Zoho: Anticipating SaaS Profits In 2009

Perhaps Zoho, the SaaS (software as a service) alternative to Google Apps, isn’t such a market underdog. Zoho now has 250 employees, expects to be profitable in 2009, and is embarking on an open source middleware strategy, The VAR Guy has learned. Our resident blogger spoke with Sridhar Vembu, CEO of Zoho parent AdventNet, for more details.

Highlights from the interview include:

• Profits: Vembu (the executive; not to be confused with Vembu the company) says Zoho will “definitely be profitable next year.” The VAR Guy doubts Microsoft will be able to say that anytime soon when describing its on-demand applets. And it’s unclear if Google Apps is a profitable operations.
• Consumers Vs. Enterprises: Zoho’s financial strategy is pretty simple: Get students and academic types hooked on Web-based word processors, spread sheets and other development tools. Then, have that user loyalty spill over into the business market, where Zoho now charges for hosted applications like CRM. Zoho’s consumer software “will always be free,” asserts Vembu. “We consider it like a marketing expense.”
• Future Enterprise Deployments: Vembu says at least 20 very large enterprises are looking at Zoho’s range of applications.
• Employee Base: Zoho now has about 250 employees, up from about 25 two years ago.
• Investors: Zoho is self-funded by parent company AdventNet. As a result, AdventNet/Zoho can control its own destiny without answering to venture capitalists. Sweet.
• Partner Strategy: Here’s where open source enters the picture. Zoho is evangelizing open APIs to help partners tie their own applications to Zoho. Similar to how Microsoft Office is the front end to many back-end applications, Zoho could emerge as a front-end to many SaaS and traditional enterprise applications, asserts Vembu. Ultimately, Vembu says it will depend on an open approach — think of it as an open source middleware layer — that will allow partners to link into Zoho.
• PC Relationships: As you may have heard, PC companies are racing to launch so-called sub-notebooks and Netbooks. Some of the tiny notebooks come with Linux and on-demand applications from Google. Zoho is exploring ways to participate in the sub-notebook and computing “appliance” markets, says Vembu.
• Perfect Combination?: Vembu also plans to connect the dots between Zoho and ManageEngine, another AdventNet company that focuses on managed services. MangeEngine already oversees all of Zoho’s back-end systems. And going forward, there are opportunities for managed service providers to work more closely with Zoho, says Vembu.

Sounds intriguing. The VAR Guy will be watching closely for more Zoho updates.