Open Spaces and Ambition: An Interview With Zoho CEO, Sridhar Vembu

By Features PCmag

The Bucket, as it's known, looms over a congested stretch of highway with no shoulder, where traffic creeps past sugarcane juice vendors and women holding the scarf end of their saris in front of their faces to ward off exhaust from autos. Marine blue and glassy, the 13-story building shaped like a wastepaper basket is Zoho Corporation's main office building in Chennai, India. At least it is for now.

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Behind it, on almost 45 acres of land, signs of construction are everywhere; a raw patchwork of rebar, cobblestone, and ambition. Landscaping around a half-empty, man-made pond is being finished before the monsoon rains roll in. Baby palm trees root themselves in the soil and will shade stone walkways within two years, growing like weeds in the tropical climate.

Sridhar Vembu, CEO and co-founder of Zoho Corporation, shows me his favorite spot on the campus, a small seating area just outside a temporary mess hall, where employees sip tiny paper cups of tea or milky kappi, the strong and frothy coffee preferred by south Indians. When the whole plan is completed, this office park could employ as many as 9,000 people. At present, more than 3,000 employees work from this location building software that Vembu hopes will become "the operating system for businesses."

Vembu is from India, and while he now lives near Pleasanton, Calif., he returns to Chennai and Zoho's headquarters every few months to stay close to operations here. In this exclusive interview, he shares his ambitions behind building the campus, his hopes for the company, and some of the early influences that set him on this path.

Jill Duffy: What is Zoho's motto about becoming "the operating system of business?" What does that mean?

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Sridhar Vembu: Traditionally, we think of an operating system as what runs your device. What is important for business is an operating system that runs the business, exactly the same way that an operating system runs your entire device, and all the applications are hosted on it. Exactly the same way, you have an operating system, particularly in this cloud era, that runs your entire business. And then on top of it there are applications that do specific aspects, something that customizes to your line of business.

Every business has a central thing. Every business has a customer. There is no business without customers. There is no business without employees. All those things are common across businesses. Accounting. Taxes. All of those are common.

But once you get to specifics, a software business is different from an insurance business is different from an automotive business. So the operating system that we envision is something that addresses the horizontal layer of things that are common across all businesses. And then you have applications that deal with the specific vertical layers of business.

It is only possible in the cloud to think that expansively.

JD: I want to talk a little bit about having an economic advantage. My assumption—and tell me if I'm wrong—is that doing business out of India gives you a huge advantage.

SV: It's actually less of an advantage than the whole strategy. Today, every American company, everyone, has an office in India. Go around Chennai, you'll see Amazon and everybody, everybody is there. Or go to Bangalore, Hyderabad, and even Pune. It's not that there's a unique advantage to being in India. Everybody's here.

So that is not as much an advantage as the whole strategy of building our whole common foundation, common framework.

There are intrinsic gains we get from building it all together. Someone like SurveyMonkey, which has built a good survey tool, they'll have 500 or 600 employees, while if we compare them to Zoho Survey, we have about 25. The same thing: Zoho Desk could have about 100 people. Zendesk could have about 1,000 people.

There are a lot of advantages of doing all this together on a common framework.

Like security, for example, we have 35 or 40 people in our security department. The same way we can secure Zoho Desk and Zoho Survey and Zoho Mail, all of that, using the common security expense. We don't have to employ security experts for each and every one, which is what each of these companies out there have to do. They have to hire data center experts, security experts, people who Q/A the software. Those are very generic functions. It doesn't matter if you're building a CRM system or help desk software. The expertise is the same. We're able to leverage across a lot of these products. It's traditional economies of scale applied to software.

JD: Zoho employees are allowed to pursue pet projects. I wanted to ask about that. It reminds me of Google's 20 percent perk, that employees were supposed to get 20 percent of their work time to pursue whatever projects they wanted.

SV: The problem with putting a number on it... You know, even Google has abandoned such numbers. It doesn't make sense.

If you have a product launch, a lot of people will be slogging their ass off for that. Other days, they're not slammed, they don't have a lot to do.

