Zoho held its annual ZohoDays outside of Austin in the beautiful Horseshoe Bay resort. While this is a good way away from Austin proper, it also gave the opportunity to have long and good conversations with Zoho execs, customers and fellow analysts outside of the conference and meeting rooms. And guess what, this is exactly what happened. 

Big time kudos to Sandy Lo with her amazing team for organizing this and of course also to all the Zoho execs, including the newly minted Chief Scientist Sridhar Vembu, Zoho’s new CEO Mani Vembu, Tony Thomas, Raju Vegesna, Vijay Sundaram and many more, who all were more than willing to share information and, even more importantly, get feedback. The latter is not something that we analysts take for granted.

Besides the usual – and important – state of the business update by Vijay Sundaram, the event revolved around three main topics

·      AI

·      Enterprise and partner strategy

·      Industry strategy

As Zoho is privately held, we are not given details, nor at liberty to divulge as much as we learned. So, suffice it to say, that Zoho grows healthily in the value chain from unpaid users to customers, to revenue to retention. The company announced having hit the milestone of $1bn US in revenue already in 2022 and is growing healthily in all of these categories while being healthily profitable.

With this out of the way, let’s have a look at the main topics.

Artificial Intelligence

Artificial Intelligence is one of the main reasons for Sridhar Vembu focusing on technology. He was very hands-on before and can do so even more now, especially on the backdrop of DeepSeek showing that after all reasoning is a commodity, combined with the fact that it is hard to discern what LLMs learn or unlearn. This creates unstructured output and therefore the need for humans verifying the output, which drastically reduces the productivity gains ones hopes to see. His solution approach is to look at prompt engineering and RAG as input engineering and to make AI create “machine checkable inferences” on business data, which has a couple of distinct advantages. Business data resides in databases, so it is known how to change or delete it. Second, it can be validated automatically, as it is structured. The validation of structured output is generally a solved problem, too – known as a compiler. Open problems are the question how to generate this structured output in non-programming cases and the then necessary output engineering which returns the appropriate answer outside the scope of programming. I am looking forward to some creative solutions by Zoho. With its contextual intelligence, Zoho already seems on this way. 

Having said this, Zoho can’t stay out of the agent game. One of the core differences to most other companies is that Zoho comes from a use case angle and looks at AI something that gets invoked in context and is a helper in the background, instead of being pushed to the front where it almost becomes an end instead of a means. A great example for this is Zoho’s own agent Ask Zia, which is imbedded in many, if not most of Zoho’s apps. In combination with Zoho’s already available and steadily growing number of hundreds of contextual AI use cases, this becomes both, a very powerful agent as well as a foundation for the creation for more agents, if they are provided as skills. These skills can only be as good as the underlying data and, going forward, the models that are available to work with. And here, Zoho is in a quite comfortable position. The company owns the complete software stack of its applications and hence can evolve its underlying “database” into a data lakehouse that holds data from structured to unstructured data and has the ability to ingest data from connected apps. Together with its already existing data cleaning technology, the ability to create new agents and the ability to connect to self-hosted as well as externally hosted LLMs, this is a strong value proposition. This is especially true as security and privacy are an integral part of Zoho’s DNA. 

Enterprise and Partner Strategy

Zoho has a firm foothold in the SMB market and for some years now is setting up the structures, processes, and messaging that are needed to better address the enterprise market. The company has already won a good number of enterprise accounts worldwide and across various industries. From a scaling angle, the user numbers in these accounts go into the six digits. Which tells that Zoho’s software scales.

Some learnings include that while many requirements are similar, there are differences by industry and region, and this is where the platform and partner strategies come into play.

Zoho is a platform vendor and starts to position itself as such, as opposed to the current messaging that positions the company as a multi-application vendor. On top of this, and as a realization of not every large business being created equal, Zoho places a domain architecture that is roughly taken from enterprise architecture frameworks on top of this. While this is an interesting positioning that caters to different use cases, it is also a difficult one, as it easily becomes quite technical and complicated. As the platform architecture is described right now, it places many elements that one would expect as part of a platform inside domain platforms that sit on top of a more generic platform. While this makes sense in an overall architecture that offers different customizing and enhancement tools for different applications, It might be easier to understand for customers to only place applications in domains and keep the development tools as part of the general platform. The general platform is needed, anyways. As a consequence, it might be easier to digest to speak of domain specific application families that integrate into each other and with the ones of other families.

