Zoho sets out to challenge the software world

In mapping out the online office suite landscape, Zoho stood out as the most expansive and ambitious undertaking. Almost every week the company makes an announcement about a new application or feature.

In mapping out the online office suite landscape, Zoho stood out as the most expansive and ambitious undertaking. Almost every week the company makes an announcement about a new application or feature. This week Zoho’s Web conferencing application, Meeting, was opened for public beta. Next week Zoho for iPhone, which nicely presents Zoho apps within Safari on the smaller screen. (Zoho's Raju Vegesna: Zoho for iPhone is just an internal fun project we considered. I doubt if we will ever release it.)

Over the next few months the company is releasing Zoho Desktop, a user console for managing Zoho application and documents, and a Business edition that incorporates an administrative interface for managing users and applications. Further down the road, Zoho may even go upstream, adding ERP applications to its portfolio.

I talked to Raju Vegesna, Zoho’s articulate chief evangelist, about his company’s plan to keep from getting squished by Microsoft and Google or other competitors. “At this point it’s early in game. I think we’ll end up with two to three players—Google, maybe Microsoft, and us,” Vegesna told me.

Zoho already has far more comprehensive online suite, with offline capabilities coming in the near future, than its competitors. Beyond the usual word processors, spreadsheet and presentation modules, Zoho offers CRM, project management, database creation, Web conferencing and more are in the works.

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Quantity of applications and features does not equal quality. Zoho will need to make sure that its applications, hosting services and the integration among the pieces isn't second class. The switching costs are extremely low.

In September, Zoho will release a beta of the Business edition, which will support Writer, Sheet, Show, Meeting and Notebook on initial release, with other applications to follow, Vegesna said. In addition, it will have discussion forums and a blogging feature.

Notebook is a unique collaborative application that allows users to create pages including any kind of content and it integrates with Zoho and third-party applications. Each object can be assigned read/write or read-only access to other users, and multiple people can work on the same page simultaneously.

Zoho Business is aimed squarely at Google, which has had some success with Google Apps, which packages Gmail, Google Docs and Spreadsheets, Google Calendar, Google Talk, storage and your own domain name. The basic version will remain free, but Google Apps Premier Edition costs $50 per user per year and includes Google Page Creator, administrative capabilities mobile access, 10 GB of storage and support. Zoho doesn’t plan to charge for its Business Edition any time soon, and it will include more productivity than communications applications, which most people already have.

“It’s too early—we have nothing to lose by not charging,” Vegesna explained. “We plan to keep Zoho free as long as possible. Google is charging for Google Apps and it’s still not business ready, and we have more capabilities,” Vegesna told me. "When Zoho does start charging it will be less than what Google charges," he added.

If Zoho gets into a price war with Google, or Microsoft, it won’t win, so focusing on the quality and integration of the applications and gaining converts with free versions is a well reasoned approach. Currently Zoho address the small business market, but it has ambitions to move up the ladder.

“Micro-businesses are helping us get the story right,” Vegesna said. “At some point we will have an appliance for larger companies if the want to host it locally.” For offline access, given every suite is converging on the hybrid online/offline model, Zoho will adopt Google Gears, Vegesna added.

More near term, Zoho is working on a higher-end database solution. Unlike Creator, which is a forms-based database application builder, Zoho DB will handle search and import and export of data and tables from a variety of formats, including Oracle, DB2 and SQL Server, Vegesna said.

In addition, the company is considering some applications for HR and financial management.

Zoho is not exactly a fresh-faced, venture-backed startup. It has capital to invest in building a market without charging subscription fees for most applications. Zoho is part of India-based AdventNet, one of the larger software product companies in the country. Adventnet has more than 600 engineers, revenue in the tens of millions (Vegesna would say exactly how much) and is growing at a 40 percent year-over-year clip, Vegesna said.

Overall, the company will grow to about 1,000 employees by year end. About 120 people, almost all engineers, work on the Zoho suite, and another 100 employees will be added to the team in the next three or four months, Vegesna told me. Only two people are currently located in the U.S., but Adventnet is “going all out on Zoho,” Vegesna said.

Zoho is also bringing some of the AdventNet technology and products into the Zoho family. For example, Zoho DB is based on AdventNet's SwisSQL product. In addition, other AdventNet products, such as service and help desk, will be brought over to the Zoho side, Vegesna said. ManageEngine, the core of AdventNet's products for managing IT infrastructure in small and medium businesses, has over 700,000 customers (mostly for a free version), according to the company.

Zoho is built on Java and the company has built its own development environment and application server, optimized for its growing suite. At this point, Zoho publishes some APIs, such as one for providing third-party applications access to data. For example, online storage provider Box.net allows its users to work with Microsoft Word documents stored in their Box.net accounts using Zoho Writer.

However, the company hasn’t taken the step to become more of an open platform where third-party developers and system integrators can create add-ons or even new applications, as salesforce.com is doing with its Apex platform. “With Zoho Creator, any application built by the community will be available,” Vegesna said. Adventnet also has network of distributors, and it plans to allow them to rebrand, customize and resell Zoho applications.

Zoho has a long way to go to transform itself from an application suite to a platform that attracts developers who create a far richer and more diverse set of custom applications. The success of Microsoft Office is in part due to the large ecosystem of developers who target the suite. Salesforce.com, WebEx, SAP, Facebook and others are laser focused on attracting developers. AdventNet has distribution and experience in selling to larger companies.

Google so far has not done much to create a marketplace or expose its suite of apps to developers beyond mashups. You could speculate that Google wants to maintain more control over the applications to keep the user data flowing and to monetize the pages, but that seems very short-sighted.

Zoho reminds me salesforce.com in its early days—but without a Marc Benioff to taunt giant competitors and come up with slogans. Zoho does most of its talking with its rapid innovation and Vegesna’s persistent and omnipresent evangelism in the U.S. It’s not clear whether Zoho will be left standing when the smoke clears, but it is beginning to cast a larger shadow on the software landscape, and becoming an acquisition target.

See also Richard MacManus's comparison of online suites.

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