You cannot apply 20 percent. What you do need is have a bit of slack in the system. What it means is people have time.

There's a great book I've been reading recently called Slack [by Tom DeMarco]. It's not Slack the product. It's about how companies need slack [reading the subtitle]: 'Getting past burnout, busywork, and the myth of total efficiency.'

You really don't want to drive people to be 100 percent efficient all the time. I don't keep myself busy, busy, busy all the time, and I don't encourage other people to.

I've long had a fascination with computer software in that the essential ingredient is the programming language. I've long had a fascination with languages. Why do they do a certain thing a certain way? Language, as they say, shapes thought, and that's true of human languages. With programming languages, a similar thing is true.

Maybe for 15 or 16 years back, when I was a programmer, something left me dissatisfied with the existing way of doing it. That's how we arrived at the idea of pet projects, maybe allowing a couple of programmers to work on [projects of their own interest] for the last 15 years. Those first projects are now multimillion-dollar products for us. Those pet projects have translated into profits. We're now building more and more ambitious things. So essentially, the fascination with programming languages has turned into products that make us money. Also, it informs the way that we develop software.

JD: What do you mean by that?

SV: I'll give you an example. In the cloud, one of the biggest issues is security, privacy of data. You put data in some website, you want to make sure nobody else takes it. There's all these hackers and people trying to steal stuff for either economic gain or blackmail, or just to embarrass somebody, like the DNC mail stunt with Wikileaks. It wasn't secure enough that somebody couldn't break in. That's an issue because, obviously, if someone put that data into Zoho, we are responsible for it.

It turns out, if you look at all the languages today, security is not a major consideration in the design. These languages were all designed for their worth and network security was not a consideration. I had long believed that your fundamental language design has to incorporate security.

If you ask a computer scientist, they'll tell you that the in the next five to ten years, this whole landscape will change, and secured-by-design languages will come to the forefront.

It is absolutely necessary today. You cannot have an email system or your financial system or your tax system written in a language that did not take security into fundamental consideration. You don't want to be writing that. And that will change in the next ten years, and we hope to be at the front of that type of evolution.

JD: When you say a programming language should fundamentally consider security in its design, what exactly do you mean?

SV: In programming languages, you are always accessing data. For example, when we are logging into Gmail, there is some computer code in Gmail that programmers have written that's taking your email from some storage, processing it, and sending it to your display. There's some code that's essentially reading your email. There has to be. But if that code is triggered by a malicious person…The code itself is neutral. Whoever commands that code, the code will do what it's told.

Languages have to put in safeguards for it. Imagine that the storage system has some flag indicating that you are the owner of the information. It's your information. No matter who triggers the code, the code that is taking the information and processing it has to respect the ownership, and language can respect that sort of thing.

It's an emerging field. There's even research at major universities about it. "Secure by design" is what they call it. You write the code, and in effect in the code you cannot violate this principle that you [the end user] can only read what is yours. It's a hard guarantee.

Today's languages are not designed for that.

JD: I've read that you very much eschew VC funding, and it seems to be a point of pride that the company is private. Can you talk about why you have that stance?

SV: Once you financialize a company—that's what I call what VC funding does—in effect your goal is toward liquidity, either an exit through acquisition or through an IP holding. The whole thing changes. No matter how true you try to stay to your mission, you necessarily have the quarterly pressure of Wall Street. They'll give you the freedom as long as you are giving them numbers. Right?

In business, often you have to take some unpopular position. Or you're interested in some area that Wall Street doesn't believe in yet. Or long-term projects. It becomes difficult. It becomes difficult even for some established companies that have or had an excellent track record. Even Microsoft, three or four years ago, Wall Street was really punishing them. Satya [Nadella] has had to come along now and he's had to be perceived as Wall Street-friendly. Google has had to appoint a Wall Street-friendly CFO, and they were the company that originally wrote a letter that said we will not pander our company to Wall Street.

But ultimately, you have to. If you don't take their money, you don't have to report to them. It's that simple.