Industry Strategy

Zoho regards verticals as a key driver for growth, for both Zoho itself but also for partners. This is based on the realization that there are plenty of underserved verticals and micro verticals that all need tightly integrated applications to build solutions. While the creation of industry solutions requires the creation of industry-specific apps as part of the suite, it also requires the integration with vertical-specific apps. No single vendor can deliver it all. Instead, this requires the ability to extend a horizontal platform to support vertical platforms, or rather solutions. As you could read in the enterprise strategy section above, Zoho has this horizontal platform.

On top of this technological issue, it requires the ability to build an industry solution that actually solves a problem – instead of one that is in search of its problem. A very good approach for this is to co-create solutions with a meaningfully large customer. This ensures two things, first that the solution actually becomes meaningful and not something that is specific to this customer, and second it gives credentials. The challenge is obvious: it is necessary to first convince this charter customer that one is able to create the solution at reasonable cost in a reasonable timeframe. 

This is exactly, what Zoho is doing. Having a reasonable size itself, a strong collaborative culture and, what is more, the technology to do this.

To scale this concept across industries, this ability needs to be made available to partners as well. This is what Zoho is doing as well. By enabling partners to build vertical solutions for smaller or micro verticals, Zoho will be able to scale the own business faster by offering them a sustainable business niche. Part of this is, of course, that partners can be reasonably sure that Zoho will not invade this niche. This is something that other vendors do; and is something that makes the investment decision for partners hard. They simply cannot compete with the ecosystem owner. 

What Zoho does instead, is offer partners the tools to build integrated industry solutions and to make them available to a global audience via the Zoho ecosystem. This way Zoho becomes more successful by making partners successful by making their customers successful. To achieve this, Zoho will make a Vertical Studio available to partners in March. The Vertical Studio will enable partners to build vertical-specific scalable multi-tenant apps that seamlessly integrate with other Zoho apps. Together, these deliver an industry solution.

Outside-in thinking at its best, and a true win-for-all. 

Bringing it all together

Zoho and Zoho customers have told a strong and coherent story during the ZohoDay 2025 event. It is one of the best and credible AI and digital agent story around, especially when combining current execution including the upcoming own LLM, own hosting and strong privacy focus.

Zoho has learned some very interesting lessons from its own endeavor into enterprise and industry territory. The best one being in my mind to “open source” its learning and to make process and tools available to partners, so that they can build industry solutions fast. This way, micro verticals can get developed and partners get what I would call a safe harbor with the promise to carve themselves a niche and owning a specialized domain. This message can only become stronger if Zoho decides to explicitly tell partners which domains Zoho will not actively engage. This increases trust further and makes it easier for partners, ISVs or SIs, to invest into creating IP.

A topic that is of importance in this regard is the one of regional partners. These fit better into the strategy of transnational localism as the global SIs and they bring relevant industry expertise. In addition, they are often more trusted than the global SIs while being able to offer near- and offshoring services that allow them to compete on price if necessary.

What I would call the “weakest link” in this good story is the messaging towards enterprise architecture and enterprise readiness. Not to be taken wrong: Zoho is enterprise ready. However, it is incredibly difficult to put the dimensions ‘SMB vs. enterprise’, ‘business domains’, and ‘industry’ into a short and succinct narrative, let alone an easy-to-consume slide. Do I have the perfect answer? No, I don’t. But I strongly believe that Zoho has the smarts and the arts to create this slide.

It was a good event, with helpful information, and I am glad to see Zoho on a continued trajectory of success. Functionally, there are only few companies that can deliver on a similar or bigger scope, culturally, there is none.

_{Disclosure: Zoho covered all cost for me attending ZohoDay 2025. Still, all points of view expressed in this post are mine and not influenced by Zoho personnel in any way}.

Finally, it happened.

We lived in our blissful world of an abundance of money that fuelled the illusion of eternal and unlimited growth. The stock markets knew only one direction for a decade. They were rising and rising. Venture capital was readily available. Valuations of all sorts of companies, profitable or not, skyrocketed. Growth at all cost over profitability has been the war cry. Acquisitions have been extremely expensive up to the end of 2021.

Logic never supported this illusion, the signs have been on the wall, yet we closed our eyes. 

Then, in 2022, reality knocked at our doors, and none too subtle.

In the “CX industry”, examples for this quite rude awakening include Zendesk. Zendesk went  private in June 2022 for $10.2 bn after refusing a $16+ bn offer in February 2022. Another one is Freshworks shares starting a steep decline in October 2021 after a very successful IPO in September 2021. These are only two examples and I by no means want to single out these great companies. Other signs included an increasing number of major layoffs throughout the first half of 2022, culminating in Salesforce announcing more focus on profitability due to a subdued outlook and subsequently laying off 8 thousand employees. Oracle already laid off more than 10 thousand employees of its CX division in August 2022. Amazon fired 18 thousand employees since November, 2022. Especially companies in the tech industry increasingly implemented hiring freezes throughout 2022.

