Grades Measure Test-Taking Skills and Interviews Measure Interviewing Skills

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Today Google dropped a bombshell: http://mobile.nytimes.com/2013/06/20/business/in-head-hunting-big-data-may-not-be-such-a-big-deal.html

They’ve made some significant changes to the way they recruit – no longer looking at things they were previously famous for, like asking a 30-something professional for his GPA and college transcript. Google, being Google, collected lots and lots of data and ultimately determined that these signals are more noise than signals, and have since discontinued using them.

At Zoho we reached the exact same conclusion many years ago, but how we got there was entirely different. Let me tell you the story.

When we got started with this company, I had fairly conventional beliefs about the value of college education, the importance of academic performance and GPAs and so on. I come from a large family, with 3 brothers and a sister, all younger than me. Academically, our family spanned the spectrum – I had a really stellar academic record, while my youngest brother, Mani, had a fairly mediocre one. I got to attend the prestigious Indian Institute of Technology and later Princeton University, while Mani enrolled in an unremarkable “evening college”, basically a place to go to avoid being called unemployed. School held no interest at all for him and I would wonder what would become of him.

He joined my brothers and co-founders Kumar and Sekar, as a junior technical assistant in the very early days of the company, when our development center was still operating out of our parent’s home in India. Kumar would conduct C programming classes for fresh recruits and Mani sat in on them. To our surprise, he showed deep interest in programming and picked up fairly quickly, quicker even than some of the engineering graduates Kumar had hired. He got assigned to write code in one of our early products in network management and within a couple of years he was able to lead that product to profitability. He started to display a natural talent for understanding what customers want, and before long, he was managing products by himself. Mani is shy and prefers to stay in the background, but internally he leads teams that deliver Zoho CRM, Zoho Projects, Zoho Support, Zoho Recruit (yes, all of them!) and he is the Chief Operating Officer of Zoho.com. If I get hit by a bus, the company would run fine, but Mani is absolutely indispensable to our continued product execution. People who work with Mani in our company know his contribution, yet, I doubt a Google or Microsoft would ever have hired him (and I am glad they didn’t!).

As the eldest brother, I have watched Mani closely from childhood, and his blossoming into a leader taught me to question everything I thought I knew about the value of academic performance, grades and degrees.

What do those things measure anyway? I came to the conclusion that degrees measure college-surviving skills, grades measure test taking skills and interviews measure interviewing skills. As you can see, they are not completely useless, they do measure something, it is just that what they measure happens not to correlate much with real world performance on the job. I am happy to see that Google has validated these observations with lots of data.

We believe in education, we just believe the higher education establishment is serving the cause of education poorly and expensively. We do not believe college is the only way nor the best way to get a good education. We believe it is a travesty for the academic establishment to encourage young men and women to pile up so much debt in the pursuit of a college degree. The higher education system is a bubble that deserves to burst. We believe it is the vital responsibility of employers to help young men and women avoid debt, and the way employers can help is to not ask for college credentials during hiring.

It is heartening to read that Google has a lot of employees without a college degree now. At Zoho, nearly 20% of our people do not have a college degree, and our long term goal is to get that percentage to 50% or higher. We encourage every company to try it, it really, really works. It is good for employees, it is good for society, and it is good for companies.

 An overwhelming majority of our people (over 95%) join us with no prior work experience, either fresh out of college or fresh out of high school. After a period of training, which varies, they tend to start out as generalists, get exposed to a variety of functional areas and over time they tend to specialize in areas such as product development, frameworks, security, design, quality assurance, support, product management and so on. We are fortunate that our people tend to stay with us, which allows us to invest in them to develop specific skills. As an example, in the past 3 years, we have grown our mobile team from a standing start to nearly a hundred people. We have not only developed mobile software development skills and shipped cool products, we have also developed a cohesive product strategy and vision in mobile.

It is not just in hiring that we are different. We do not have formal performance reviews.  It is natural for people to postpone giving bad news, and managers are people too. This means managers tend to store up negative feedback for review time and inflict negative surprises, which is deeply frustrating. Instead, we ask our managers to share any negative feedback immediately, and only keep positive surprises during pay revision time. This system has worked well, both in terms of increased employee satisfaction as well as by reducing the endless amount of review-writing that managers have to go through.

All of these ideas come from a fundamental philosophical belief: human beings are intrinsically unmeasurable. Trying to measure and classify people will ultimately lead to dissatisfaction and failure. Instead, we have noticed that small groups of people, with leaders who are directly connected and aware of the work each team member does, can achieve tremendous productivity and job satisfaction.

