AdventNet, parent company of Zoho
Sridhar Vembu is frugal. Employing more than 600 employees in Chennai, India—plus fewer than 20 in Silicon Valley—cutting costs comes naturally to the chief executive officer of AdventNet, the parent company of on-demand office suite vendor Zoho. With its inexpensive office software, Zoho cuts corners in unconventional ways. For instance, Vembu recruits engineers from low-income areas in India. He spends time training young engineers, often fresh out of high school, to aid in Zoho innovation. In his blog—remarkably open and blunt, an unusual trait for a CEO blog—he writes, “Based on a few years of observation, [AdventNet] noticed that there was little or no correlation between academic performance, as measured by grades and the type of college a person attended, and their real on-the-job performance.”
Another revolutionary measure is that Zoho’s marketing efforts are slim to none. The organization relies mostly on word-of-mouth marketing and the “Try it free—buy it if you like it” approach. In his blog, Vembu points out that competitor Salesforce.com spends nearly eight times more on sales and marketing than Zoho does on development and research. (Did we mention he refused an acquisition offer from Salesforce.com cofounder, president, and CEO Marc Benioff?)
“It takes a lot of guts to break with the tried-and-true formulas of the past and [set] a different course,” says Laurie McCabe, vice president of SMB insights and business solutions at AMI-Partners. McCabe notes that Vembu’s refusal of Benioff’s overtures proves he’s focused on growing Zoho’s business, but not to a point where he wants to make it a “universal profit engine.” Zoho’s breadth is expanding—with 17 applications and four utility tools—yet the cost is still low.
In fact, “low” is an understatement: Zoho CRM is free for up to three users; a subscription to the professional edition costs just $12 per month. The privately held company is making money, but Vembu won’t say how much—perhaps because profit isn’t his driving force. “I think [Vembu] has a really different take [on] and approach to things,” McCabe says, noting that Zoho and other free models are putting pressure on the “big guys.” “I think he’ll shake things up,” she says. In many ways, he already has.
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