IBM Should Buy Zoho (Updated)
Last week I mentioned how risible the idea of IBM trying to match Google Apps could be. Acknowledging all of IBM’s strengths in the enterprise market, it’s ludicrous because they’re trying to offer a lot less in function for not that much less per user. And when was the last time you heard anyone who wasn’t employed at Big Blue even talk about Lotus Symphony? That’s why IBM should buy Zoho.
The possibilities are impressive. Zoho has actually figured out how to provide an extensive set of services via web-delivery and apparently has somewhere north of 1.8 million users, with 100,000 more coming in a month. Depending on who is doing the reporting, Zoho is either now or later this year will be profitable, and is seeing $50 million a year in revenue. That’s roughly a third the size of Google’s likely revenue from Google Apps, but given the relative sizes of the companies, that is an impressive achievement. (Though the fact that it took so long to get profitable should scare to any start-up considering a freemium business model, as it’s taken Zoho 13 years to get to this point. That’s a long runway. [Update: The company existed under the name AdventNet for 13 years, eventually to change the name to Zoho. It started offering an ASP model - SaaS precursor - in 2004, so is closing in on 6 years in that. Not 13, but still a long ramp time to profitability.]) Plus, both Google Apps and Zoho are doing well in emerging economies where price sensitive is acute.
Not only are there business applications with function categories beyond what Google offers, but collaboration capabilities, which, as I’ve heard from Google Apps users, is one of the driving factors for adopting that platform. Combine the capabilities with IBM’s reach into corporations, the strength of its sales team, and its ability to deliver software services and manage outsourcing, and you begin to have a package that begins to look compelling to CIOs. That would still leave IBM with one historic weakness that I’ve seen: marketing. I remember when it came out with OS/2 and managed to completely bomb, which was a shame, as the operating system itself was a good offering. But the fact that Zoho has the freemium approach could help IBM build user demand in corporations, making it a de facto corporate cloud champ. Not only would Google have something to really be nervous about, but so would Microsoft.
Image via stock.xchng user juliaf, site standard license.
Erik Sherman is a freelance journalist whose work has appeared in Newsweek, the New York Times Magazine, Technology Review, the Financial Times, Chief Executive, and other publications. Follow him on Twitter.
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