This is to quite an extent a consequence of their optimism (or should we say hubris?) but also of companies across industries keeping their budgets in tighter control than before.

Another problem is that the definition of customer experience is not fully clear. In the words of Paul Greenberg, it is “how a customer feels about a company over time”. Dr. Michael Wu in a recent CRMKonvo gave a very pragmatic one: “The difference between customer expectations and the company’s delivery”. Still, business department continue to compete for ownership of their company’s CX.

At the same time, across brands, the Forrester Customer Experience index dropped in 2022.

As a result, spending does not grow as before – even somewhat declined – which “forces” vendors to lay off personnel, whether this is the right solution or not.

Now, what does this rant have to do with CRM or CX?

Why don’t customers buy from their vendors?

They do not see the value of the offers.

Based on the recognition that the true differentiator of every vendor nowadays are not product, price or promotion/placement but the customer experience, there are a few things that enterprise software buyers – customers – and software vendors can do. Software vendors clearly didn’t deliver up to their customers’ expectations.

This is something that can be changed.

Here some brief recommendations. Some of them have a short term impact, some a more long term one.

Enterprise software buyers

• At all times, be clear about where your CX pain points are.
• Develop models that help in the objective quantification of the benefit of improving on these pain points. These models mandatorily need to include a financial impact analysis.
• Invest where you differentiate yourself from the competition and not where it does not matter.
• Prioritize the pain points using the models regularly and frequently, to address the right ones first. This prioritization is a cross department effort that includes IT. It follows a think big – act small approach.
• Develop an IT strategy and roadmap that minimizes technical debt over time and helps to efficiently address the pain points.

Enterprise software vendors

• Be clear what your customers need and want and deliver exactly that in a way that it is fast and easy to implement. This way, there is an improved time-to-value for customers. This includes industry solutions that are more than current industry clouds.
• Establish pricing models that clearly show the value for the customer. What we still see far too often is the transposition of on premise pricing models into the cloud.
• Reliably include your partner ecosystem into the creation and implementation of industry solutions with fast time to value. My recent article on how to create winning industry solutions gives some valuable recommendations.
• Genuinely have your customer’s success at heart. Consider your own success as a consequence of your customer’s success. Reimagine your organization across this idea, starting with your customer success department.

While this sounds like a lot, it is actually not too hard to achieve.

Combine this with the three humble wishes for CRM, CX and customer engagement and let us all work on resolving these challenges.

One of the terms du jour is „industry cloud“. We hear it even more often than even platform or CX at this time. Why is that? Why do we speak about them only now and not for a longer time? After all, we have seen industry solutions forever, albeit on premise. Yes, the concept of vertical solutions is that old. What is the value of an industry cloud?  How does "industry cloud" differ from "industry solution"? And does this term really describe what industries need?

These are only some of the questions that we wanted to discuss with Vinnie Mirchandani as part of aCRMKonvo.

Hurricane Ian intervened and Vinnie had more important things to do than a CRMKonvo. Luckily, everything turned out well for him.

Good for the CRMKonvos team, that friend and Enterprise Irregular Jon Reed could jump in to what turned out to be an even more interesting topic than we hoped for. We will continue this discussion with Vinnie on a later occasion. He has quite something to say about industry clouds, and comes from another angle than Jon.

 The problem with industry clouds 

Most business applications have started their life as horizontal applications. This makes a lot of sense, as a good deal of the functionality that a business needs, and the application offers, is not exactly industry specific. Instead, it is applicable across a range of industries. Therefore, business software vendors at first concentrated on developing horizontal functionality, as this functionality is reusable across and customized for numerous industries.

Often with only little effort.

This applies to SaaS software as well as it did apply to on premise software back in the day.

So far, so good. One challenge is, of course, that it is not always that easy to configure a business app to specific needs that easily. This, on the contrary, often needs substantial effort and knowledge.

The result is that horizontal solutions often under-deliver, as one can see in soaring implementation costs, even in times of the cloud.

Another challenge is that an industry solution is first of all a solution, which means it regularly stretches across more than one business application. This requires integration between the involved applications. This, in turn, is something that not all software vendors can deliver. The same is true for many system integrators as there are many ways to integrate different applications.

These deficiencies, combined with one of the main promises of the cloud, led to increased silo'isation of the application stack that got (and still gets) implemented at businesses. In addition, ERP software has a longer history of targeting industries than e.g., CRM software or analytics software. When it comes to industry specific CRMs, Jon rightfully names the acquisition of Vlocity by Salesforce a milestone that brought this topic into the forefront of business software vendors' minds again. Again? Yes, again, as there have been Industry flavored CRM solutions already at the beginning of this millennium.

