doing it.

A few of the things I learned about him from my conversation with Sramana:

  1. Zoho (formerly known as AdventNet) is fully owned by Sridhar Vembu.  He grew the company organically.  VCs have approached him but he had no need to for their investment given the millions of dollars of cash flow the business generates.
  2. Vembu has over 1000 employees.  Many of whom he recruited directly from high school and trained into programmers in the university that the company runs.  He recruited from candidates pools that were traditionally underserved by local universities and got unwavering loyalty from those he offered the opportunities to.   He definitely has the guts to think differently and do it.
  3. With his success, Sridhar Vembu remains understated and does not call much attention to himself.  They have fewer than 10 employees in the San Francisco Bay Area.

As Microsoft starts to put part of their Office offering online and Google continues to push Google Apps, many people have actually been using Zoho’s product offering.  Here is another article from ReadWriteWeb titled Zoho: The Little Engine That Could (Take on Both Microsoft and Google).  These guys are certainly something to watch.   I suspect that Zoho might actually be making more money than Google Apps but I do not have any data to back up that speculation.

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to FurlAdd to Newsvine

SaaS vendors who eat their own dog food

Should SaaS vendors be running a lean and mean IT group and utilize SaaS versions of ERP, CRM and other applications systems?  Mary Hayes Weier wrote on her InformationWeek blog that SuccessFactor has signed on to use NetSuite to run their ERP but Salesforce.com is still using on-premise Oracle applications to handle account receivables and payables.

I agree with Mary’s assessment that SaaS vendors should really be commended when they fully adopt SaaS software to run their own business operations.  After all, there are a few concerns with SaaS that this practice would help eliminate:

  1. SaaS still does not scale for a large corporation with huge amount of data.  It seemed that Salesforce.com may actually be struggling with this issue with their A/R and A/P system.   If SaaS companies can’t figure out how to solve this problem, then their own growth projections are in question as well
  2. SaaS is not secure enough.  Data hosted at the vendor can be leaked or  stolen.  I don’t believe mature SaaS vendors is less secure than many of the corporate IT infrastructure, but if a SaaS vendor can’t trust another trust vendor to run their business applications, we may not want to trust either of them to run our business applications.
  3. Complexity in integrating SaaS with other applications.  Vendors will  tell prospects that they have solved the integration issue.   Data exchange between SaaS and in-house applications can be taken care of.  However, if the SaaS vendors themselves can’t show that they can rely on such integration in-house, you may not want to believe their sales pitch either.
  4. Long term cost effectiveness of SaaS vs on-premise software.  There are economic models that show SaaS applications are cheaper to run in the short run, e.g. for 3 or 5 years but if you extend the payments out to 10 years or more, SaaS actually costs more than on-premise.  By using SaaS applications to run their own business, vendors of SaaS can show that using SaaS for the long haul is a sound business decision and they are going betting their own success on it.

I think these are in fact questions that you can ask your SaaS vendors.  The point is not to make your favorite salesperson squirm but it is to force the question that if I were to run my business with your application, can you concretely show that your company believes in the economic value of your solution?

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to FurlAdd to Newsvine

VMware enters the PaaS fray with SpringSource purchase

At the crossroad of virtualization and cloud computing, VMware apparently chose to build up their PaaS capability by buying SpringSource for over $362 million in cash. I don’t think this purchase alone will make VMware a major player in the PaaS space but it is nevertheless telling of their strategy.

VMware already is a dominant vendor in the virtualization space, owning 55% to 80% of the virtualization marketshare according to sources on the web. However, they have a formidable competitor in the form of Microsoft and emerging competitors in the form of cloud providers who are targeting the Enterprise IT Infrastructure market.

As a result, I expect VMware to look at the following areas as growth as well as competitive threats:

  1. Data Center Server Virtualization – Microsoft Hyper-V and Citrix XenServer are the major competitors to VMware’s expanding offerings.
  2. Private Cloud – VMware has been positioning its infrastructure software for those IT Infrastructure folks who want to establish Private Cloud. This is provided as an alternative as the public cloud providers such as Amazon Web Services’ EC2.
  3. IaaS – Infrastructure as a Service is basically what AWS EC2 provides.  You can use this contingent infrastructure to spin up servers when necessary without having idle capacity that is not used most of the time.  VMware’s interest would be to either become the platform of choices for major IaaS vendors (not likely with Amazon doing everything in-house) or make it unattractive for IT Infrastructure folks.
  4. SaaS – There is no direct competition between VMware with software vendors that provide their products in SaaS form.  However, if enterprise IT moves to adopt SaaS in a major way, they will not need to run as many servers in-house.  As a result, there will be less need for virtualization software.  It can be a threat.
  5. PaaS – Microsoft has been pushing the Windows Azure Platform for a couple of years now.  They want ISVs to develop on their platform and then stay wedded through the deployment and service their end customers using Microsoft PaaS.  This can have a similar effect as SaaS in that it would shrink the footprint of in-house IT and reduce the market potential for virtualization.  Remember too, Google and Amazon are also vying for this space with their developer API offerings for developers.

VMware has been quite active in the Private Cloud area looking at their press activities, but this latest acquisition indicates that they are gunning for PaaS too.  I really wonder how well VMware can execute with this strategy, given that PaaS needs a significant invest in the operations capability.  It is not just building software and shipping it to IT customers.  They will also need to start pulling together a developer community who is traditionally more aligned with Amazon and Microsoft.

Also, there might be too much noise in this space already.  Amazon has significant mindshare and marketshare.  Microsoft has the advantage that they own the Microsoft platform.  I am not sure I see VMware being very successful with this buy but further analysis from others may reveal angles that I have ignored.    What do you folks think?

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to FurlAdd to Newsvine