Digital Media Buzz > The Gadfly and Goliath: Vembu Challenges Microsoft

The Gadfly and Goliath: Vembu Challenges Microsoft

By Ned Smith

The Economist called Sridhar Vembu a “dangerous man.” If he achieves his goal of removing the “value-pad” from business software, the publication reported in 2008, “a lot of people will lose a lot of money; software developers, consultants, shareholders and others.”

Vembu didn’t originally set out to be the gadfly of the software world; a graduate of one of India’s top engineering schools, he had his eyes on pursuing an academic career after he completed his Ph.D at Princeton in 1994, but was disillusioned by the “paper-shoving and the tenure-chasing.” Instead, he answered the call of the sirens of Silicon Valley. Academia’s loss turned out to be open-source software’s gain.

Vembu is the founder and CEO of Zoho, a privately held company that offers a comprehensive suite of some 20 low-cost, web-based applications for business that range from word processing, spreadsheets and email to web conferencing, databases and CRM. Zoho is the Swiss Army knife of office productivity software; if you have a business need, it has an app for that.

Founded in 1995 in Pleasanton, Calif., a hour east of Silicon Valley, Zoho is profitable with annual revenue of more than $50 million and has continually spurned venture capital and bank loans. Its major competitor in web-based office productivity applications is Google, but Zoho’s  menu of comprehensive applications and budget-pleasing business case makes it a potent competitor to the business productivity applications Goliath, Microsoft.

Zoho is clearly on Redmond’s radar. When Microsoft recently announced price cuts on its Business Productivity Online Suite, the company took advantage of the occasion to take a swipe at the competition. “We’re not seeing any inclination that Zoho or Google or Zimbra or any other of those offering fake Office capabilities can replace [Microsoft Office],” said Ron Markezich, corporate VP of Microsoft Online.

Did Zoho tremble? Not hardly. Vembu reacted in his customary feisty fashion. “Wow, wow, wow - Fake Office!” he wrote in a widely circulated email.  ”That is indeed a badge of honor for us. We just have a polite suggestion to Microsoft: to be perfectly consistent, Microsoft should also label their Bing ‘Fake Search’ - fair is fair, right?”

And Zoho retaliated against the latest rant from Redmond by launching fakeoffice.org, complete with its very own YouTube video, “Fake Office - The Movie.”

What is Zoho’s role in the cloud computing ecosystem?
We view ourselves as the “business operating system” - something a customer tweeted about first! Our goal is to be the extended IT department of small to midsized companies, giving them a rich, integrated suite of online applications, priced very affordably.

Zoho already offers 20 different services. What new service offerings are you working on?
We do not pre-announce products. Basically our product strategy is to offer an end-to-end business oriented applications suite, targeting the needs for SMBs, affordably priced. We bring depth of functionality and integration as our key differentiators.

What trends are driving the adoption of cloud computing?
These are the broad trends: 1. Increasing productivity in both delivering and deploying cloud applications. We get to develop and deploy applications faster, with fewer people; our customers get to consume these applications without the huge headaches of traditional systems management. 2. Such productivity gains translate into cost savings - because of our own cost savings, we can price cloud applications cheaper.  3. Integration costs are substantially lower.  4. Increasing mobile adoption - the future cloud client may well be a smart phone connected via USB to a keyboard/display device - the “network computer” is really a smart phone!

Is application integration the next frontier in cloud computing?
Absolutely. In fact, we believe cloud computing represents a breakthrough in application integration, because of easy web service interfaces and lighter integration approaches like REST (Representational State Transfer). A key part of Zoho’s differentiation is in the comprehensive integration we are doing across our document-centric (mail, office suite, wiki, discussions) and our structured data centric (CRM, Project Management, …) applications. In particular, the way we have integrated CRM & Mail is a signal of things to come.

What are the greatest technical challenges facing cloud computing? How is Zoho addressing them?
Earning customer trust in the security of the cloud is the single biggest challenge for all cloud vendors. We take security very seriously, and have an active security research team. If there is one thing we are paranoid about in Zoho, it is security of our customer data.

Does Microsoft’s entry into the world of cloud applications with the next-generation Office 2010 send a signal that cloud computing is now mainstream?
It does. Microsoft has been lukewarm in its approach to cloud computing, promising to come out with its full stack in one breath, while defending its existing cash-cows in another. It makes sense from their perspective: they have a lot to lose in the cloud evolution, because unlike the desktop world, the cloud computing application space is going to be far more competitive. I have argued that they have to get used to more earthly margins, always a hard thing to do for any company.

You’re not intimidated by the Goliaths of the software world and have taken potshots at organizations such as Safesforce and Microsoft. Who’s next on your “dis” list?
I like to think that what I am doing is to point out who is on the right side of history here, so to speak. We compete with Google as much as we compete with Salesforce, but we also love Google here at Zoho, and cooperate with them wherever we find common ground. My issue with Salesforce is their bloated business model, something we are very happy to compete with.

What’s been the reaction to fakeoffice.org? Does Redmond have a sense of humor?
The reaction has been overwhelmingly positive. I am not sure if that is what they intended, but I think even Redmond would have had a chuckle!

Ned Smith is a New York-based writer who reports on business and technology. He can be contacted at nedsmith@gmail.com.