Getting Out of the 揑nevitable MonopolyMindset

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Microsoft announced their business cloud offering, Office 365, yesterday. In keeping with Microsoft’s installed software offerings, it has three components: Microsoft Office, Exchange and SharePoint. The natural question is “How does it impact Zoho?” And what do we think of this at Zoho? I believe Microsoft’s offering will be successful. Microsoft is a formidable competitor, and when they focus, they tend to get things right. They have been lukewarm about the cloud in the past, but that strategic ambiguity is firmly in the past—with Office 365, they are making that loud and clear. From our perspective, Microsoft getting serious about the cloud brings both opportunities and challenges. I will first outline the short to medium term effects. The obvious first effect is that the entire cloud ecosystem benefits due to Microsoft’s arrival. This is the well known “anchor tenant” effect in shopping malls, where every store benefits from the increased traffic brought by the anchor tenant. Microsoft has signaled that the cloud is the future of all software, including their crown jewels. The future is here and now. It is a rising tide, and that clearly benefits Zoho. We don’t have to sell why the cloud is better for apps that were traditionally thought of as firmly wedded to the desktop; we just have to articulate why our cloud offering is better. On the challenges, clearly Microsoft is going to have a formidable presence, due to its sheer installed base and the incumbency advantage Microsoft enjoys at its installed base. Again, the challenge for us is to clearly articulate why we offer a better value proposition. In a nutshell, we bring a sharp focus, a comprehensive product strategy, and a vision that integrates traditional document oriented apps with database oriented business apps, opening new avenues for business productivity; and finally, we bring better pricing. As a nimble company that has no corporate ego, we will integrate our offering with Microsoft wherever possible, just as we do with Google Apps today. Google has been exemplary in their openness, and we hope that Microsoft will be as open in allowing third parties to integrate into their stack. For example, we would seek to integrate our CRM with Microsoft’s cloud Exchange and SharePoint offerings. Looking ahead over the long term, I want to make an important point: Software in the cloud is going to be more competitive and more open than software on the desktop. The analogy here is the wireline to wireless transition in telecom. Not long ago (though it feels like ancient history), there was really only one phone company in each country, often known as “the phone company”—because no further qualification was needed. Today, there are very few places in the entire world where there is not a choice of three or four wireless providers. It is one of the most dynamic markets in the world—as in, if you blink, you missed a product turn. Looking at the cloud ecosystem, we have major forces operating that practically ensure that we are not going to have a monopoly. We have a competitive service provider market, an ultra-competitive data center market, and we have infrastructure offerings like Amazon that make it easy for cloud software vendors to scale up quickly. Consider the crucial client operating system market, which no longer means just the desktop and laptop, with mobile and tablets being where the action is. The mobile OS landscape is a real horse race between Apple, Google, Microsoft, BlackBerry, Nokia and Palm/HP—the only certainty here is that it is not going to be a monopoly. Even on the business desktop, Mac OS, riding on the astounding success of the iPhone and the iPad, is making strong inroads, and it is unlikely Microsoft is going to be able to stop Apple from making its presence felt in business computing. This is not to say that Microsoft won’t remain a formidable player; I personally think Win Phone 7 is a serious and credible offering and will gain reasonable share. My point is that the client operating system monopoly is over. The constellation of forces, from carriers to device vendors, from application developers to consumers and businesses, precludes that possibility Why is all this relevant? If Microsoft cannot consolidate the client operating system market, it cannot monopolize the cloud. It was the Windows monopoly that practically ensured the Office monopoly. If the cloud apps market is not an inevitable monopoly, by definition, many vendors are going to flourish, and there will be many opportunities to differentiate and add value. Microsoft has made it clear it is not going away; Google is not going away, and we want to be clear that Zoho is not going away. While the short to medium term impact of Microsoft’s strong cloud showing is actually a positive for us, we strongly believe we have a really good long term opportunity here. Of course, it all comes down to execution, and we like our chances at Zoho.