Why Zoho Wants to Be the Operating System for Businesses

The vision of Zoho Corporation is to become the “operating system of business.” Originally founded in 1996 as AdventNet Inc., a network management company, Zoho changed gears in 2005 to focus on cloud-based services for businesses. Since then, Zoho’s offerings have grown to include 34 Web apps and 30 mobile apps for running all aspects of a business, from project management and human resources to email and social media tracking. In 2008, the company hit one million users. Today, that number exceeds 20 million. As I found when I recently visited Zoho’s headquarters in Chennai, India, the company’s do-it-all, full-services approach is not reserved only for its customers.

At Zoho’s rapidly growing campus, more than 3,000 people work, eat, and play (cricket, of course). The campus has all the perks you’d expect in a successful and progressive tech company: three complimentary meals a day, shuttle vans that allow city commuters to avoid the stress of driving, an open office plan where nobody gets a private office, and bicycles for an eco-friendly way of getting from one end of campus to the other. A man-made lake is currently in construction. Workers are encouraged to spend a portion of their work time on pet projects. A botany consultant has selected species of native trees and flowers to line the outdoor walkways between buildings.

It might sound like the heyday of Google, but it’s happening far from Silicon Valley, in South India, where arranged marriages, traditional saris for women, and sarongs for men are the norm. The company’s Indian roots and unique culture are driving innovation in a different way from what many in the tech world are used to seeing from software giants such as Salesforce, IBM, and Microsoft. As I learned, the perks and general setup may be similar, but the mentality and motivation come from somewhere else.

Company Culture, Local Flavor

Hari Narayanan, a product marketing manager at Zoho, found me online in early 2016 and emailed me, somewhat out of the blue. He had read my review of Zoho Project and noticed on social media that I was in his geographic neck of the woods. In the tradition of South Indian hospitality, he extended a warm welcome and invited me to come see the office any time, or at the very least watch some aerial drone footage of “the bucket,” as the main Zoho building is affectionately known, and the rapidly expanding campus around it.

A few months later, I was driving down to Estancia IT Park to meet the CEO, talk to employees, and tour the campus.

Before my visit, I asked Narayanan about Zoho’s company culture. Even though Zoho’s Chennai campus holds thousands of people, he said, it replicates a small cottage-industry setting. Lunch conversations are common, as are small, informal gatherings throughout the day. People are encouraged to come up with new products. “Other companies make software like it comes out of a factory,” he said. “We want to look at it like a craft.”

Sridhar Vembu, Zoho’s CEO and cofounder, is effusive about R&D, and Zoho puts out a lot of apps. “It’s the kind of environment where innovation can happen. The management tells me, ‘Take this budget, try [what you want to do], and if you fail, it’s okay’” Narayanan said. “People give us the freedom to make mistakes.”

In contrast, Narayanan sees a lot of companies in the U.S. tech scene that “find it hard to build even a second product.”

Zoho is very informal, with few rules, he added. Employees dress casually. Vembu, when he’s visiting, throws down his laptop at a free desk that looks like every other desk. (He lives in California but returns to Chennai regularly.) Because “the bucket” is cylindrical, no one is far from a window and there are no corner offices. Business hours are flexible.

The Operating System of Business

It’s a typical blazing-hot and humid day in Chennai as I drive down a dusty highway and spot the bucket, an unmistakable landmark, even though it’s set back from the road a bit. After a swift paperless check-in, I’m ushered to a bank of elevators, sent up a few stories, and brought to a conference room where I wait with Aravind Natarajan, who handles PR at the company.

We make small talk, and I pepper Natarajan with questions about the campus. From our vantage point on the ninth floor, I can now see the massive construction project underway. I assume an assistant will fetch us when the CEO is ready to meet, but the first person to come knocking is Vembu himself. No private offices mean we stay in the conference room.

Vembu leans back and lifts his chin when he speaks, his whole upper body relaxed. He’s so soft spoken that at times it’s hard to catch every word of his quick-cadenced Indian English. But his opinions are unmistakable. He is at the same steadfast level of calm when he calls higher education in the U.S. “a scam” as he is when he offhandedly mentions that he’s looking into building a hospital adjacent to the office so employees and their family members can have reliable access to medical care. He is bullish on R&D and eschews venture capital funding.

I asked Vembu to explain what becoming the “operating system for business” means. The same way an operating system runs a device, Zoho will run businesses, he responded. An operating system handles many core functions of a computing device, and the OS is typically the same across many devices, regardless of the user. The applications on the computer, however, are specific to each owner, so Zoho wants to deliver the core functions that are common across all businesses, he explained.

“There is no business without customers. There is no business without employees. All those things are common,” he said. “But then, once you get to specifics, a software business is different from an insurance business is different from an automotive business. So the operating system that we envision is something that addresses the horizontal layer. Then you have applications that deal with the specific vertical layers of business.”

Before the era of cloud computing, the very concept of a company becoming the OS of business was impossible, Vembu said. “The technology of your traditional enterprise software did not permit this. Even though companies attempted it, you had too much fragmentation.