I only have two constituencies: customers and employees. I don't care what external channels do because they don't exist here. That's a lot easier way to run a company.

JD: Along those lines, what is your ultimate future for the company, and related to that, what do you want your legacy to be?

SV: As I said, becoming the operating system for business is a huge project. It's hugely ambitious, ambitious for any company. It would be ambitious even for Microsoft at this scale. We are building this here, and we are building this from a developing country where all the skills, we have to build in house.

As much as India is a software promise, a lot of it is still in the formative stages. For example, from security expertise to design to marketing—a lot of this we have grown here in-house. That is flowing back into the rest of the ecosystem now. We're seeing as a result of Zoho existing and being success, there are a lot more companies being founded here.

JD: When you say the ecosystem, you mean the local economy?

SV: Local economy, sure, all the other cloud companies being formed here, they are looking to Zoho as a role model. Some even will prefer to stay private like us. I hear from entrepreneurs all the time that they have chosen a similar path to ours. That's something that we definitely get some credit for.

I believe that in regional economies, like in South India and Chennai, you need anchor companies that are committed. Even in an era of globalization, you need companies that are rooted in a place. That's how we think of ourselves. We're global, but we're rooted here. Just as BMW is rooted in Germany, Zoho is rooted here in Chennai.

JD: Tell me about your personal journey. You did a PhD at Princeton, and then you worked for a little while in the US and eventually decided to come back to India.

SV: I worked at Qualcomm in San Diego for about two years. And since 1996 approximately, when I left that job, I've been at this. No external money, no startup money, nothing. We did whatever we needed to do to survive. We did a collection of things and slowly grew.

JD: Did you learn anything while you were at Qualcomm that inspired you?

SV: Yes. One of the things I liked about the company is it was hugely ambitious.

When I joined, Qualcomm was this fledgling company that had one product. The product was for long-distance truckers to communicate with their dispatchers or their headquarters. It was like a messaging terminal. It was a way for the truckers to say, "I'm here." In 1994, that was the only product.

I was working on a project to essentially completely transform the satellite communication industry. They had another project to transform the cellular industry. For a company that small—I was employee number 1,700 or something—this was hugely ambitious to try to transform the cellular industry, which they did!

Now it's a $15 billion or $20 billion company. But at that time, it seemed like an extremely long shot. The company was barely profitable. Wall Street didn't particularly like it. But by about 2000, it was clear that it would take off. It took off after I left, but still it left an imprint: You have to be very ambitious.

JD: Did you learn anything about the management team and the strategy that they had or the decisions they made that allowed for that success?

SV: I was only an engineer, so I had no business up there.

JD: So it was observing the big picture.

SV: Observing the big picture of the whole company, as small as it was, as insignificant as it seemed to the rest of the world. It was intentionally ambitious. The engineers really believed. The top-level, most valuable engineers believed. And they were part of what transformed it into a reality.

JD: You said your priorities are your customers and your employees. Can you explain a little more about that?

SV: You don't exist in business if you don't take care of the customer first. And you cannot have any employees if you don't have customers. So customers come first in everything. We are always looking for how we can give them better software, better support, and charge them less. That's what I'm constantly looking for.

The second most important goal: You cannot take care of customers if you don't have employees who trust the company long term. Extensive turnover is a killer of customer satisfaction, more than anything else because you don't have continuity, you don't have software quality. It's directly a result of—it's not "process," it's not all of that—it's how long people are at their gig.

This is unconventional. A lot of management teaches that people are small, replaceable parts. An engineer is doing some job, and when that engineer leaves, you put another engineer in the job. But that's not actually true. In reality, anything worth doing, anything really tough takes a long time to master. We need to rethink keeping people long enough for them to learn and have continuity. The continuity is important for the customer. We have to take care of our employees to take care of our customers.

JD: The plan for what this entire campus will be is an employee park where people will be happy coming to work. They feel good being here, they can be productive. Can you talk a little about that vision?

SV: We moved out here for the space. Really, space is a big problem. Space not only to work, but to think, to walk, to play. All of those things. That's why we moved here.

