Issue: Zoho apps vs. Google and Microsoft

Two months ago, Google made a quiet, back-door admission that it was developing an online suite of applications to take a bite out of the lucrative office apps market, which has been dominated by Microsoft for over two decades. Apparently, Google did not want to wake the sleeping giant by making a direct challenge to Microsoft. After all, Google CEO Eric Schmidt was previously an executive at Novell and Sun, two companies that got steamrolled by Microsoft in the server software business in the 1990s.

By contrast, a small private company called Zoho is making an open challenge to both Google and Microsoft in the office apps arena. While the idea of Zoho dethroning Microsoft in office apps seems laughable when you consider the fact that the graveyard of failed challengers to Microsoft’s office apps crown includes IBM, Sun, Apple (remember ClarisWorks?), and the open source crowd, Zoho’s challenge has one important advantage — it’s got the products to back it up.

In the past 18 months since Zoho Writer was first released in October 2005, Zoho has released 14 more online applications/services. It now boasts one of the broadest and most mature sets of online applications available in the cloud. The screenshot below lists some of the Zoho fleet.

Of course, the cornerstone of the Zoho application suite is the trio of Zoho Writer, Zoho Sheet, and Zoho Show — word processing, spreadsheet, and presentation apps, respectively — which are aimed at taking on the dominant Microsoft triumvirate of Word, Excel, and PowerPoint. The three screenshots below provide a quick look at Writer, Sheet, and Show.

While Google is trying to take on Microsoft Office by providing streamlined online office apps with a pared down feature set, Zoho is attempting to give users the full feature set and take advantage of the benefits of a Web-based experience with tagging, sharing, and collaboration.

Microsoft still hasn’t released an online version of the Microsoft Office suite, so we don’t know what its online office suite strategy will be. Microsoft’s OfficeLive is an online mail and Web site service for small businesses. It’s unclear why it calls the service “OfficeLive,” because it has nothing to do with Microsoft Office. I wouldn’t be surprised to see Microsoft play catchup by buying an online office player like ThinkFree, another startup that is nipping at the heels of Google and Microsoft. It’s also possible that Microsoft is quietly developing its own online office suite, or simply an online component of its current application suite.

Sanity check

It’s impressive that Zoho has created a broad fleet of full-featured online apps in a short period of time, but just as significant is the fact that it has done it without sacrificing simplicity and usability. That points to software that is well-conceived and well-developed. Nevertheless, there are some caveats with Zoho and some issues that it will have to address if it wants to stand toe-to-toe with Microsoft and Google. Let’s take a closer look at where Zoho is winning and where it has progress to make.

Zoho strengths

  • Feature set — Almost all of Zoho’s apps have the best feature set in their class of online apps. “Our individual applications have 20-30% more features than Google [apps] at the individual app level,” Zoho Evangelist Raju Vegesna said. In fact, 20-30% is a low estimate in some cases. Plus, the Zoho suite has about twice as many online applications as Google, even though Google employs about 300 engineers working on online apps while Zoho only has 120.
  • Online savvy — Zoho’s apps take advantage of Web technologies and Internet connectivity, including tagging, search, document sharing, RSS, chat, and collaboration features. One example: Document management is much easier than traditional desktop office apps because files are much easier to search and aren’t spread out in various directories across the filesystem.
  • Speed of development and updates — Every Zoho product typically has at least one upgrade/update each week. For newer products like Zoho Notebook, there are usually multiple updates each week. For more mature products like Writer, there’s usually an update every 10 days. That’s a lot faster and more nimble than the new versions of Microsoft Office that come out every few years, with a handful of significant service packs and patches in between.
  • Internationalism — One of the secrets to Zoho’s success is the international character of the company. (It’s actually an independent division within AdventNet, a traditional shrink-wrapped software vendor.) The data center is in Silicon Valley and so are the business development and sales teams. The software development teams are in India. (Zoho typically takes students who can’t afford college but have a passion to become software engineers and trains them in its own internal “university”). Zoho also has offices in China, Japan, London, and New Jersey. While Google prides itself on hiring PhDs, Zoho has only one PhD — the CEO. “It’s about adding the right people,” Vegesna said. “We don’t have degrees. We have passion.”

Zoho weaknesses

  • Business model — Currently, almost all of the Zoho products are available for free. Zoho charges for advanced use of its CRM and project management apps, but the other apps are free to individual users and will remain that way in the near future. Unlike Google, Zoho does not plan to monetize its online applications by selling advertising on them (either display ads or search ads), although Zoho might consider sponsorships, according to Vegesna. Eventually, for companies that want to widely deploy Zoho, there will likely be various packages of applications, some enterprise-specific options, and a per-user fee. That’s where Zoho thinks it can make most of its money, by offering the same level of features as Microsoft Office while charging the same kind of fee that Google does for its Premium Apps. The question is whether that will be enough to make Zoho profitable and to keep funding the rapid development of the Zoho office suite.
  • Security — This is not a knock on any bad code or poorly developed features on Zoho’s part. It’s simply a matter of whether business users will feel comfortable saving sensitive business files online. I know that there are certain documents I’d hesitate to save online with Zoho or Google because if someone figured out how to crack my password, they could read sensitive internal business information. I’d feel a little more confident if Zoho implemented something like the Vidoop authentication grid that I wrote about last week. In addition to authentication, Zoho will need to integrate some strong data security and encryption features to win over IT departments.
  • Full offline capability — Zoho has taken a couple small steps to give its applications some offline and desktop capabilities by releasing a Microsoft Office plugin and a Desktopize widget for Writer, Sheet, and Show. However, to compete with Microsoft Office on a wide scale, Zoho is going to have to give its online apps full offline capability with an identical interface and local caching of files. There’s a reason that Zoho’s 250,000 users are concentrated in education and several pockets in Asia — those areas have the best and most consistent broadband connections. Zoho can’t simply wait for the rest of the world to catch up to those small pockets. That will take decades. If Zoho does try to wait it out, the market will pass it by.

In taking on Microsoft and Google in the office application arena, Zoho sees itself in the same mold as Microsoft taking on IBM in PCs in the early 1980s and Google taking on Microsoft and Yahoo in search in the past decade. It would be easy to wave off Zoho as a bug destined to be squashed, but judging by the quality of what Zoho has created so far, I wouldn’t count it out.

Are you ready for an online office suite? Have you tried any of Zoho’s apps, and if so, what do you think about them? What do you think about Zoho’s chances against Microsoft and Google? Join the discussion.