“Traditionally, your sales function would not talk to your accounting function. Your accounting function would not talk to HR. Each was a disparate island of software, loosely integrated with massive expense. In fact, a massive IT industry exists to do that limited integration. But now, in the cloud, you can think of it as one unified solution,” he said. All the apps can talk to each other, as it were, because they’re built on a “unified data source.”

Vembu brushed off a question about the economic advantages of doing business in India, saying every tech company has offices here. “That is not as much an advantage as the whole strategy of building our whole common foundation, common framework. There are intrinsic gains we get from building it all together,” he said.

For instance, SurveyMonkey has close to 500 employees whereas Zoho’s competing tool, Zoho Survey, has about 25 people assigned to work on it. Similarly, Zendesk employs more than 1,000 people, but Zoho Desk has about a tenth that number. “We have 35 or 40 people in our security department,” Vembu explained. “We can secure Zoho Desk and Zoho Survey and Zoho Mail, all of them, using the common security expense. We don’t have to employ security experts for each and every one, which is what each of these companies out there have to do. They have to hire data center experts, security experts, people who QA the software. Those are very generic functions. It doesn’t matter if you’re building a CRM system or helpdesk software. The expertise is the same. We’re able to leverage across a lot of these products. It’s traditional economies of scale applied to software.”

In the last few years, Zoho has been through a major growth spurt. It hit 1 million users in August 2008, 5 million by January 2012, and 10 million by February 2014. Now, two years later, it has doubled again.

Of Zoho’s apps, Zoho Mail has the largest user base, but Zoho CRM has the largest customer base and is by many accounts the company’s best known product. All told, the company has more than 100,000 customers. In the software business, customers are often a more clear indicator of size than users (because a “user” can be anyone who created a free account, even if the account was never actually used). To put Zoho’s 100,000 into perspective, Salesforce reported having more than 150,000 customers in its 2015 report [PDF].

The U.S. accounts for about 50 percent of its business, but Zoho’s fastest growing markets are the U.K. and Latin and South America. “Their businesses need software,” Vembu said of Mexico, Chile, Colombia, Argentina, and Peru in particular. “They could not afford traditional software. It’s too expensive. Now, with it in the cloud, they can get the software, get started, and it’s more affordable. It’s a huge leap.”

I asked Vembu for his take on the corporate culture. “Walk around, you can see it,” he said. “You cannot tell who is a manager and who is not.” During cricket season, he added, people half joked and half complained that nothing got done, “but we managed to ship a product during that time!” He called his employees “playful” and said Indians in general are easygoing. “We don’t take ourselves too seriously. We don’t have this feeling like we need to be number one in this country as much.”

Building Out

Zoho’s headquarters are in an expansive IT park on the outskirts of town. The company moved there a few years ago to get out of a more crowded section of Chennai called Velachery, where it was quickly running out of space. The new site is on nearly 45 acres, much of it still undeveloped. A massive project is in the works to build multiple offices that will become the workplace for 8,000 to 9,000 employees when it’s all finished.

On the third floor of the bucket is a scale model of the final campus, which Vembu estimates will take four or five years to complete. The model shows a sizable man-made pond and a series of curved buildings spooning each other in such as way as to create little streets between them. Vembu told me it will have a “European feel.” Currently, the site is an open and dusty parking lot that bakes in the sun. Vembu pointed to a picturesque clock tower at the center of the model and said it is his ode to Princeton University, where he completed a PhD in electrical engineering.

At the far end of the campus, one of the arc-shaped buildings was more than halfway completed when I visited with Vembu and Natarajan. We walked along shaded pathways dotted with outdoor tables and benches for grabbing a quick coffee, tea, or buttermilk, a local favorite. Native plants and palm trees had already taken root. The palms will grow to full size quickly in the tropical climate, Vembu explained, replacing the artificial shade over the walkways in just a year or two. Vembu seemed to take an active interest in every detail, right down to which species of palm were used. An initial batch of trees were uprooted and removed because they weren’t coconut palms.

Outside the arc-shaped building, we stopped to admire some Roman-inspired columns that create a dramatic entry. Inside, employees had already set up shop on the ground floor. One enormous room the entire length of the building stretched before us. People were quietly clicking on keyboards and whispering to one another in small group meetings. The space was cool and tranquil, although poured concrete floors caused every word above a hushed tone to reverberate from end to end. All the overhead lights were off when we arrived (Vembu switched them all on for my benefit). It felt as if everyone was afraid too much light might cause a surge of energy and break the delicate state of calm they managed to achieve in the cavernous space.

In addition to several large office buildings, the scale model includes a school, which has already been built. A nearby local school where employees’ children might have attended “didn’t have enough space to admit a lot of children,” Vembu explained. “So we built an extension on our side, on our land, with capacity for about 1,000 kids, with the understanding that they will admit our employees’ children” alongside the existing students. The school has classes for kids in pre-K all the way through the equivalent of high school. “We also conduct daycare there,” Vembu added.

