Zoho approaching the utility model
It has been my belief for several years that our industry is trending toward the formation of an information utility. I draw this conclusion carefully based on my understanding of how markets develop and commoditize. I also believe large swaths of this utility deserve regulation (that’s you Mark Zuckerberg).
I take the beginning of the modern IT era as the early 1970’s. You can graph a rising line of performance, and a declining one for price, essentially Moore’s law and that signals the economic importance of information technology. This view eliminates a chunk of the mainframe era as well as the earliest computers of the 1950’s. My reasoning is simple: the earlier era was seminal but had so little economic impact that it was not important to this story. For instance the moon mission had onboard computers but it has been referred to by people in a position to know as an era of analog rockets.
The 1970’s formed the High-Tech era because of the relentless diffusion of technology throughout the economy. From there you can track a timeline that includes mini-computers, relational databases, SQL, third and fourth generation programming languages, general purpose operating systems, GUIs, microcomputers, PCs, networks, the Internet, client server, cloud computing, social media, wireless and other stuff that I am leaving out.
The net effect has been to not only constantly reduce costs and raise performance but also to democratize technology so that anyone can afford its benefits today. Along the way we’ve seen a great deal of commoditization take place. What’s cloud computing but the commoditization of IT?
The last steps in any disruptive innovation are commoditization and utility formation. We saw the same thing happen (if you have a good historical perspective) in things like telephone and electricity. They weren’t always utilities capable of taking on all customers; first they were private companies. But growing markets made them indispensable and that provided technical and political pressure to form utilities.
The same thing is happening right now in IT. It is happening before our eyes. Large vendors like Oracle and Microsoft are announcing increasing compatibility. Others like Salesforce have built vertically integrated stacks that enable them to support the needs of partners and customers and to integrate with third parties too.
Becoming a utility in my book entails having a vertically integrated stack plus the necessary communication, integration and security needed to give customers a soup to nuts experience.
There are many candidates for inclusion in the pantheon of utility IT providers, a forming oligopoly that, much like today’s electricity market, will provide the appearance of a homogenous market through adoption and strict adherence to standards. To that group we should add Zoho.
Zoho has been around for decades and it is still private. Founder and CEO Sridhar Vembu has been at the helm since 1996. He likes not being on the treadmill of quarterly reporting preferring instead to think independently about the deep future.
Remaining private, Vembu and his team have self-financed and focused on customers and they have developed a maniacal focus on building everything in-house up to and including employees many of whom graduate the company’s rigorous training program. Increasingly Zoho’s combined strengths are serving it sell as it challenges the commoditizing efforts of other software providers. It can become the low cost provider if it wants to.
So it is no surprise to see that Zoho today introduced an updated Zoho One “operating system for business” to the world. What’s most interesting to me is how closely Zoho One resembles a fully functional part of an IT utility that I had thought was still a few years off. Let me elaborate.
Zoho One is both vertically integrated and outwardly connectible, it sits on its own stack, and tries to do as much internally as possible by offering over 45 apps. But it also acknowledges the greater market’s need to integrate third party apps. It’s connectible by virtue of its platform-based integration and single sign-on. It also sports the numerous advanced extensions to CRM like BI, AI, bots, voice assistance, video, and much more that are now essential. Taken together all of these components add up to a big chunk of a utility grid.
Anyone considering a new CRM system whether it’s a first for a business or a logical upgrade, should add Zoho to its shopping list. Zoho may not be right for all customers and the company has made its bones working with companies that have about 4,000 employees or fewer. But the reality is that Zoho’s architecture is more scalable than that and some customers are already testing its limits.
Markets like CRM today have a good deal of stability. For instance, any number of emerging CRM businesses today is ready to take on Salesforce but they will not likely have the chance because they are me-too solutions. But Zoho may be different if only because they are not trying to become the next Oracle, Microsoft or Salesforce. They are happily trying to define their own vision and that may be different enough to spark another disruption. That’s why Zoho One is so interesting.