Recent Service Disruptions

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We have been facing an on-and-off surge in network traffic that is causing these service disruptions. It is a denial of service attack, and we are working with our service providers to mitigate it.

As we work through these, we are also putting in place stronger measures so that we can withstand serious attacks in future.

We sincerely apologize for these service disruptions. Our own business relies on Zoho so we know how painful these disruptions can be. We want to assure you that we are working on both short term and long term steps to handle these attacks.

Salesforce Acquisition: Nobody Rings a Bell at the Top

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Yesterday rumors broke out that Salesforce is entertaining buyout offers and has hired investment bankers to consider “strategic options”. My first thought? What a great time to sell! My second thought: please don’t jinx it – not when someone is coming up on a $50-$60 billion payday at 10x forward sales. The P/E of course is incalculable since there is no E.

Nobody rings a bell at the top of the market. But we gotta admit – Marc Benioff is the best salesman in software the cloud, ever. Now, I am trying hard not to think of ​Steve Case and AOL and Time-Warner, because this time it ​will be different, of course.

In the past few weeks, BlackRock’s chief Larry Fink released a letter addressed to the CEOs of S&P 500 companies talking about the need for a long-term view. That may not be a good idea, because it is no fun to think about write-downs and kitchen-sink quarters. Only spoilsports talk about a hangover when the party is in full swing.


Consolidation is coming to the cloud; we at Zoho recognized that a long time ago. Our entire strategy has been dictated by our desire to stay independent (as I have explained before), even as consolidation alters the landscape around us.  Even CRM, a very significant industry just by itself, doesn’t make much sense as a stand-alone product. The proof is that Salesforce (hint: their stock ticker is still CRM) has been on an acquisition rampage over the past few years trying to complement its product portfolio and show growth by acquiring revenue.

But even with the more than $3 Billion spent on acquisitions in the past 3 years, and even with their market cap of $40 billion $50 billion dollars, Salesforce finds itself the target of a takeover.

Why do we expect consolidation? Simple – there are too many companies not making money. Why don’t they make money?​ Again, simple – they spend way too much on sales and marketing. Let’s consider a hypothetical combination of Box and Zendesk – both “Post-IPO Non-profits”  as we call them – you could cut the combined sales and marketing spend by half, and that may just be enough for them to turn a profit. That is the classic case for consolidation; a case that looks ​compelling on a spreadsheet – you know, the tool that Box actually doesn’t know how to build.

If only company cultures were modeled as cells in a spreadsheet, where people stay in their neat little boxes and hairy code-bases magically combine to produce beautiful children.

Take the case of Salesforce acquisitions for the past 3 years – here is the extensive list. How many of them have been integrated even at a single sign-on level, let alone at a product level? In fact, to solve that problem, Salesforce recently acquired a single sign-on company.

Winner’s Curse

​When you escape the jinx, there is still the curse – the winner’s curse. Most acquisitions fail and silently get written down or written off entirely – see for example, Zimbra’s acquisition by Yahoo. Salesforce has written down a bunch in the last few years, after overpaying by hundreds of millions of dollars – at least, the money didn’t come out of their profit!

Jinxes and curses? No, we don’t want these to befall our customers. Since consolidation is coming, if you are a customer of cloud companies, it’s time to get used to being traded around.

Except, of course, if you are a Zoho customer. With us, you will not underwrite any acquisition premiums or bloated sales and marketing costs. You will get a broad suite of deeply integrated products that helps you run your business on the cloud. Private and bootstrapped since our founding – we don’t answer to anyone but you. We never will. We aren’t going anywhere.


Microsoft’s Oxygen Supply Problem

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Zoho and Google both have offered free office suite for years, and today, Apple announced that their office suite will also be free across all Apple devices.

Given that Microsoft Office has long been the de-facto monopoly, none of our three companies have anything to lose in commoditizing the office suite market. That is the nice thing about facing a monopoly in an adjacent market – every player other than the monopoly would win if they get a non-zero share of a massively shrunk market. If the $20 billion market shrinks to $2 billion, we at Zoho would celebrate it, as long as we can hope to get a share of that shrunken market. In fact, competitors would win even if they don’t get any share of the shrunken market, because it denies the monopoly the ability to use its cash cow to dominate adjacent markets they do have an interest in.

That very same dynamic has played out in the operating system market already. The near-zero revenue share that competitors to Windows had meant that Google and Apple could give away their operating systems (which Apple also announced today!) and not have anything to lose. What Google achieves with the $0 ChromeOS license it charges OEMs (which costs Google exactly $0 in foregone operating system revenue) is that the OEM will now turn around and ask Microsoft for a $0 Windows license.