An ambulance parked in front of the bucket prompted Vembu to explain that Zoho keeps a private ambulance on hand; with more than 3,000 people on site, something is bound to happen. And in a country where infrastructure is poor and getting an ambulance might be a crapshoot, Zoho decided to keep a private one on call. For less urgent matters, a cardiologist who formerly was based out of Chicago is available as the resident doctor for employees and their kids a few hours a day, five days a week. While it’s not in the scale model now, Vembu envisions there might be a full-service hospital here one day.

Despite all the plans for schools, hospitals, clock towers, and buildings with Roman columns, there’s still a lot of undesignated space. Vembu wants to keep it that way. “We moved out here for the space. Really, space is a big problem,” Vembu said. “Space not only to work, but to think, to walk, to play. We don’t want to cram it full of people so we can’t have room to play.”

India is densely populated. It’s roughly one-third the size of the continental US (it helps to visualize it with about four times the population. Still, Vembu believes open spaces are a major contributor to mental and physical wellbeing.

“When I was a kid, I picked up a taste for running around alone. I like to give that same thing to other people,” he said. “We under-appreciate the importance of space now. Once you experience a spacious area, it has a psychological effect. You think more expansive thoughts.”

A Strategy for the Future: Ambition

To some, Zoho’s plans might sound a little too all-encompassing. Zoho will shuttle you to and from work. Zoho will make sure your children get an education. Zoho has a doctor for you. Zoho University, a paid training program, teaches young recruits how to become a programmer or engineer so they can one day become employees. New apartment high-rises conveniently located next door aren’t owned by Zoho, but they sure aren’t invisible either.

It’s not uncommon for Indian corporations to provide comprehensive perks and benefits to employees, though. The reason? “We don’t have infrastructure,” Vembu said. “In India, we’re in a state of building.” Local governments have no money to build parks, he said, let alone large-scale projects that cities and towns need, such as sanitation and water treatment system. “So the private sector has to do more. Unlike China, we are not a government-dominated country. I see it as part of our responsibility to fix some of it, at least in one town.”

By any account, Zoho’s campus construction plan is as ambitious as its goal to become the operating system for business. Vembu uses that word, “ambitious,” often. His company’s goal is “hugely ambitious,” he says. “It would be ambitious even for Microsoft at this scale.” The products Zoho employees build are ambitious. For several years in the 1990s, Vembu worked for Qualcomm, before it was a multibillion-dollar company, and he attributes much of its success to “being intentionally ambitious.”

At the day-to-day level, Vembu’s ambitions are to answer to two constituencies: customers and employees. “You don’t exist in business if you don’t take care of the customer first. And you cannot have any employees if you don’t have customers,” he said. “So customers come first in everything. We are always looking for how we can give them better software, better support, and charge them less. That’s what I’m constantly looking for.”

To deliver this value to the customer, however, requires “employees who trust the company long term.” The campus, the benefits, open space, and play time are all aimed at convincing employees to stick with Zoho.

“Extensive turnover is a killer of customer satisfaction, more than anything else, because you don’t have continuity, you don’t have software quality,” Vembu said. “A lot of management teaches that people are small, replaceable parts. An engineer is doing some job, and when that engineer leaves, you put another engineer in the job. But that’s not actually true. In reality, anything worth doing, anything really tough takes a long time to master. We need to rethink keeping people long enough for them to learn and have continuity. The continuity is important for the customer. We have to take care of our employees to take care of our customers. That’s the truth.”

One group that Vembu doesn’t have to answer to is investors. He has disdain for venture capital funding and Wall Street. “Once you financialize a company — that’s what I call what VC funding does — in effect your goal is toward liquidity, either an exit through acquisition or through an IP holding. The whole thing changes. No matter how true you try to stay to your mission, you necessarily have the quarterly pressure of Wall Street. They’ll give you the freedom as long as you are giving them numbers,” he said.

“In business, often you have to take some unpopular position, or you’re interested in some area that Wall Street doesn’t believe in yet. Or long-term projects,” Vembu said. But investors see financial results quarterly, which makes it very difficult to prove the value of projects that take more than a few months or that aren’t popular at the moment. “If you don’t take their money, you don’t have to report to them. It’s that simple.

It is a refreshing change of pace from other businesses in the tech world, where overhyped IPOs and acquisitions always hold the spotlight. (Who will buy Yahoo? How much is Snapchat worth? Is Facebook overvalued?) As much as campus life at Zoho seems to have taken a page from late 1990s Silicon Valley culture, it’s conducting business differently, focusing strongly on R&D, creating dozens of products instead of one killer app, and making long-term investments in its people.

“I don’t think of this company as just as an economic entity to profit maximize. It’s a social entity,” Vembu said. “Beyond a point, I just don’t see the point of bankrolling. I have enough cars. I have enough houses. I don’t need more.”

For more, see PCMag’s full Q&A with Vembu.

Originally published at www.pcmag.com.