Why Zoho Has a Manic Strategy for Selling Software

While many software start-ups focus on perfecting one product in an effort to get bought by bigger competitors, Zoho keeps adding to its massive list of applications that span the whole software market, competing with Microsoft, IBM, Salesforce.com and Google, just to name a few. The company is betting that the low cost of its products will allow them to stay in the game.

Despite selling products that inhabit a competitive landscape occupied by technology heavyweights like Microsoft, Google and IBM, Zoho keeps building new online software that consumers can use for free or that businesses can buy on a massive scale for dirt cheap prices. As struggling companies cut their technology budgets, Zoho has become a compelling option, says Raju Vegesna, the company's chief evangelist.

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"Business is really picking up," Vegesna told CIO at the Web 2.0 Expo here in San Francisco. "This downturn might actually help the low-cost technology providers like us."

Zoho, which derives its name from the term "small office home office," launched back in 2005. It's a property of AdventNet, a privately held company in India that handles IT support and data center maintenance. Because Zoho is a software as a service company, customers access its software over a Web browser and Zoho hosts all the information on its own servers.

For an upstart software vendor, Zoho sells a staggering (around 20) amount of applications. Many of the apps are available for free (for up to 10 users), while Zoho charges $50 per user per year for every user thereafter. From a word processor, spreadsheet and presentation app that competes with Microsoft Office and Google Apps, to customer relationship management (CRM) software for sales and marketing people that nibble at Salesforce.com's billion dollar business, Zoho and its 200 person developer team in India fearlessly create app after app, quickly sending them to market.

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"They're going for the shotgun approach," says Oliver Young, a senior Forrester analyst who researches the economics of software vendors. "Pull out as many apps and products as you can, and see what happens."

At the Web 2.0 Expo, Vegesna showed off Zoho's latest app, an instant messaging client. It allows users not only to connect with other people using Zoho, but they can also chat with contacts on their consumer AOL, Google and Yahoo accounts. Coupled with Zoho's existing e-mail client, it puts the company more firmly into the market for messaging software, which also claims the likes of Microsoft (with Exchange and its Outlook client), IBM (with Lotus Notes) and Google, which sells Gmail to companies.

Zoho makes the case to prospective customers that the emergence and proliferation of online software has created some problems concerning information management. If, for instance, you buy online customer service software from one vendor, and you buy online e-mail from another, those two applications (and the information contained within them) often don't talk with each other very well.

While Zoho's laundry list of applications might not be "the best" within each individual software category, they communicate well with one another. For instance, Zoho's CRM app can be used by sales people to track the activities of a customer. When you open the app, it will not only give you vital sales data, but it will show you all the e-mails, chats, documents and spreadsheets that have been created in regards to that individual customer in one unified view. This prevents employees from having to toggle between multiple apps to retrieve information, and ideally saves them time.

"We want all of our apps to work together contextually," Vegesna says. "This helps people do their work faster."

Zoho's strategy in the software market runs counter to many of its contemporaries. For example, Enterprise 2.0 companies — a niche of the software market where vendors mimic technologies popular in the consumer space like Twitter and Facebook and make them available for businesses to use internally — have generally thrived by focusing on doing one thing well (like, for instance, building a wiki).

Vegesna says such a model works for companies "looking to get bought, and we're not doing that because we're in this for the long haul."

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