Outliers 66: How Zoho works

Pankaj Mishra August 3, 2018

In June this year, we broke away from the mould to bring you companies, not just people, that are outliers with How AngelList works. If there’s one thing common in most of the companies that appear outliers, it’s their founders. From Steve Jobs to Elon Musk and even Jeff Bezos, the founder’s mentality continues to shape Apple, Tesla and Amazon. These founders are almost inseparable from their companies.

I first discovered Zoho, the cloud software company, in 2010 when I wrote this story about how it was hiring talent from unconventional places. Sridhar Vembu, the Zoho founder who we hosted for the 27th episode of Outliers podcast last July, is an outlier for many reasons. For instance, amid all the startup frenzy, he believes in “slow laddering” or building a company slowly, one step at a time. And to top that, he’s shunned venture capital and said “no” to an over $25 million acquisition offer from Salesforce during the early days of Zoho.

Zoho, the cloud software company with estimated revenues of over half a billion dollars, is an outlier for many reasons. For over a decade, Zoho has been hiring students from government schools and colleges and turning them into software programmers. Such students will constitute nearly half of the company’s over 5,000 workforce very soon.

And then, there’s a strong growing “Zoho mafia”, too, wherein former employees and leaders including Freshworks founder Girish Mathrubootham and Chargebee’s co-founders are building the next generation enterprise software companies.

Why Zoho exists: Sridhar Vembu

“Zoho exists because India exists. I always thought that if I were born in a different country, I may not have been an entrepreneur. I actually wanted to become a professor, to teach, publish papers. But growing up here…surrounded by what you see, at some point you ask, ‘Why are we so poor?’” he tells me.

“I realised you have to be building a lot of things to skip poverty. And I am the kind of person who will say, ‘What am I doing about it?’”

“So, in a sense Zoho exists because India exists and it continues to exist because some 27 million kids are born in India (every year), and in this state of Tamil Nadu the number is around 1 million. That’s actually the same number as all of Japan’s. And you see the number of companies, the brands from Japan….”

“South Korea has around 45 million population and Tamil Nadu has about 72 million people. Which brands are popular worldwide?”

“It’s not just about the brands. It all correspondingly translates into jobs, incomes, infrastructure, all of that.”

“If we are not able to create world class products and world class companies here, then we will never have world class incomes, or world class healthcare. In other worlds, we cannot consume if we cannot produce.”


How Zoho builds products: Shailesh Kumar Davey

“Our engineering department is like Rahul Dravid — scores slow but steady. I even call this a Dravidian phase of development, not because we are based in south India — I dedicate it to Rahul Dravid. The engineering is more tuned towards that approach,’ he says.

“All of us agree that making products is like preparing for a movie release. So, out of the ten movies you make, two of them will be superhit and others not so successful. Success of a product is based on how many people pay for it. Each of our service teams across 40 product lines are aware of the monthly revenues.”

“At the engineering level, we are now tracking usage. Over past 15 years we have been revenue focused, but now we are looking at feature usage. How many customers are using a product, and within that a particular feature, and so on.”

“One of the good things about Zoho is that most of our hires are freshers, and they stay through. More than 90% of our managers are homegrown. Because we have had people working for long terms, we can do knowledge transfer just by sitting next to each other. Working together for long reduces friction.”

Inside Zoho University: Revathy Durairajan

“When the six of us joined, we knew where a computer keyboard is and mouse is, that’s all. Later we were taught programming here as part of 18 months training,” she says.

“I come from a very poor family,” Durairajan adds.

Durairajan now leads iOS development for some of Zoho’s software products including Zoho Recruit.

“My professor in school used to tell us you should aim to work at Google and Yahoo. But Zoho is now competing with Google, so why to go there?”


Inside the Zoho apps: Rajendran Dandapani

“There was a time when Zoho was talked about as an engineering company, even today it’s an engineering company. User interface design was done by engineers, too. But over time, things changed,” Dandapani says.

“Today, we started realising that individual brilliance isn’t enough. … a couple of months ago, one of our customers said, ‘Every one of your interface is good, but why do they look different?’”

“So now we are back on the drawing boards.”



Disclosure: FactorDaily is owned by SourceCode Media, which counts Accel Partners, Blume Ventures, Vijay Shekhar Sharma, Jay Vijayan and Girish Mathrubootham among its investors. Accel Partners and Blume Ventures are venture capital firms with investments in several companies. Vijay Shekhar Sharma is the founder of Paytm. Jay Vijayan and Girish Mathrubootham are entrepreneurs and angel investors. None of FactorDaily’s investors has any influence on its reporting about India’s technology and startup ecosystem.