What OS X, iOS, Android and ChromeOS have collectively achieved is to drive Windows market share to under 25% of all client devices and yet, these alternative operating systems derive near zero revenue in and of themselves.

There is really not much Microsoft can do to fight back to stop the erosion of these core franchises. Their traditional weapons – closing the document format; tying the Office suite closer to Windows – none of these weapons work anymore. Today, for the first time in a couple of decades, Microsoft faces serious competition in Office, from competitors who, for their own reasons, all want to tear down the monopoly. Why do Apple or Google or Zoho all want to commoditize Microsoft Office? Each company has its own reason: Apple wants to add value to its world-class devices, Google wants to extend the reach of its web services, and for Zoho, the Office suite is one part of our broader work-oriented application suite. As I have argued above, underlying these different strategies is a more fundamental reason: why not tear down a market where we face a monopoly? Apple would want to stop Microsoft from being able to leverage the Office franchise and money into tablets and smart phones, Google would want to stop Microsoft from being able to pour money on Bing indefinitely and so on. Bill Gates would know what it means to “cut off the oxygen supply” – after all it was a phrase he invented while finishing off Netscape. Apple and Google recognize, just as we do at Zoho, that the $12+ billion in oxygen (aka operating income) that Microsoft Office contributes to the mothership is now extremely vulnerable.

The Windows and Office monopolies have massively incentivized the broader ecosystem to come up with business models that drive down the value of those core Microsoft franchises to near zero. This is the price Microsoft has paid with its profoundly anti-competitive tactics of the 90s – every single player in the ecosystem, from their once-slavishly-loyal OEMs to would-be competitors all want to see their market shrunk to zero. Microsoft has punished itself more than the Justice Department could ever have done.

Zoho Outage on Sep 26, 2013

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We experienced an outage yesterday, September 26, that affected all Zoho services. The outage started around 2:32 pm, PST. This was due to the network disturbance caused by a misbehaving access switch in our primary datacenter LAN. This switch actually has redundancy built in. The switch was losing packets, but didn’t fail fully, and so the backup switch didn’t take over.

Our team took the troublesome switch off the network, and had the backup switch take over. Most of the Zoho services including Zoho CRM which were hosted in a different network were up within the first hour. Actual downtime of Zoho CRM and other services was 52 minutes. Zoho Mail, which was hosted in the same network as the failed switch, was the most affected, and it took around three hours to restore full service.

We are still analyzing the root cause of this issue, and we will post our observations, corrective actions, as we get more insights into the events that led to the outage.

Any downtime is painful, and we are investing in both infrastructure and R&D to avoid downtime. We apologize for letting you down yesterday.

What the US Government Surveillance Programs Mean for Zoho Customers

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At Zoho we take privacy and security of your data very seriously.

However, privacy is not just a matter of software engineering. A few customers have asked us what the recently leaked US government surveillance programs mean for us as a company and for you, our customers. Our data centers are based in the United States, and we do a sizable chunk of our business here as well. We are, therefore, subject to US law. We do not make the laws, but we are bound by them – whether we agree with them or not.

We would love to be able to guarantee the privacy of your data against any government intervention. However, realistically that is not possible. Companies like Google and Verizon have also found themselves having to comply with over-reaching requests. Choosing not to comply is not an option given the way the current laws and programs work. Customers might want to consider the fact that the US government can do as it pleases – with your data whether it is stored in the cloud, or sitting inside your own company walls.

It is our view that the federal programs that have come to light (and others that we might not know of yet) are too far-reaching. We hope that with the intense pressure that the current administration is facing from media and the general public, these programs will be modified to allow for better due process and increased transparency.

Meanwhile, we continue to focus on the elements of privacy and security that we are able to influence and control. The technical safeguards that we work on are meant to protect you against hacking attempts, and also to keep Zoho itself out of your data. In matters of privacy, it is worth highlighting that Zoho remains the only major email service provider that never displays any ads. In fact, there are no ads inside any of our products. We don’t have an incentive to look inside your data ourselves. While Google has gone on record to say you can’t expect privacy from Google itself, we can assure you that we guarantee your privacy, at least from Zoho itself, if not from the Government.

So far we have not faced any situation that has presented us with these conflicts, but we do not assume we will never face it. This is not a technology issue, this is a political and constitutional issue. We just thought we would let you know about the current environment that companies like us face.


Grades Measure Test-Taking Skills and Interviews Measure Interviewing Skills

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Today Google dropped a bombshell:

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 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.