 The real value proposition 

Industry clouds target industries and therefore promise the delivery of specialized functionality at low implementation cost. This is quite a big and enticing promise, especially in uncertain times like these, when not only efficiency but, even more so, cost play a major role. Implementation projects need to be short and deliver value fast.

According to Jon, there is even more value. As this specialized functionality must include responding to new or changed regulations, the customers do not need to take care of this anymore. This also reduces technical debt in the customer systems. In addition, and this is a fascinating thought, in a multi-tenant cloud environment, a solution vendor can provide all sorts of (anonymized) benchmark data. This data can help companies discover where they can improve relative to their peers. The challenge is, of course, data ownership and privacy.

Do industry clouds live up to this promise, or are they really “a great way to advance your career in marketing and our industry by taking existing functionality, creating a nice sexy new term that gets everyone excited and then, when they start scratching under the surface, they get more and more confused” - as Jon put it provocatively?

Or is this not that provocative a statement at all? We need to acknowledge that businesses need to make revenues and profits. These come from markets and it is a job of marketing to create and/or nurture markets for their company.

Well, according to Jon, industry clouds do not live up to their promise, yet. One important reason for this is that they regularly replace software that is very mature and in use by businesses for a long time. In contrast to this, a newly built software just cannot cover the full breadth and width of functionality that businesses require. Sometimes this software even misses on functionality that is essential to run a business.

 Are industry clouds the right thing? 

Another reason is that "industry cloud" is not about technology, which is what the term industry cloud suggests. The term delimits thinking. Instead, we need to think about an "industry-ecosystem" that surrounds the software. The software is still important; but it is only part of the solution. An industry solution requires domain expertise, which is often not available within the software vendor. It requires the frequent or constant exchange of domain experts with each other to identify how to solve challenges best. Good places for this knowledge exchange are industry events or even gatherings that are part of vendor events. According to Jon, this can even work well for smaller companies.

These domain experts then need to work out with engineers and UX experts how to implement the solutions. This can create a winning proposition.

This is why I prefer to talk about industry solutions and rarely use "industry cloud". Industry solution does not have the strong focus on technical delivery that the term industry cloud has. It gives a more holistic view of the idea.

How to create winning industry solutions 

This leads directly to the question of how to fill the idea with life.

An industry solution always needs domain expertise.

Additionally, an industry solution requires a strong technical platform. This platform enables the building of industry specific functionality, based on horizontal functionality.  The exception is the vendor targeting a small number of industries.

Creating winning solutions requires the platform provider having the strength and honesty to not only say where they are strong - but also to state where they are not!

Why?

Because this is exactly the spot where industry play and ecosystem play overlap!

Furthermore, it builds trust. No company can be equally good at everything. Once companies admit weaknesses, an ecosystem around industries can emerge. Then they can bring together domain and software experts. Partner companies can fill in the identified gaps. Practitioners can design solutions that augment each other. All this becomes easier if the partners can trust the platform provider.

So, an industry strategy needs to be part of an ecosystem- and partner strategy.

This strategy needs three industry buckets.

The first bucket contains the industries that the platform owner delivers solutions for, or intends to deliver solutions for. These are the industries where the platform owner feels strong or already has a strong offering. Partner companies are not forbidden to provide solutions for these industries, but they are aware that they are potentially competing with a big company in any given deal. Partner solutions are still also free to augment these industry solutions for use cases that are not covered by the platform provider.

The second bucket has all the industries that the platform provider leaves to partners. They can build their own industry solutions without competing with the platform provider. The platform owner should even support the creation of these industry solutions. The important part of this is that this is not a temporary commitment by the platform provider but an assertion. This is about trust. Removing the risk of getting crushed enables ecosystem partners to confidently invest in a way that helps all stakeholders: customers, platform provider, partners.

The third bucket is the most interesting one. it covers the industries that the platform provider may or may not enter. The platform provider should also indicate the likelihood of its entry into these industries. While this involves some uncertainty for ecosystem partners, it also provides the transparency that is essential to take investment decisions.

These buckets need some stability. Still, they can and will change over time. However, changes should not come as a surprise to the ecosystem partners. Partnership requires mutual trust and respect to be valuable for everyone. The platform provider shows this trust and respect by committing to provide a stable framework. This gives the breathing space for the partners. These partners commit to providing complementary solutions.

The winner is the customer.

The result of the customer winning is that the other ecosystem members win, too.

Industry solutions are a platform play!