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Zoho (Finally) Goes Upmarket
Welcome to The Digital Experience Report, your source for news, analysis, and insights on the ExTech (Experience Technologies) market and all things related to the Digital Experience.
In this report, I go deep on Zoho's long-anticipated move upmarket and how it may be indicative of newfound receptiveness for broader platforms within the enterprise. Also new studies from Riverbed, Optimizely, Elastic, Accenture, Citrix, Gigamon, and Digibee. Plus news from SugarCRM, Appian, Robin, Boomi, Microsoft, Algolia, Freshworks, 8x8, Dynatrace, Retool, UiPath, Arena, Workato, and AISERA.
Zoho (Finally) Goes Upmarket
After years of dithering, Zoho is finally prepared to make an earnest effort at selling to larger organizations — but is it still selling itself short?
Zoho is a technology company that defies simple definition. It offers a massive suite of over fifty applications. It has long focused on serving its bread-and-butter market of small and medium-sized businesses (SMBs). Even its name evokes the concept of the "small office/home office" ethos.
At the same time, however, it has built a fully-owned, vertically-integrated tech stack that it operates in its own globally-distributed network of data centers, rivaling some of the world’s largest public cloud providers. It has also been steadily developing and releasing developer-oriented tools and offerings that include serverless functionality (Zoho Catalyst), workflow automation and orchestration (Qntrl), and a low-code offering (Zoho Creator) that are well-suited to larger enterprises.
From a business software standpoint, several of its solutions are clearly enterprise-class. Its CRM offering (Zoho CRM) has received numerous awards, with many analysts seeing it as on par with Salesforce's industry-leading offering. Across a large swath of solutions, including business intelligence and analytics (Zoho Analytics), marketing (the Zoho Marketing Plus suite), and even finance (Zoho Books), Zoho has racked up an impressive set of larger-than-SMB clients across its global footprint.
Yet, it has steadfastly resisted moving upmarket and intentionally selling to these larger organizations.
Zoho Takes a Step Upward
As an enterprise-focused industry analyst, I have long seen the potential appeal of Zoho's large integrated suite to the small-to-mid-sized enterprise market (what I call the SME space and generally define as organizations with $300MM - $2B in revenue).
From my perspective, Zoho solutions deliver most of the enterprise-class functionality that these organizations require and combine it with the rare combination of pre-baked integrations, high levels of customization, and low costs. But in past conversations with Zoho executives, they were reticent to shift their focus and market approach.
The reason made sense. While many of its products may be enterprise-class in terms of functionality, SME buyers require a different type of sales process and support model than SMB customers. And the company was not prepared to alter how it served them.
But during its annual analyst conference (ZohoDay), held at the end of July in Austin, TX, the company signaled that it was ready to take the steps necessary to move upmarket.
Chief Strategy Officer, Vijay Sundaram, announced that the company was investing in separate sales, solutions consulting, account management, and support teams to go after these small and mid-sized enterprises directly, with an initial focus on the US and Middle East markets.
Sundaram stated that the biggest reason for the move up-market was that large customers independently acquired its applications and pulled them into the space. (For the record, I think it was the constant badgering by me and other enterprise-minded analysts, but I digress!)
This pull into larger organizations was evident in conversations with several enterprise executives attending the event. Many of them told me that they had moved off more traditional enterprise apps to solve a specific use case and then expanded their use of the company's suite over time.
The Operating System for the Non-Enterprise?
I think this move is long overdue and am eager to see how these small and mid-sized enterprises react as Zoho enters this space in earnest. What I’ll be most interested in, however, is the application spread as it does so.
In addition to selling each of its applications independently, the company also offers Zoho One, a single, per-employee subscription that includes access to most of the company's applications. Its go-to-market tagline for Zoho One is the operating systems for business.
However, this is not its apparent strategy as it moves upmarket.
During the announcement, Sundaram said that the company does not currently intend to focus on bringing the entire suite to this market. It will emphasize, he said, its offerings around CRM, Help Desk/Customer Support, Billing, Business Intelligence (Analytics), and custom solutions via its Zoho Creator offering.
While I'll be the first to say that not all of the company's applications are enterprise-ready, I believe the company may be mistaken in thinking that the operating system for business concept only applies to smaller organizations. From the perspective of putting forth a vision into the market, a mission to deliver a comprehensive "operating system" of all the applications an organization may need to run itself is compelling — for everyone but perhaps the very largest of organizations.
The power of this particular statement is even more potent in Zoho's case, with all of its applications built from the ground up (no acquisitions) on a single, unified data platform. The result of this architecture is a native integration layer that is almost impossible to achieve in any other way.
While the company occasionally stumbles in executing this cross-application integration, the architecture is sound. And likewise, while few enterprises will adopt the Zoho suite in its entirety (especially at initial purchase), the mission and the vision it represents are enticing.
The Platform Gains Traction in the Enterprise
As I spoke with enterprise executives at ZohoDay, none of them had adopted the entire Zoho suite (although Zoho executives did tell me that several enterprises in India have done so). Still, each of them told me a similar story about how they receive greater value as they adopt more of the suite.
As you might expect, this value comes from reducing friction as business processes, employees, and partners must interact with various elements of the organization's data and technology stack. Through its integrated and unified architecture, and the fact that it can employ things like single sign-on, unified analytics, and pre-built integrations, it takes much of the burden off enterprise leaders who would rather be spending their time on business-oriented rather than technology-centric activities.
At the same time, the company has made significant strides in reducing the historical cost of these types of integrated platform market plays by allowing for substantial non-coding customization and easily integrating with other non-Zoho enterprise applications (including through its own integration hub, Zoho Flow).
This reassessing of the balance between integrated platforms and best-of-breed solutions is something we're seeing play out across the enterprise tech landscape. Salesforce's acquisition of Mulesoft, Tableau, and Slack, combined with their existing CRM, support, and marketing suites, is a clear example. So is ServiceNow's expansion into functional apps and its broader push into workflow automation.
Enterprise leaders are rapidly recognizing that they will rarely find competitive value in these types of run-the-business applications. Instead, they are finding that they must focus on two things as they build out this part of their tech stack: creating a seamless flow of data between systems of record and engagement, and minimizing the friction as employees and business processes traverse the enterprise landscape.
Increasingly, enterprise leaders will look to integrated platforms that help them simultaneously achieve both of these goals. And dare I say, they’ll be looking to create their own “business operating system” to do so.
Zoho should be well positioned to help them achieve this goal if it seizes the moment and embraces its own vision.