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  • SAAS RESEARCH

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Techaisle Blog

Insightful research, flexible data, and deep analysis by a global SMB IT Market Research and Industry Analyst organization dedicated to tracking the Future of SMBs and Channels.

Culture is the strongest foundation of Zoho and applications are its biggest strength

Five years ago, I flew in from Newark into Mineta San Jose International Airport. At the baggage claim carousel, I noticed a massive advertisement of Zoho with the tag line – operating system for the business. I was both intrigued and non-committal. It was my first introduction to the company. Before that day, I had either not paid attention or had not come across the name. When I reached home, I sent an email to my team with a question, does Zoho appear in any of the surveys as a cloud business application that SMBs and midmarket firms are using. Two hours later, nearly midnight, I was pinged by my overseas team with an answer. Zoho's penetration had been increasing since 2009. I still did not give Zoho the serious consideration that it deserved. In 2019, during my several visits to Dell Technologies' events, I began noticing the remarkably colorful Zoho banners at the Austin, TX airport. During the same timeframe, the number of inquiries from our SMB panel of respondents seeking our take on Zoho increased. I knew I had to call Zoho's analyst relations, and I did. It was a turning point. I contacted a company where customers come for the products and get enriched by Zoho's ethos.

I first met Sridhar Vembu, CEO, Zoho, in January 2020. Unassuming, unpretentious, and unassertive, he was standing in his "chappals" and "bush shirt." He poured out his passion for building a company that cares for the underserved communities, hires, educates, and develops talent from underprivileged families. He is committed to keeping Zoho private and debt-free, fiercely protect its customers' privacy and security, and spread its offices in the rural areas of India, the US, Europe, and Japan. I knew I had to learn more. Soon enough, I also got swept up into Zoho's product portfolio. A collection of 50+ apps running on single database architecture and purpose-built on Zoho technology stack consisting of services, software infrastructure, network infrastructure, and hardware infrastructure deployed on Zoho's data centers to ensure performance availability, security, and privacy. It is not for small businesses only. Zoho's fastest-growing market segment is the midmarket. Salesforce, Microsoft, and SAP are the established brands within the midmarket; Zoho is the challenger, not by deliberate design but by a sheer and silent commitment to customer success. I have interacted with many Zoho senior executives, product evangelists, and customers in the last year. The pervasiveness of genuine fondness to learn, desire to challenge the status quo, develop themselves as great human beings and develop solutions that exceed customer expectations is palpable. Zoho has as many micro-cultures as there are apps, fifty.

Zoho has been 25 years in the making. With 9000+ employees, 60+ million users in 180+ countries, annualized 5-year revenue growth of 34%, and a 97% customer retention rate, Zoho seems to be just getting started. Using a hub and spoke model – major city and adjacent rural areas – Zoho has opened 15+ small offices in the past six months to support local economies and partnerships. Sridhar Vembu, the recipient of Padma Shri, one of India's highest civilian honors, calls the model a cloud-enabled rural revival. He returned to India from the US in September 2019 and has settled in a small rural village, Tenkasi, where even the street lights are non-existent.

Sridhar is setting the tone for the next 25 years. He aims to continue enhancing a vertically integrated technology stack (from the data center to applications) and building horizontal integration where different groups, micro-cultures, and departments feel empowered and collaborate seamlessly. The deep-seated culture is evident in the enthusiasm of Zoho's empathy and responsiveness to the pandemic. It instituted a 6-month subscription waiver for small businesses. To meet remote workers' needs, it launched Remotely, a suite of 11 free productivity tools. To enable workplace re-opening, it has announced the BackToWork app, free for a year. For Zoho, free does not mean using customer data for monetization. Zoho does not run on public clouds, has removed all adjunct surveillance, and does not collect or store any customer data.

Zoho's latest versions of Zoho Projects and Zoho Analytics (with 1500 built-in dashboards) are comprehensive, customizable, secure, scalable, and intelligent. Zoho's universal NLP (Natural Language Processing) search – across all apps and data pillars - provides contextual answers, processes 16 million search requests a day, and performs 150 million indexing jobs a day. Zoho's offering is the Low-code platform to empower citizen developers with last-mile customizations. It incorporates many new functionalities, including Zia (Zoho's AI platform), assisted development, and sandboxing. Zoho's other recent notable offerings include the Employee experience platform and Marketing platform.

Agility is essential to managing business uncertainties. It also translates into business process automation and rapid deployment, and enhancements to business applications. Specifically, the smaller a business is, the less likely it is to have dedicated staff developing custom applications to support unique processes. From pro-code to low code to no-code, Zoho Creator Platform can appeal to a broad swath of citizen and professional developers. For citizen developers, it reduces complex functions to one-click or drag-and-drop actions. For experienced developers, Zoho has added controls to build customized applications and services from the ground up. Like everything Zoho, the platform has been 15 years in development, rendering the learning from organizations of all sizes to better user experience and scalability. For specific vertical industries for whom governance is a vital issue, the platform is SOC2 Type II and GDPR compliant. It also provides authentication, encrypted data storage, and full lifecycle management. Zoho's low code platform, Zoho Creator Platform, currently has 13,000+ paying customers, which is up by approximately 30% during the pandemic year. A testament to how the platform empowered businesses to pivot with agility to respond to employee and customer needs.

