How Zoho is enhancing its software chops with a generous dose of AI

FOLLOWERS OF @svembu, the X handle of Sridhar Vembu, co-founder and now the chief scientist at Zoho Corp., are used to posts with strong viewpoints, sometimes polarising, never apologetic. Transitioning to a new role at Zoho earlier this year, Vembu has a lot to say about the future of software productivity in GenAI (Generative AI). “The initial hype, say six months ago, was that AI would take over all the software jobs. Now it has cooled off a little bit. It’s clear that it’s not going to happen anytime, immediately,” says Vembu, whose company AdventNet acquired the domain Zoho.com in early 2000 and rebranded itself to Zoho Corp. in 2009. Being at arm’s length from the daily grind has given him the required focus to think about it. With a focussed team of 40 people, on a day-to-day basis, Vembu collaborates closely with 20-25 of them from his workplace in Silaraipuravu village in Tamil Nadu’s Tenkasi district, close to the Kerala border. His work currently revolves around the intersection of old and new technologies and humans. His goal: to achieve reliable, compliant, secure software for 10X productivity gains. The group roadmap What brings in the moolah is Zoho Corp.’s “legacy” ManageEngine started in 2002 and the Cloud division Zoho.com, which offers business workflow and collaboration products, started in 2005. The group is now digging into AI to fill a few blanks in its B2B offerings and build a common AI infrastructure that all business verticals can use and learn from one another. Take, for instance, its recent free offering of the messaging app Arattai, touted as the Made-in-India alternative to Meta’s WhatsApp. When Zoho Corp. soft launched it in 2021, it made no waves. In September, downloads surged briefly when Union education minister Dharmendra Pradhan endorsed Arattai, followed by some colleagues. The surge lasted only a few days. Shailesh Kumar Davey, co-founder, who took over the role of group CEO of Zoho Corp. earlier this year, says volatility is expected in any B2C offering, but it stabilises at a higher level than before. Arattai was not even slotted for a big-bang launch this year. “We were planning it around early next year,” he says. Arattai runs on the same engine as Zoho Corp.’s Cliq, an all-in-one team communication and messaging software. Zoho Corp. has been offering the Slack-like messaging feature to its B2B clients since 2012-13. Arattai, a B2C offshoot, has taken many Cliq features and improved them. But why get into B2C at all? The answer can be found in the group’s new offerings over the past two years, plugging the payment gaps in the ecosystem. In 2024, it introduced Zoho Payments, a unified payments gateway for businesses, and this year it expanded to Zoho Payments PoS devices, QR devices, and sound boxes. Arattai aims to be the differentiator in a fairly well-explored space. Davey says eventually what Arattai has been envisioned as, is an open network — allowing third-party developers to build on top of it, like a marketplace, with value-added services such as payments or ticket booking, while also being a secure communication platform. Zoho Corp. is also working on its language models. In July this year, it launched a proprietary large language model, Zia LLM, and two automatic speech recognition (ASR) models for English and Hindi. Not just LLMs. “We are also building our own medium language models because we are differentiating the B2B and the B2C. In the B2C, people can ask anything that they want, but in B2B there is a constrained environment. So you could do it with smaller or medium-sized LLMs,” Davey says. One reason for pushing Indic language models is also to apply the learnings in places such as South America and other non-English-speaking regions. Zoho.com and ManageEngine Leading the company’s next-gen AI-embedded Zoho offering is Sridhar Vembu’s younger brother, Manikandan Vembu (Mani), CEO of Zoho.com. The only non-engineer graduate in the family, Mani, who has a bachelor’s degree in mathematics, is the first non-founding employee in India. He recalls his brush with his first project in the telecom space for AdventNet out of the country, but laughs, given that finally the code was never shipped to the customer. While his interest in coding began during college days when he started taking computer classes, “the real product I worked on was in 1998-99, where I first interacted with customers and was lucky to have worked on a product that succeeded at the time. There was a lot of learning for me,” he says. In his business development role, he also saw the 2001 telecom bust, drying up the company’s revenues. Today, with in-built Generative AI capabilities, Zia is being integrated into its product offerings, including the launch of a no-code, low-code agent builder, Zia Agent Studio. “We have already opened (the agent builder) to thousands of customers, and they have started building agents, and they have deployed them in our products. Right now, the goal is to allow them to deploy it as digital employees,” says Mani. Insights are being drawn from initial use cases on speed and accuracy from Zia, Agent Studio, and the ASR tools, where the company has converted more than 100K hours of voice data. However, given AI agents must tackle scattered data across systems and the technology itself evolving, deriving value for customers is still a nascent field, Mani says. Zoho.com is also betting on the creator economy boom, with its low-code/no-code offerings