Zoho Corporation will not list as long as I am CEO, says Sridhar Vembu

This is simply to preserve our operational freedom and culture, said Vembu

At a time when the global economy is going through a post-pandemic recovery, SRIDHAR VEMBU, founder and chief executive officer (CEO) of Zoho Corporation, believes the world economy on the brink of recession may affect software-as-a-service (SaaS) companies as well. In conversation with Shine Jacob, Vembu trots out reasons why he is reluctant to list Zoho and also lays down the road map for the company’s future. Edited excerpts: 

With the pandemic slowly dying out, what is your view on the SaaS landscape and the current economic scenario?
 

The SaaS sector is doing well. From a broader economic outlook, recession is almost certain at this point in the US and Europe. Given that SaaS companies like ours depend on these countries, I expect a slowdown.

It is too soon to predict the impact, but we had warnings from companies like Microsoft and Salesforce. When recession sets in, it is going to impact the SaaS market as well. We just don’t know the magnitude of the impact or whether we will see reduced profits or reduced revenue.

In terms of the SaaS landscape, I had predicted there would be consolidation. There is a limit to the number of applications and subscriptions a company has. Consolidation in this industry is inevitable and an economic downturn will further hasten this. When growth is falling short, companies consolidate to cut costs and expand their product portfolio. I expect that is going to be another trend in SaaS.

Fundamentals of SaaS are sound, but too many companies are chasing the same market. Not every company that is betting on it will survive.

What is Zoho’s strategy to tide over this slowdown?
 

Nobody can be absolutely prepared for this as we have to live in the present. Global economy is in a seismic zone, thanks to poor monetary policy, bubbles, and debt issues. These issues had been long-standing. However sound our company’s balance sheet may be, in a strong earthquake, we will incur some damage. No one can hope to escape unhurt. We have to be prepared for that earthquake.

Will Zoho be looking at listing in the near future?
 

We are not looking at listing. This is simply to preserve our operational freedom and culture.

Public companies generally face quarter-to-quarter pressure. The company culture becomes pressure- and metrics-driven. These have an impact on long-term productivity. We don’t want that. We don’t want to go for a listing any time soon, or any time ever, as long as I am the CEO.

You were one of the first companies in the country to focus on smaller cities. What was your experience like?
 

We are overcrowded in major cities, when the population is distributed. Major companies have always been recruiting from these cities. It makes sense to go back to where real talent lies - the smaller towns.

From an employee perspective, it provides a lower cost of living and a higher quality of life. People staying closer home are more likely to be satisfied.

From a company perspective, the cost of real estate is cheaper. That directly reflects on profit. This idea will be particularly useful during a downturn. During a downturn, your competitiveness is determined by your basic cost of operations.

Is it true that the industry is seeing a talent crunch right now?
 

Talent crunch is primarily an issue of people chasing companies with a short-term mindset wanting ready-made talent. Unwillingness or inability by companies to invest in long-term talent is the cause of talent shortage. In countries like Japan or Italy, there is an absolute shortage of young people. In India, we have a lot of youngsters hungry for jobs. It is the job of companies to take young talent and develop them. Instead, they are looking for ready-made talent and poaching from other companies. That explains the shortage.

Tour recently remarked that globalisation is going to end. Why do you feel so? What will be the future of Zoho in such an era?
 

You have countries piling on debt. A smaller country like Sri Lanka has debt that is 50x its annual exports. The US is also the biggest debtor in the world. These imbalances are very large and cannot go on. That is the reason why I predicted the end of globalisation.

We will adopt a policy of transnational localism. We are adopting data centres in various countries. A lot of customer demand can be met in those countries.

Zoho is working on the integration of technology. In the next 10 years, our priority would be to navigate the economic downturn, which I expect to be brutal. We have to look at our geographic coverage to be stronger in the US, Europe, West Asia, Japan, China, Southeast Asia, Africa, Latin America markets. My goal is to be 10x our present size.