Will Zoho Conquer the SMB 2.0 Market?

Online presentations, spreadsheets, word processing, CRM, project management, recruiting, invoicing, human resource tools -- WOW!  Zoho has it all.  Naturally then I wanted to discuss the future of Zoho with Raju Vegesna (Chief Evangelist) as it relates to Enterprise 2.0.  It turns out not much - but not for reasons you’d expect.

If Enterprise 2.0 is about bringing web 2.0 technologies into the enterprise, then Zoho believes SMB 2.0 is about integrating those technologies into Zoho applications for the Small Medium Business (SMB) market.  More than integration, Zoho wants each of their applications to talk to the other seamlessly and without having to launch a separate application. 

According to Vegesna; “Social tools integrated with productivity tools then become powerful.”

He used an example of Zoho CRM tracking all of the activities of Zoho email automatically.  When a salesperson emails a prospect, that info is automatically entered into CRM without having to do it manually.  All of the Zoho applications will understand the context of the contact’s activities and respond accordingly.

Further defining the SMB 2.0 market, Zoho plans to release a kind of Facebook for the SMB market.  I asked Vegesna to expand on this topic, and he would only say that Zoho People will be evolving to help define this area. 

On Zoho Competition and Google Wave

When asked about developing a Web 2.0 tool like Google Wave for the  or building on top of it, Vegesna divulged, “we don’t see the value of Google Wave and it’s too confusing.”

I then wanted his perspective on SalesForce Chatter and the Social CRM space.   He sidestepped a direct response to Chatter but did mention that Zoho People will soon step up and be a much better solution.  

Interestingly, Vegesna believes Social CRM is a temporary bubble and that 95% of their customers prefer a simple solution to manage their customers. The Social CRM crowd may want to respond here.     

He did circle back to SalesForce the company and recognized that they did a great job of taking applications in the cloud to the next level.  Yet he doesn’t like their traditional sales approach where 100’s of salespeople sell Salesforce, and believes the Zoho model of “we don’t sell software, we let customers buy it” is superior. 

Vegesna believes they will cede some business to Microsoft and Google, but will remain profitable due to their unique sales approach. Vegesna adds: “Zoho advantage is not being VC backed. We can take our time. Our competitors competitor is our friend, and we will make good partnerships with them.”  In effect, they are not constrained by not invented here syndrome. 

He closed out his views on competition by hinting that Zoho wants to add the ability to have their applications work across competitive applications.  Perhaps Google Apps or Microsoft Live Office integration? 

On Building a Zoho Customer Community

Vegesna admits they have not done a great job in building a community around their customers and hopes to change this in 2010.   Yet their early experiments on Twitter and CloudAve (disclosure I write for Cloud Ave) have been successful.

His basic philosophy on Twitter is use common sense and do no evil.  Looking at the past few months, the Tweets have been focused on solving customer issues and introducing new Zoho features. 

My Perspective:

Zoho applications are fast.  More, I like the applications better than Google Docs.  But it’s missing a few major things that are keeping the company from owning the SMB space. 

While the company has come along way in creating great point solutions for the SMB, the company has trailed companies like Salesforce in developing Web 2.0 products (or enabling Web 2.0 functionality in their existing applications). 

Below I outline three major strategic opportunities Zoho can execute on in 2010 to be the SMB 2.0 leader. 

Strategy #1  Business Productivity Platform: Zoho can take a giant leap forward in terms of SMB adoption if they created a Zoho Intranet 2.0 platform that intuitively connects employees, Zoho applications, and content.  In other words, a better SharePoint aimed at the SMB. 

Currently, Zoho users start in email (Zoho Personal) and launch point applications as needed. There’s no connective tissue with the rest of the organization.  Which means users are individual silos.       

Strategy #2  Build Community:  The need to develop a Community for the SMB that helps them with their three main priorities: profitability, connecting with customers, and company awareness is paramount.  Vegesna hinted at this during our Q&A, but they need to go farther.

They could use American Express’s Open Forum as a starting point but take it to the next level by letting small businesses share templates, share best practices, building customer lists and consolidate back office activities (e.g. outsourced HR or Accounting).  SMB’s need to learn how to utilize Web 2.0 technologies or risk losing ground to the competition.  Zoho should later verticalize the information by industry so as to become the defacto hub for the SMB market.     

Strategy #3 Strategic partnerships: Zoho has a large advantage over Microsoft and Google in the area of developing partnerships.  Because of corporate politics, the two behemoths simply can’t partner with competitors or potential partners that compete with divisions within the companies.     

Being agnostic, Zoho has a competitive advantage they have yet to exploit.  A review of their partner pages illustrates the point.   Partnerships with companies like Intuit, Adobe, Xtuple and Cisco will go a long way in developing Zoho into an SMB powerhouse.   

In summary:

Zoho is not focused on the Enterprise.  Yet they have parallel goals to Enterprise 2.0 vendors who are growing rapidly (SMB vs. Enterprise).  Moving the SMB market to SMB 2.0 is a huge opportunity where Zoho can capitalize. 

Zoho should Adopt the SMB 2.0 moniker and own it.  Educate the SMB market on a more productive and innovative way of doing business by using Zoho.  Keep it simple but glue the applications together into a unified communication vehicle. 

Remember that SMB decision makers primarily buy software through word of mouth and trusted media sources.  Help SMB’s toward the goal of winning over their customers and beating their business objectives. 

It builds trust while creating more Zoho customers.   And their gain is your gain.