like Zoho Creator. One consistent strategy Zoho Corp. has maintained over the years is low spends on making themselves visible. “We kept the demand organic. So even though a product finds traction, we ensure it’s all through word of mouth. “We don’t pour money into it,” Mani says. “For us, sales and marketing would be climbing one peak rather than mapping the entire mountain range of business software.” For Zoho Corp., the legacy business is what it developed in the early 2000s, its ManageEngine, which provides software for IT departments of businesses. Rajesh Ganesan, who now is the CEO of ManageEngine, sees IT security and management as an evergreen revenue stream. With Zoho.com’s growing footprint, the synergies will kick in by 2026, providing some tailwind. “Today, ManageEngine and the Zoho software are built on top of the same platform, same framework. The Cloud stack we are hosted on is also very similar. So, we use the same technology, same platform, and same stack,” says Ganesan. The expansion of its business products is opening new doors. Ganesan says that if someone from Zoho.com talks to a customer first, they are happy to introduce ManageEngine, and when someone from ManageEngine works with a prospective client, they will introduce Zoho.com. “That is how it works, because of how we grew as independent business units inside the company, because we cater to completely different audiences... the pricing model, and the partners sometimes are different,” Ganesan says. Although ManageEngine has grown more slowly than Zoho.com in the recent years, Ganesan says the business has its own way of navigating the current disruption caused by AI. “When companies adopt a disruptive technology — like AI today, be it traditional, AI like Machine Learning, Deep Learning or Generative AI, Agentic AI — we will be there to solve any problems they face in managing infrastructure,” he says. Growth vectors According to the latest available numbers, Zoho Corp.’s standalone revenue was ₹7,727 crore in FY24, up 13% from ₹6,834 crore in FY23. According to the company’s annual filings, at the end of March 2024, Zoho.com’s business overtook ManageEngine as the largest revenue segment. Zoho.com’s revenues grew from ₹3,380 crore in FY23 to ₹4,162 crore in FY24. ManageEngine’s revenues grew from ₹3,410 crore to ₹3,498 crore during the same period, with Asia and Africa markets seeing a big jump in revenues. While FY25 numbers are awaited, “Whether in FY25 or even FY26, growth has been from all these developing worlds. Starting with India, Southeast Asia, the Middle East, and Latin America are the areas where the maximum growth is happening both for Zoho.com and for ManageEngine,” says Davey. “In a lot of these countries, digitalisation is being given a lot more focus. It could be because of business requirements or government push, like the Middle East (which is rolling out a new tax structure), even in Southeast Asia, some countries are getting on board,” he adds. The digitalisation push also provides a tailwind for ManageEngine, with security and IT service management driving growth. Zoho Corp. has reached $1 billion in revenue, but its bosses are conservative when issuing guidance and refrain from disclosing revenue targets. Zoho Corp. is in for the long haul, they say. For things that are beyond their control, for instance, the U.S. trade strategy, their mantra is serenity. “You have to read the Serenity Prayer, calm down because you cannot control everything,” Davey says. With local offices and local hiring across the globe, be it in the U.S., Mexico, Colombia, Singapore, Dubai, China, and Japan, Zoho Corp. sees its investments in local communities and its adherence to local regulations as its strongest pillars to tide through rough patches. Will Zoho Corp. now splurge on marketing? “Every organisation has a culture; it’s either a sales-first organisation or an engineering-first organisation. We are a very engineering-first organisation,” Davey says without hesitation. With a newly setup R&D centre at Kottarakkara in Kerala, about 80 km from Tenkasi, the focus is also on hardware that is ready for the AI age, especially around robotics. In July, Zoho Corp. acquired Asimov Robotics, which works on industrial robotic solutions addressing hazardous, inefficient, and repetitive scenarios. Zoho Corp. has not just invested in companies such as medical device manufacturer vTitan, EV company Boson Motors, and sanitation robotics firm GenRobotic Innovations, it has also incorporated a few companies recently such as Vipus Advanced Materials, Pilabz Electro Mechanical Systems, and Silectric Semiconductor Manufacturing Pvt. Ltd in the adjacent fields. “We work closely with them, bring in our software chops, especially some of these newer ones like vacuum insulation panels. That’s a pure-play hardware kind of a thing where we are talking about fibre reinforced plastics and their application in industrial domains,” Davey says. For Zoho Corp., the true test of success is having willing, paying customers for its products. The company expects the AI-led personalisation phase to eventually lead to bespoke offerings to its customers, while its IT services management business catering to IT systems, will benefit from the growing use of technology. In the AI age, Zoho Corp. believes it is R&D that will give it a stronger foothold in the software-as-a-service (SaaS) market.

How Zoho is enhancing its software chops with a generous dose of AI

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