Ted on Tech: Zoho and the business of business
I really don’t get out all that much. I’m pretty much a stay-at-home. But I do go to the occasional user group event and even more occasional analyst events. I mention this because a few weeks back I attended such an event hosted by the software vendor Zoho. They had some things to talk about that got me thinking about the accounting software market, and business software as a whole.
Let me be clear from the outset — this is not a review or a recommendation. I just thought I’d share some observations with you. I find Zoho’s approach particularly fascinating given that they offer their large stable of applications either for free, or for a very reasonable price per user. Of course, an increasing number of software vendors are following this pricing model, but Zoho appears to me to be somewhat ahead of the crowd, at least at this time.
One thing that becomes evident when you take a deep dive into Zoho is that unlike many cloud accounting software vendors, it isn’t primarily an accounting software vendor per se. Yes, it offers impressive finance bundle, but it also has strong CRM, project management and a potpourri of other capabilities. You need a website? It has a website builder. Office suite? Yep, it has one of those as well, and much more.
While I haven’t tested or evaluated how well each functions, the sheer number of applications the company offers stands out — everything from bookkeeping, invoices, expense management and inventory to CRM, analytics, spreadsheets, social media management, mobile device management, collaborative tools and much, much more. This might seem like a scattershot approach, but that might be a bit deceptive. Modular accounting applications are far from a new concept. Creative Systems (now part of Thomson Reuters) was using an underlying database decades ago, and it’s become common practice in the years since then. But Zoho has implemented this on a grand scale. I kind of think of its approach as Lego modules for building a custom business system.
On the technical side, Zoho’s infrastructure is tightly controlled. It's created its own operating environment and technology stack on top of the OS running its data centers. Zoho calls its Zoho One an “Operating System for Business.” There’s a tiny bit of hyperbole in calling Zoho One an operating system, but regardless, it does seem to provide tight integration for Zoho’s 45-plus applications. Many of these incorporate Zoho’s Zia AI functions, which give you natural language access to data across the installed applications.
On a side note, another interesting fact about the company is it is just about completely vertically integrated. It owns and runs its own data centers, rather than using AWS or MS Azure. This gives the company much better control over costs, and isolates it from rate increases on one of its core operating expenses. It even “grows its own” coders and many other employees, running Zoho University in India (with another on the way in Austin, Texas) to train programmers and other crucial employees through a two-year post-high school program.
So, is Zoho One an ERP? At the moment, the company isn’t quite claiming to offer one, but when you plug in the right pieces, it comes pretty close to what I consider an ERP, albeit, more for companies in the SME market. It’s not going to compete with SAP or Oracle Financials. At least not for now.
But ERP or not (depending on how you define ERP), what Zoho appears to offer is a business system that addresses as many areas of running a business as it can crank out applications for. The pieces are there to build some capable verticals, though there are still some gaps in exactly what kind of verticals you can assemble.
But, not to trivialize it, the business of business is to generate more revenue than expenses and to do so (in a macro sense), you have to ask and answer just a few overall questions: Are we making more than we are spending? If not, why not and how can we turn that around? And if the answer to that question is yes, how can we make more?
One of the presentation charts from Zohoday 2020 illustrates this nicely, and the chart is applicable and appropriate to many of the other offerings in the software industry from multiple vendors.
When you’re looking to advise your clients on what software to consider, it’s important that the software gives them the tools to answer these questions and to act on the answers.
Zoho has taken an interesting approach to this. Whether it’s a workable and desirable one is something only time will tell. But I find it interesting that a number of companies in what used to be a fairly stagnant market are really rushing to enhance their offerings with sophisticated technologies like artificial intelligence, advanced analytics, and a much more usable customer interface and customer experience. While the saying, “May you live in interesting times” was actually originally meant as a curse, in a positive sense, we are living in interesting times. And that’s a good thing.