 

They Acquire, Acquire, Acquire While We Build, Build, Build

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Today, Salesforce announced their biggest acquisition to date: ExactTarget – revenue under $300 million, accumulated losses of over $60 million over 3 years – for $2.5 billion. Here is the interesting part: ExactTarget, which competes with our Zoho Campaigns product, has about 1600 employees, while all of Zoho Corp has about 1600 employees. By way of comparison, Salesforce has nearly 10,000 employees, and they are adding those additional 1600 employees today. With all that headcount, they still don’t have the breadth and depth of Zoho. At our annual Zoholics event last week we launched 3 new products (Zoho Pulse, Zoho Vault and the very handy Zoho Leads mobile app), and also announced numerous enhancements to the entire Zoho suite of offerings.

Are we very efficient or are they very inefficient? Well, you be the judge: we fund our extensive R&D investment out of profits, while ExactTarget has lost money for years and Salesforce is not exactly a profit-machine either – they spend over 65% of their revenue on sales, marketing and administration and only 12% on R&D. I don’t know a more unbalanced structure in all of technology. Most acquisitions fail, but in this case, maybe the two companies do have a deep cultural fit, because they both know how to spend loads and loads of money to “acquire” customers while never turning a profit.

We happen to know ExactTarget well. We started development on our competing Zoho Campaigns product 3 years ago. We put in a lot of hard work, and today it is enjoying rapid growth and market acceptance, thanks to its nice feature set and the integration we offer with Zoho CRM. To get that same level of integration, Salesforce is shelling out $2.5 billion. The contrast between what we do and what they do cannot be starker.

So how does it all matter to you, the customer? First, if you are a Salesforce customer, you are going to have to pay for this acquisition – and not just monetarily. I am a software engineer, I review code, I design frameworks, so I know a thing or two about software. I will say with confidence that integration projects on the scale needed to integrate ExactTarget into Salesforce are extremely difficult to pull off in any reasonable time frame. Just the technological challenge of integrating totally separate code bases is immense, and then you add culture clashes, political rivalries, geographic separation, large teams – I wouldn’t ever want to be the project manager who has to integrate this acquisition. It is a thankless job, and at the end of the integration, all you accomplish is that the combined product falls way behind nimbler companies like Zoho. Salesforce has done these deals before, without ever integrating them. Let me enumerate.

About 3 years ago, Salesforce acquired Heroku, shelling out $212 million for the company. Just last week, the Heroku founder announced he was leaving. Visit Heroku.com and see if you can detect any sign of Salesforce anywhere. How is that for deep integration? From a business point of view, can anyone claim that Salesforce is on track to recoup the substantial investment it made in acquiring Heroku? Now, visit Do.com and Desk.com – both of which Salesforce acquired a while ago – yeah, there is nice logo level integration, I will give them points for that. Try to sign in with your Salesforce account in any of these sites.

The Salesforce playbook is simple. Benioff feels restless, he sees stagnation, sees companies like Zoho continuing to innovate, he just goes out and does a blockbuster deal to feel good, more money the better. Who cares if the acquisition actually pays off long term? This playbook can only work as long as the stock price keeps levitating – and for that, let’s give credit where it is due: it is not Benioff, it is Bernanke. How companies with continuing losses year after year could reach a valuation of nearly 10x annual revenue is a topic by itself, but that would take me on a major tangent on our broken bubble-blowing monetary policy, and the wanton stupidity of policy makers like Bernanke.

I am putting my conviction to the test. We are expanding our investment in R&D in Zoho. We see a massive opportunity to seize leadership in the cloud because we believe the Salesforce strategy is going to fail long term. They already face engineering stagnation – their core SFA product hasn’t improved in years. Second, they have to try to stick it to customers to make the money back on these blockbuster deals. The end result is that customers will revolt and seek alternatives. While our strategy of investing in R&D is slower in the short run, as we gain speed over time, our breadth and depth increases. Here is our promise to customers: we will continue to out-innovate Salesforce, while offering incredible value.

How can we make that promise? Simply because we don’t throw around money like them. We owe it to you, the customer, to be efficient, and pass on the results of efficiency in terms of lower prices. We don’t do ego-boosting acquisitions to create hype in the short term, only to be forgotten a couple of years later. Instead, we hire engineers and write code, because we believe that serves our customers better.