We have about 45 acres here. We are going to keep it reasonably low density. We don't want to cram it so full of people that we don't have room to play. We conducted an internal corporate cricket tournament recently. For a few weeks, about half the company competed in cricket.

Those are things that have a direct contribution to people's well-being, their sense of well-being, their mental health, their physical health. It translates into how well you do. These are holistic. It's not like your work life and personal life can be totally separated.

JD: I wanted to talk a little bit also about Zoho University, which is more like a training program, is that right?

SV: It's a training program for those who have finished [the Indian equivalent of] high school.

There's a system here in India that after tenth grade, you can go to essentially the equivalent of community college, but it's more like a training school. After tenth grade, you can go to polytechnic, where you can study electrical engineering to become an electrician, or mechanical engineering, or any of those trades. That system is running in parallel to the school system. So all the kids who don't want to go to college or can't afford to go to college and want to get to work faster, they will go through that stream of tenth grade and then spend three years in training.

Then you have the regular ones who finish high school and go to college.

We recruit from those two pools. We recruit them, and then we put them through about a year of intensive training.

JD: After you recruit them, they're paid for the training?

SV: They're paid. We pay them because in a lot of cases, they're not going to college because they really need to work. They really need to earn. They cannot afford to pay us. They cannot afford to take money from their parents. It's not an option for them. So we pay them.

They get to live on their own. They typically take some apartment with two or three others. We actually have food for them, all three meals, including on Saturdays.

It's an intensive training for a few months, and then they'll join our team. About 85 to 90 percent of them do. A few will drop out along the way, either they change they mind and decided to do something else or they don't like it. That's only 10 or maybe 15 percent.

JD: When they're in this training program and are getting paid, it's not quite an apprenticeship, but is it the same idea?

SV: The first year is actually just intensive, very similar to college, but it's only one year and it's very intensive.

We only focus on three subjects: computer programming, math, and English.

The hardest one turns out to be English. They pick up the programming faster. Math? Just enough to make sure that they can be a software engineer. Software is not math-heavy. High school-level math is sufficient. But they're grounded in the concepts they need. And then they'll join a team and learn through the job.

There are about 400 to 450 [former students] now in the company as employees. The annual intake now is about 120 or so.

JD: It's really a long-term investment in your employees.

SV: Exactly. Obviously, these employees only become productive in year two. It may take three or four years for them to be fully productive. But we think long-term as a company, so we are ready to invest in them.

JD: So back to your legacy…

SV: We hope to be one of the largest technology companies coming out of India. And we want to make an impact both on the markets themselves and the places where we are.

You impact markets, but we also want to have an effect on the immediate economies and the people in society.

It's very much part of Zoho already to think long-term. In this country, you ought to think long-term. I don't feel any satisfaction exiting [that is, cashing out by selling the company] and just making money on this.

JD: I know that Zoho has another office south of here in Tenkasi. Is there a reason it's in Tenkasi? Is there talent there or something?

SV: India is densely populated enough that you can draw a random 50-km radius and find people. It's not like we're running out of people! [Laughs.] Even when we say, "It's not real dense," compared to what? The next village is probably a mile away.

We never worry about whether we can find talent.

JD: Do you ever bring people from Tenkasi up for the university aspect?

SV: Some people come up, but we usually keep them there. Actually, part of our goal is to try not to bring not too many people here. I like to say every percent that we bring here, we are crowding the city more and making life more miserable for people here. We might as well spread it out. We have a waitlist of people who want to work in Tenkasi.

Where I live in Pleasanton—I don't even live in Pleasanton. I live in the outskirts on a ranch with goats. I like space. When I was a kid, I picked up a taste for running around alone. I like to give that same thing to other people.

We underappreciate the importance of space now. Once you experience a spacious area, it has a psychological effect. You think more expansive thoughts.

Sometimes I don't think of company as just as an economic entity to profit maximize. It's a social entity. But beyond a point, I just don't see the point of bank rolling. I have enough cars. I have enough houses. I don't need more.

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