The privately held company has been around since 1996, and was offering online productivity applications for several years before Google entered the market with Google Apps in 2006. Google’s move didn’t hurt the company at all, but instead drew more customers into the cloud. According to Zoho product evangelist Raju Vegesna, Zoho saw its growth rate increase sevenfold in the year after Google Apps launched.
Zoho thinks Microsoft’s entry with Office 365 will have a similar effect. Vegesna compared it to having a new high-profile anchor tenant in the same mall. Customers may intend to visit the anchor, but will check out the competition at the same time.
But won’t Microsoft’s massive cash flow and existing relationships with thousands of large customers crowd Zoho and other small players out of the space?
Vegesna doesn’t think so, and gave two major reasons why not.
First of all, one of the big benefits of cloud services is that users can access them from anywhere on any device. That includes mobile devices, where Microsoft has tiny market share and faces competition from well-capitalised companies like Apple, Google, and RIM. The desktop dominance of Windows and Office won’t necessarily help it in cloud computing.
Microsoft’s traditional business strategy is the other reason. Microsoft often takes an all-or-nothing approach, where its products work best together, and it has a history of using proprietary or closed technologies to lock customers in once they’ve made a choice. (The company’s recent push for better interoperability was driven in part by demands from EU regulators, although demands from large and influential customers probably also helped.)
You can already start to see this with Microsoft’s online services. Users can get to Exchange Online e-mail with a Web browser, but the best experience requires Outlook, which is part of Office. SharePoint Online can be used to store all kinds of data, but Office apps have “save to SharePoint” functionality built right in.
And while Microsoft makes plenty of tools to help companies migrate data into Exchange Online (from Lotus Notes, for instance), it’s not easy to get your data out of the system if you want to cancel your subscription. I’d be surprised if this changes.
In contrast, Zoho (and Google, Vegesna acknowledged) make it relatively easy to mix and match applications from different vendors and to move data between them. Zoho’s CRM system integrates with Google Apps. Zoho has customers who use its productivity services in conjunction with a Microsoft SharePoint Server that they run themselves.
Finally, Zoho is focused mainly on smaller businesses, so it doesn’t expect to run into Microsoft salespeople and partners trying to push Microsoft’s cloud services as part of a larger software agreement. The small business space has been perfectly fine for Zoho: the company claims 3.5 million end users, and says to be adding 120,000 new users per month.