Zoho is already beating Salesforce on Internet reach, on the sheer number of new organizations signing up for our platform month after month. We will continue our relentless execution.

Zoho Services Having Performance Problem, Please Use Read Only Version (Update: All Services Are Up Now)

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We are experiencing performance problem across all Zoho services right now (as of 6:30 AM Pacific Time). Our team is looking at it.

Please use read-only versions, which are hosted from our separate data center.

These are the URLs:

Zoho CRM:  https://crm-ro.zoho.com

Zoho Creator: https://creator-ro.zoho.com

Zoho Invoice: https://invoice-ro.zoho.com

Zoho Mail: https://mail-ro.zoho.com

We are working on this right now, and we will post updates as soon as we have additional information.

Update: We are experiencing packet loss on our network access paths, and we are working on it right now.

Update 2 9:13 AM PST: We have brought down the degree of packet loss, but still due to intermittent packet loss services are slow. We are working on it.

Update 3: As of 9:30 AM PST packet loss has been reduced to negligible levels. Services should be accessible now, but we are still monitoring closely. We will post a root cause analysis in a day or two, and what actions we are taking.

Pruning The Garden: Saying Goodbye to a Few Zoho Services

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Zoho’s strategy from the beginning has been to provide a wide portfolio of online applications so that you can focus on your business while we take care of the rest. Over time, we have launched many applications that support this mission. But from time to time we need look back and assess how those products are doing in relation to our expectations. Even the most well-tended gardens need some pruning every now and then!

We have decided to sunset some Zoho services so that we can focus our energy and delight our customers with our other products. Today we are announcing we will close

  • Zoho Challenge
  • Zoho CommentBox
  • Zoho Planner
  • Zoho Plugin for Office
  • Zoho Share
  • Zoho Viewer

Customers are, as always, our #1 priority. So you have plenty of time to get your data out. We will continue to allow access to these products (in read-only mode) until December 31st, 2012. On January 1st, 2013 data for all these products will be permanently deleted.

Current subscribers to paid plans of these products will automatically receive -in the next few days- a full refund of the value of their active subscription.

We are of course, a bit sad to see these products go. But we are a risk-taking company and we like to try many things. We know some of them will not be as successful as we want. We will move the resources (people and otherwise) we had dedicated to these services to our other more promising areas.

Sridhar

 

 

Push Comes to Shove

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In 2008, I wrote a post Why We Compete with Google, in response to the persistent question at that time “How can you guys survive Google in the online office space?”

My basic argument was that business software, due to its extensive sales and support requirements, simply does not have the productivity or profitability of consumer internet businesses, and could never produce the margins that Google enjoys in search or what Facebook enjoys in social networking today or for that matter how today’s margins at over-the-hill Yahoo and getting-there eBay compare to the still-hot Salesforce. I concluded that post (keep in mind it was written in 2008) with:

When push comes to shove – and there is a lot of very messy push and shove in the business software market –  Google’s resources are going to flow into figuring out how to monetize the humongous traffic of YouTube or compete in online auctions, rather than figure out a way to squeeze a bit more margin compared to Oracle or Adobe or Salesforce. That may explain why Google has been silent on CRM, Project Management, Invoicing or HR type of tools, because those markets don’t offer the profit potential they already enjoy.

Well, today, the Wall Street Journal has a well-researched post by Clint Boulton, Google Organizational Changes Cloud the Future of Apps. On purely strategic grounds, the enterprise business is very sales and support intensive, and it does not have the potential to offer Google-y margins. Microsoft achieved its 90% operating margin due to its monopoly pricing power, and the emergence of the cloud and mobile devices, in part thanks to Google’s role, has eroded that pricing power. So it was always clear, to me at least, that Google was in this game to make sure Microsoft does not have the infinite cash to keep throwing money at search. As Google’s strategic threat from Microsoft fades into the rearview mirror while Facebook emerges as a strong potential threat, I predicted that Google would naturally lose interest in what remains a fundamentally inferior business to their own core business. Senior executives in Google in charge of the Apps business seem to be reading the tea leaves, as Boulton reports. There have been a slew of executive departures and other organizational changes in the Google Apps division.

Signs are emerging that Google is de-emphasizing its efforts in online productivity tools that compete with Microsoft, which was never the core of its business to being with, to focus even more on search and social networking, and its increasing competition with Facebook.

