You must be inclined to believe that running startups is easy. Afterall, financing has become easier, a large section of population is jobless and founders have innovative ideas. All these factors sound music to the ears. Until, you trudge into reality. It makes you realise why startup founders are selling their companies within a few years. This is where ZOHO’s Sridhar Vembu stands apart.
Vembu’s observations in the US
For a major part of his career, Sridhar Vembu was a typical Indian middle-class kid. He grew up in an average family, qualified for IIT, learned electrical engineering, and migrated to the USA for MS and PhD degrees from Princeton University. After earning his degree, Sridhar joined Qualcomm as a wireless engineer.
By the time he joined the industry, computer was big buzzword in America. Businesses were shifting from the real to the real world. Initially, companies were skeptical about them, so they preferred a gradual adoption of technology. Online networking was a pilot for these businesses. Sridhar observed that companies were content with the networking services but were not happy with the high prices they were charged.
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Initial 5 years gave mixed bag results
This is where he changed tracks. Sridhar aspired to provide cheap services to these companies. For low prices, low labour costs are a prerequisite. He made it possible by making Chennai the headquarters of Advent Net, Inc., the company he had founded.
It focused on providing network management software to small and medium businesses. Sridhar sold the software to foreign clients, mainly based in developed countries, and earned quite a good return.
Then, in 2001, the dot-com bubble burst. Advent’s US operations were in trouble as the client base declined by more than 90 percent. Other owners would have packed their bags and sold companies to big investors.
But Sridhar decided to use that year for research and development. From the feedback, Sridhar realised that diversification was the key. It would help him in vertical and horizontal integration with industry as well.
ZOHO- The arrival and strategy
Advent diversified, and now its software services are not confined to networking only. Sridhar and his company were now serving companies with software to manage sales, marketing, finance, HR, helpdesk, and customer relations management, among others.
One of the softwares launched by Advent was named Zoho. Gradually, Zoho Projects, Zoho Creator, Zoho Sheet, Zoho Show, Zoho Docs, and Zoho meetings became buzzwords.
The company sold these products in packets. For instance, suppose a small business is using Zoho Creator and Zoho Sheet and is looking for software for meetings. Zoho executives would ask company owners for a free trial of Zoho meetings.
Since Sridhar took care of quality control, customers were happy with the product. The price negotiation would involve offering a lower price than the market. The logic behind it is that Zoho’s production costs are low due to cheap labour in India.
Additionally, if the client buys a product and is happy, Zoho stands a chance to offer more quality products in the future. No wonder that, at a time when the recession was at its peak, Advent reached one million users in 2008.
Spend on Productivity, not marketing
Next year, Advent was named Zoho. The company is now wholesome and aatmanirbhar in itself. Sridhar has created a Zoho University to which anyone can apply. After getting the desired training, the person is hired by Zoho itself. It helps keep the cost low as IVY League and other high-profile engineering college graduates turn out to be expensive and not temperamentally fit for industry.
Today, Zoho has more than 50 products in its office suite. They are cost-effective and of high quality. We at TFI also use it for our internal operations. The experience is as smooth as it can get.
Riding mainly on the back of word of mouth, Zoho’s revenue has crossed $1 billion. While all other startups are spending more on marketing, Zoho is focusing on product efficiency. This is what other companies need to adopt.
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