ZohoDay 2024 - Zoho's local approach to global expansion

ZohoDay24 - regional leaders panel (Zoho)

Business software vendor Zoho is proud of its global network of 25+ rural offices, part of a philosophy it calls transnational localism, which combines global scope with local operations. My recent interview with Sridhar Vembu, CEO of Zoho, gave an intriguing overview of this philosophy and where it might lead next. But how does it translate into how Zoho operates on the ground, and what exactly is a 'rural office'? The company's annual analyst conference, ZohoDay 2024, held last week in McAllen, Texas, gave an opportunity to dig into these questions.

What emerged is that the philosophy is about much more than where Zoho locates its offices — and that few of those locations are truly rural in the sense of being bucolic country backwaters, even though it has its origins in Vembu's vision for a technology-enabled rural revival. Take McAllen, which is home to one of those offices. While it's true that this is not a big metropolis like Austin, Dallas, San Francisco or New York, it's a city of almost 150,000, and the metro area has a population of over 1 million people — or 2.4 million if you include those living on the Mexican side of the border. Even Tenkasi in India, where Zoho opened its first rural office, is a city of almost 100,000 people, and the Tenkasi district as a whole has a population of around 1.5 million. Zoho does operate a remote farm in the Tenkasi area and an elementary school, both flagship initiatives in the rural revival gameplan. But while agriculture is an important part of the local economy here, it's not dominant.

What makes a 'rural office'?

So what is it about such places that marks them out as suitable locations for one of Zoho's 'rural offices'? An important qualification is that it should be a location that's missing out on opportunities compared to larger metropolitan centers. In an afternoon session when Vembu was not present, Zoho's Chief Strategy Officer, Vijay Sundaram, told me:

The way that Sridhar might look at it is, define something as rural as something where talent is bled from. Where people are emigrating from and creating hollow communities. So in some cases, the jurisdiction might be a village, it might be a small town. That's what we're looking at — bringing opportunities back into regions where it's being sucked out off into urban centres.

But at the same time, it's not somewhere completely derelict. Zoho wants its employees to be able to enjoy a certain standard of living. In the same session, Raju Vegesna, Zoho's longstanding Chief Evangelist, set out the characteristics the company looks for in a potential location:

When we look at setting up an office, what are the factors we look at? One, can our employees afford a good life, afford a house, and move their family there? Does it have a good healthcare system? Does it have a good education system? Is the crime rate relatively low? And generally, is the quality of life high? Those are the factors.

And can we bring enough value to the community and make sure that the people that we hire can set up a good [relationship] with the local community? And can we be an asset to the community and not a liability?

Demographics are a key factor. He admits that Zoho attempted to set up a rural office in Japan but wasn't able to make it work because it couldn't recruit enough local talent. He comments:

The median age of Mexico is 27. The median age in Japan is 48, the median age in Europe is 42. So there are these economic realities and demographic realities that we have to take into consideration.

Local engagement

The potential to make a positive difference to the local community is another important factor. Zoho makes a point of working with local government and economic development agencies, as well as spending with local suppliers and supporting non-profit initiatives. All of this was evident in McAllen, but the strategy is even more pronounced in its Middle East and Africa region. For example, Zoho has partnerships here with the Ministry of Communications and Information Technology in Saudi Arabia, the Ministry of Digital Economy and Entrepreneurship in Jordan, and the Department of Economy and Tourism in Dubai. The latter is the sole authority for issuing trade licences to businesses setting up in Dubai, and Zoho offers businesses who register for a trade licence a free one-year subscription to its Zoho One suite. Hyther Nizam, a 25-year Zoho veteran who moved to head up the region in 2017, comments:

The government personally pushes Zoho because they see the value of 50+ products with very affordable pricing and they want businesses to use those products. We have onboarded more than 4,000 paying customers on that single partnership.

In Kenya, the local office has just announced its support for the Hope for Literacy campaign established by MOMO Pencils, a Nairobi-based manufacturer of environmentally friendly stationery and a Zoho customer. The campaign aims to equip school children from poor families with pencils to help support their education and improve their life outcomes.

As well as contributing to the local community, something as simple as pricing in the local currency represents a significant commitment to Zoho's customers in the region. Nizam says:

For example, take Nigeria. There is no other single global vendor which has local pricing. Everyone else charges in US dollars. And you don't get US dollars in Nigeria readily. So this goes a long way in reassurance that commitment to the local country and the local market. Customers appreciate that. Our ad tagline is 'Global software in local prices.'

This has been particularly impactful after a massive devaluation in the Nigerian currency, the Naira. He goes on:

That's 150% down, devalued in the last six months. We absorbed that shock, we absorbed that devaluation as a company, while other global software companies charge in US dollars. That goes a long way. Despite that, Nigeria has grown by 30% for us in 2023.

It's all part of the same ethos. He sums up:

I have offices in Nigeria [and] in Kenya, where a lot of global players don't have an office. That's again a local commitment. You want to be locally priced, a local office, local hiring, local people and helping the local economy and play the long game. That's what we do with the transnational localism.

My take

The common thread across all of these different elements is a sense of respect for local communities and a willingness to engage with them and adapt to their specific needs. What this necessarily means is that there cannot be a single blueprint for transnational localism, because it's inherent in the model that each locality should develop its own blueprint. I suspect that the notion of rural revival has particular relevance in India because of that country's recent history and circumstances, whereas other permutations are more appropriate elsewhere. The model in outlying US cities and townships like McAllen will have common features but different emphases, and similarly what works in Dubai, Nigeria or South Africa will be subtly different in each case.

One key element that ensures all these different variations on a theme remain true to Zoho's core ethos is that every region is led by a Zoho veteran with an intimate knowledge of the company, who in turn ensures that local offices follow that ethos. This is the transnational component that's essential to ensure unity of purpose. Within that ethos, the respect for and engagement with local communities both ensure that Zoho's offer is in tune with local needs.

This all seems to be paying off for Zoho, expanding its footprint in regions of the world that other software vendors find challenging. Most of the tech industry tends to take a US-centric view of the world, in part because the US market accounts for at least half, often more, of the revenue of even the largest tech companies. But that's not where the greatest opportunity lies, when the US accounts for only a quarter of the world's economy, and growth is much faster in countries such as China and India as well as many parts of Africa, Asia and Latin America. With its more locally attuned approach to global expansion, Zoho is positioning itself to make the most of that growth potential, across BRICS nations and beyond. It's a characteristically long-term stance that could deliver rich rewards, for both Zoho and its communities.