Google Apps has had some churn to its core leadership as the company evolves under CEO Larry Page, including the loss of Dave Girouard as vice president of Apps and president of Google’s Enterprise business. Girouard, who joined Google in 2004, oversaw the development and launch of Apps for businesses. He left April 6 and no successor has been named.

A source familiar with Google Apps told CIO Journal: “I was personally shocked to see Dave G leave. That was his baby, and he was so invested in it.”

At Zoho, of course, we have patiently been investing in R&D, while building our business for the long haul. We came to the conclusion a while ago that ad-driven consumer internet business is a poor fit for a business-focused suite of apps. In an ad-driven business, the users are the product, to be packaged and sold to advertisers. When you ask someone to directly pay for something, as a visitor or a user becomes a customer, the very nature of the engagement changes.

That’s why since the very beginning we have never funded our business through advertising. We’ve made a commitment to our users that we’ll never display ads, not even in our free products, and that we’ll never sell their data to a third party so that they can be “better targeted”. We’ve understood since the beginning that advertising and business applications just don’t mix.

We will continue to execute to provide a compelling, ad-free cloud experience in our Zoho suite of apps, particularly Zoho Mail and the Zoho Office suite. We respect the engineering prowess at Google, and indeed, we will continue to actively participate in the Google Apps marketplace, but ultimately whether a business makes sense or not is not an engineering question alone. In that sense, I am not at all surprised that someone high up at Google looked at the business question of the Apps suite, and came to the conclusion that was obvious from the start.

Our deep, existing integration into the Google Apps suite makes it really easy to migrate customers from Google Apps. We welcome Google Apps users to Zoho, and we are very happy to provide migration free of charge!

Now, what about the other elephant in the room? Microsoft Office365 is going to be a formidable player, but so far, their execution in the cloud and in mobile is less than terror-inducing, to put it mildly. Our Mail & Office suite are written from the ground up to be in the cloud, on tablets and smart phones. We will continue to invest in R&D to make them stronger, and, unlike Microsoft, we will provide first-class support to all the devices out there, including the iPad, the iPhone and Android-based devices. Of course, we will also continue to integrate our Mail & Office suite with our other business apps, including our rapidly gaining CRM.

Zoho CRM Read-Only Mode Available From Our Secondary Data Center

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One of the priorities we set ourselves after our outage is to get a read-only instance up quickly in our secondary data center in the New York metro region. We have always had the data backed up in that data center and our software team has been busy making it run in read-only mode. Today, we are happy to announce that Zoho CRM is running in read-only mode from our secondary data center.

The URL is https://crm-ro.zoho.com

We will keep this read-only mode accessible to customers all the time, so that in the event of an outage in our primary data center, your access to data will be preserved. We still have some limitations we are working through – for example, database information is synchronized immediately between our silicon valley and New York data centers, while document attachments have a one hour lag, which we will be addressing soon. There are some other limitations: search does not work and most of the integrations, particularly Mail integration do not work. All of these limitations will be removed in a few weeks. Our goal in getting this out quickly is to give you access to your core CRM data from our secondary data center.

Other Zoho services are working on read-only versions right now and we will open them up as soon as they are ready and post announcements regarding them.

This read-only version is just a start. We are working to provision our New York data center fully so that all Zoho services can run in hot standby mode, so when the next disaster strikes, we could switch over the service quickly.

Our Friday Outage and Actions We Are Taking

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On Friday, January 20th, we experienced a widespread outage that affected all Zoho services. The outage started around 8:13 am Pacific Time. Zoho services started coming back online for customer use at 3:49 pm, and all services were fully restored at 6:22 pm PST. We absolutely realize how important our services are for businesses and users who rely on us; we let you down on Friday. Please accept our humblest apologies. 

The cause of the outage was an abrupt power failure in our state-of-the-art collocated data center facility (owned and operated by Equinix) in the Silicon Valley area, California. Equinix provides us physically secure space, highly redundant power and cooling. We get our internet connectivity from separate service providers. We own, maintain and operate the servers and the network equipment and the software. The problem was not just that the power failure happened, the problem was that it happened abruptly, with no warning whatsoever, and all our equipment went down all at once. Data centers, certainly this one, have triple, and even quadruple, redundancy in their power systems just to prevent such an abrupt power outage. The intent is that any power failure would have sufficient warning so that equipment, databases most importantly, can be shut down gracefully. In fact, the main function such data centers perform is to provide extreme redundancy in power systems, provide cooling for the equipment and provide physical security. Absolutely no warning happened prior to this incident, which is what we have asked our vendor to explain, and we hope they would be transparent with us. I do want to say that Equinix has served us well, they are a leader in this field, we have never suffered an abrupt power outage like this in 5+ years. But they do owe us and other customers in that data center an explanation for what happened on Friday. They restored power quickly, but the damage was done because of the abruptness of the outage.

