Zoho relies on ‘Hub-and-Spoke’ approach to drive growth

TENKASI: The Chennai-based Zoho Corporation is confident of its ‘hub and spoke’ strategy to drive its growth as it foresees India to move up a notch to become its 2nd biggest market after the US and Europe.

Sridhar Vembu, Co-founder and CEO, Zoho Corp, said this move which began in 2020, at Tenkasi, had yielded positive outcomes with this hub approaching nearly 1,000 people. “We will soon expand it to house 3,000 resources,” he told the media here on Monday.

This will be replicated in other regions too as the small operations that had started before the pandemic are being consolidated into the hub-and-spoke model. In Uttar Pradesh too, the efforts to scout for a similar hub is underway, with the Zoho chief scheduled to visit the Central and Eastern UP to finalise a facility. As per Vembu, these are “demographically the richest regions,” and a definite hotspot for future talent sourcing.

In the last six months, it has opened two ‘hub’ offices in Tirupur and Tiruchy and plans to open them in Tirunelveli and Madurai districts in TN.

Zoho decided to follow the hub-and-spoke model of offices to cater to a distributed workforce, and as part of its 'transnational localism' strategy of being locally rooted, while staying globally connected. The hub offices are ones that can accommodate 1000 or more employees, while the spoke offices are smaller offices of up to 100 employees.

Eventually, each hub office will have a few spoke offices associated with it for infrastructure support and team collaboration. The company currently has five hub offices, including ones in Chennai, Tenkasi, and Renigunta, and around 30 spoke offices presently in India. Nearly 2000 employees are working out of Zoho’s hub and spoke offices in villages and Tier 2/3 towns, out of which about 1000 employees were hired locally.

To a query, Vembu said his “senior management leaders” with decades of experience are keen to move from the city operations to such rural locations owing to the “quality of life” and the ability to participate in community building efforts offered by them. Zohodesk is a product developed from this hub, making a successful contribution to Zoho’s overall customer base of six lakh. Vembu expects it to reach the 1 million mark within 1.5 years as the company is “approaching the goal faster.”

Even a region like Coimbatore would be registering faster growth than Chennai, he said, dwelling on the impact of geographical leverage. Not only in India, the “hottest growing market,” but also in the Middle East (Jordan) and countries such as Nigeria, Columbia, Brazil and Mexico.

Vembu also said unlike typical SaaS companies that spend between 40 to 60 per cent on sales and marketing, Zoho only incurred about 20 per cent. “This short term sacrifice in growth has proved more transient in generating the cloud revenue,” he noted.

Elaborating, he said the US contributes 38 per cent of its revenues while for competitors like Salesforce it generated over 65 per cent. The diversification strategy deployed by Zoho had paid off.

Just like the growth of the GDP of all BRIC nations for the first time had exceeded that of the G7 countries, he said for Zoho too, this was true. “Developed markets are much more sluggish. Japan is in deep doldrums. India which is now third in contribution of global revenue, will move to second position in three years,” he said, adding in 7-10 yeas time it will emerge as the numero uno, reflective of the major transformation as India constituted under 2 per cent of its global revenue 12 years ago.

Agreeing that the company did see reduction in growth, he said things were better now as it plans to hire 100 people in Mexico while offices in Brazil and Columbia are in the offing.