Entrepreneur Marc Benioff is afraid of him. Venture king Mike Moritz wants to invest in him.
You have never heard of Sridhar Vembu, founder and CEO of AdventNet, the company behind newly launched productivity suite Zoho.
Vembu is a low-profile guy if there ever was one. He is also cheap as hell. Yet, of course, you know that among entrepreneurs, frugality is a virtue. A tremendous virtue.
Vembu has stretched this virtue to extreme limits, and added layers and layers of creativity upon it. The result? A 100%, bootstrapped, $40-million-a-year revenue business that sends $1 million to the bank every month in profits.
Doing what? you might wonder.
Selling network management tools, to be precise. But with a unique twist. Vembu employs 600 people in Chennai, India, and a mere eight in Silicon Valley. Imagine what that does to his cost structure!
Not only that, in India Vembu's operation does not hire engineers with highflying degrees from one of the prestigious India Institutes of Technology, thereby squeezing his cost advantage.
"We hire young professionals whom others disregard," Vembu says. "We don't look at colleges, degrees or grades. Not everyone in India comes from a socio-economic background to get the opportunity to go to a top-ranking engineering school, but many are really smart regardless.
"We even go to poor high schools, and hire those kids who are bright but are not going to college due to pressure to start making money right away," Vembu continues. "They need to support their families. We train them, and in nine months, they produce at the level of college grads. Their resumes are not as marketable, but I tell you, these kids can code just as well as the rest. Often, better.???
(Read my full interview with Vembu here.)
With that rather unique workforce of 600 engineers, Vembu has not only built an excellent, cash-cow, network tools business, but he recently launched Zoho, which is getting a lot of buzz in the Web 2.0 community.
Why?
Well, Zoho does everything that you would do with Microsoft Office. It also has a hosted customer relationship management service that is free for very small companies and only costs $10 per user per month for larger ones. It competes with Salesforce.com (nyse: CRM - news - people ), which charges $65 per user per month.
Marc Benioff, chief executive of Salesforce.com, has made an offer to buy Zoho for an undisclosed amount. Benioff seems appropriately nervous, since Salesforce.com's sales and administration costs are high, eating up most of his earnings. Can he afford to compete if Zoho undercuts him at such a dramatic scale?
Vembu has turned Benioff down.
Many venture capitalists want to invest. Vembu's situation is one that every entrepreneur dreams of. You don't need money. VCs are chasing you. Freedom is delicious, and Vembu knows it.
Vembu has a very exciting opportunity ahead of him. What the Chinese have done in manufacturing, he is showing that the Indians can do in software: undercut U.S. and European software makers dramatically. Not in information technology services. Not by body shopping. Vembu has done something few Indian entrepreneurs have been able to achieve--build a true "product" company out of India. This is not a head count-based business model.
A brief primer would perhaps help put things in perspective. "Product" companies build once and then market and sell the same thing multiple times to multiple customers. "Services" companies that do custom software development have to use "bodies" to do customer-specific development over and over again, with limited leverage. Theirs is a head count-based business model. Recently, popular software-as-a-service companies have come up with the model of "renting" software over the Web, thereby offering "products" as "services" while maintaining the scalability advantage of products.
Vembu has first done a network management product. Then he has done productivity suite Zoho as a software-as-a-service.
True, Vembu is a rare species in India these days. As far as I know, he's one of the very few entrepreneurs who has been able to execute on the premise of building software "products" and/or software-as-a-service out of India. He has a big vision, and so far, he has executed flawlessly.
Watch this guy!
1 comment:
I know of a story of an entrepreneur who again, had a very simple plan, one that did not need much capital.
way back in my school days, we had a darwan, a gatekeeper, who used to ask us for our used notebooks at the end of the year. We never gave a second thought and handed them over to him.Now Shyam Bahadur, the gentleman in question, used to take out the unused pages, and bind them together as small notebooks with fancy covers his wife designed, and sell them back to us.
They were huge hits with their flowery cover, unlike the dry notebooks we used to buy from the shops. 2 years after I left school, in 2001, Shyam had had enough capital to start a small educational stationary shop of his own where he used to sell notebooks,pencils and the like.
I recntly met him (during this years Durga Pujas) - his shop has now become a large establighment, and he also sells books. Of course, he had friends to help him out,and a large number of students still buy books from him, but he did not have much startig capital - simply his will and a desire to make it on his own
I salute Shyam Bahadur the entrepreneur
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