As of today, while we have a substantial level of redundancy in the system, we still rely on our data center provider to prevent an abrupt power outage (it happened once, so it could happen again), and we are scrambling to prevent another power outage from becoming a service outage of the duration that happened Friday. Those are literally the first steps we are taking. This includes having our own separate UPS systems (in addition to all the UPS systems, generators and cleaned-up utility power that our vendor provides in the data center), and database servers that have batteries in them so they can be gracefully shutdown in an event like this.

Now let me acknowledge that it took us way too long to recover, and let me explain first why it took so long, and then explain what we are going to do about it in the future. In a nutshell, when every database cluster and every server went down, the sheer amount of testing and recovery work overwhelmed our human-in-the-loop recovery system. There was never any issue with the safety of the data itself. 

We have a massively distributed system, and the design intent of such a distributed system is that everything would not fail at once and parts of the system can and do fail without impacting overall  service availability. The problem was that when the entire system went down, it required manual recovery. We had about 20 people working to restore services, but there are well over 100 clusters, of which about 40% of them had errors – basically the redundant database servers within a cluster were out of sync with respect to each other. The inconsistency across replicated instances is usually very slight – perhaps a few bytes off in a 100 GB instance, but the only thing that matters is that there is inconsistency, however slight. This is recoverable without any data loss (except for the data that was entered just at the exact moment when power went down). This process is necessary to ensure that there is no data corruption and all data is consistent across the replicated instances. In most instances this was fast, but in some instances recovery took time, and the number of such slow-to-recover instances caused delays in the overall recovery. In fact, the first few clusters we tested were OK, so we relied on that to provide an estimate of recovery time that proved too optimistic, based on later instances that had a problem. There were way too many such clusters that took time for the 20 people to recover them in parallel. In effect, the human system was overwhelmed by the scale of the problem. That’s why it took us so long to bring all services back up. 

We do have all data mirrored in a data center in the New York region (also owned and operated by Equinix) and that data center was not affected by the power outage.  All the data was present in that secondary data center, so there was never any possibility of any data loss, even if all our primary servers had been wiped out completely. But we do not have sufficient capacity to run all Zoho services from that secondary data center as of today. We have 3 copies of your data in the primary data center, and usually 1 or sometimes 2 copies in the secondary data center. That means that we do not currently have: a) sufficient data redundancy in the secondary data center by itself to run all the services – i.e assuming the primary data center is totally dead, or b) sufficient computing capacity to process all the traffic by itself in the secondary. Our secondary data center serves to protect customer data but it could not serve all the traffic.  We intend to address this issue ASAP, starting with some of our services first.

Our first focus is on preventing an outage like this from happening again, and the second is faster recovery when disaster strikes. We have been working on this second problem for a while already and we will accelerate this process. Additional steps we are taking include: a) offer better offline data access so customers never have to go without their mission-critical business information b) offer read-only access to data on the web quickly, so at least access is preserved while we work to recover the editable instance and c) more automation so recovery from a large scale incident can happen with less manual intervention.

During this entire episode, our first priority was to make sure customer data remained safe. No customer data was lost, but because incoming mail server queues overflowed (the mail store went down), some mail bounced back. We are working on preventing such a thing from happening again, with a separate mail store instance.

We will keep you steadily updated on the progress we are making on each of these priorities. Hardware progress is going to be the fastest (buy and install new systems), and software is going to be the slowest (implementing better automation for faster recovery is going to take time), but we will keep you posted on all the progress we make. That is our promise.

This was, by far, the biggest outage Zoho has ever faced. We absolutely understand that many businesses rely on Zoho to go about their work on a daily basis. We can understand how many customers were disappointed and frustrated by this outage. We too, are extremely upset about this incident. 

In the coming days we will be refunding a week’s worth of your subscription to each and every single customer, whether you complained or not. We know money will not give you back the time you lost, or compensate you for the hassle and trouble, but we hope you’ll accept it with our deepest apologies. While the money is not going to mean anything to any single customer, at an aggregate level, it does affect us, and that punishment would serve as a reminder to ourselves not to let this happen again. That is ultimately the best assurance I can give.

Sridhar