Although Zoho is known for its focus on the small business segment, which continues to grow, it also gains traction within the enterprise segment. Zoho's largest customer is IIFL, with 28,000 employees using 45 of the 50 apps. Zoho is a genuine one-of-a-kind visionary firm. It is the complete CRM platform and has the most comprehensive toolsets for hybrid, co-modal work. Its flagship, Zoho One, has over 50 products designed for multiple business needs across productivity, finance, marketing, HR solutions, etc. I am glad I made the call to Zoho analyst relations. Zoho will continue to be within Techaisle's vendor research radar for a long time. It should be on the evaluation map for SMBs, mid-market firms, and enterprise customers.

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Artificial Intelligence – visibly absent in small businesses but notably present in midmarket firms

The IT industry is abuzz with discussion of Artificial Intelligence (AI) and blockchain. Both AI and blockchain are currently aspirational within SMBs and Midmarket firms. It is not because these firms are not open to the technologies but they have limited understanding of deployment processes.

Regardless of the aspirational nature, both the technologies are showing a very promising adoption trends within midmarket firms. Techaisle’s survey research of 1100 US firms shows that 26% of midmarket firms are currently using AI and another 28% plan to deploy within the next one year. If they stick to the plan, by mid-2020, over 50% of firms will have at least either begun trials or accomplished full deployment of AI within their organizations.

Similarly, blockchain adoption shows an important trend. Although, less than 1/5th of midmarket firms are currently using the technology, a full 40% do plan to adopt blockchain within the year. In fact, when the two datasets are combined, data shows that 42% are currently experimenting and another 42% are developing protypes. Drilling down into the data we find that 26% of midmarket firms are seriously investigating the possibility of implementing blockchain.

In contrast to midmarket’s current and planned adoption of artificial intelligence, only 5% of small businesses are currently using artificial intelligence and 10% of small businesses which are planning to deploy AI are conducting trials.

Not only is the adoption trend different between small and midmarket businesses, the expected benefits and application usages also differ. For example, 38% of small businesses believe that use of AI in marketing / advertising and 32% in improving customer experiences will be integral to their business success whereas 43% of midmarket firms believe that use of AI in process automation and 42% in improving analytics will be integral to their business success. Nevertheless, one-third of both small and midmarket firms believe that use of AI in cybersecurity will be essential for improved security.

Identical percentage, 54% of US small and midmarket businesses agree that artificial intelligence refers to a system consisting of a series of algorithms that can learn from constant inputs. 45% of small businesses and 46% of midmarket firms aspire to use AI for automating IT and a similar percentage plan to initially use AI for non-core processes and applications.

Artificial intelligence adoption within SMBs is at a stage where cloud was a decade ago. Visibly absent within small businesses but notably present within midmarket firms. However, it is not a question of when AI adoption will take firm root but how. The responsibility lies with the vendors and other suppliers for guidance, deployment alacrity and outcomes.

 

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WW SMB and Midmarket analytics adoption acceleration needs external services

Techaisle’s latest US, Asia/Pacific, Europe and Latin America SMB and Midmarket Analytics and Artificial Intelligence adoption trends survey research shows that although 73% of midmarket firms (100-999 employees) and 10% of small businesses (1-99 employees) are using analytics (weighted data), only 6% of small businesses and 27% of midmarket firms are highly data-driven, that is, they have an evidence-driven culture, in which data helps defines requirements or opportunities thus enabling SMB executives to determine the best option for moving forward. Majority of SMB, 54%, are rarely data-driven and rely primarily on the insights and expertise of the senior management. Nevertheless, within the next one year, 23% of small businesses plan to adopt analytical solutions beyond spreadsheets and overall 30% of small businesses plan to engage with an external professional services firms to understand how they could provide assistance to deploy advanced analytics solutions. Cloud-based analytics is being used by 57% of midmarket firms and as compared to only 14% of small business but the intent to use within small businesses is significantly high at 48%.

Within 31% of midmarket firms, IT is being challenged with demand for increased analytics. As a result, overall 35% of midmarket firms are planning to engage with professional services firms to help develop and prepare data management systems, techniques and technology.

The whole product for analytics starts with cloud. 37% of SMBs consider cloud to be an essential analytics technology but when drilled down into midmarket firms, data reveals that 30% of midmarket firms believe that large scale local storage and fast processing infrastructure is necessary for deep analytics implementation.

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Techaisle midmarket study shows cloud maturity does not always equal high digitization

Techaisle’s US midmarket digital transformation trends study shows that maturity of cloud adoption does not equate to high digitization of the business. Study data shows that only half of the 47% of mature midmarket cloud adopters are holistic adopters of digitalization. It is true that these firms believe in cloud and its effect on digitization but they also believe that true digital transformation requires advanced adoption of multiple technology solutions. Data also shows that the midmarket firms that have a siloed strategy of digital transformation are intermediate adopters of cloud, mostly driven by non-IT business units which need cloud to further their business objectives.

However, it is also clear from data that the Holistic segment includes a disproportionate number of mature cloud adopters, and mature cloud adopters in turn are much more likely to be Holistic in their approach to digitalization than firms in the intermediate category. A smaller (7% of total) third group of midmarket businesses, ‘born in the cloud’ (i.e., have all IT resident in the cloud) largely echo the patterns of the mature cloud users.

From a digitalization product/service marketer’s perspective, this is an important finding: it shows that those who can identify mature cloud adopters are likely to find greater receptivity to their messages and offerings than those that engage equally with the similarly-populous group of intermediate (in terms of cloud adoption) midmarket businesses.

High adoption of diverse technology solutions determines digitalization success

Even considering planned adoption, Siloed midmarket digital segment is likely to remain far behind the Holistic midmarket digital segment. The Siloed segment even lags being in the technology areas which midmarket firms see having the most impact in their business for the next 5 years.

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