What became abundantly clear during this conversation was that Zoho continues to forge its own contrarian path, adapting to market pressures by continuing to rethink how software value is delivered. One could even say that Zoho’s thinking gets validated by current developments.
TL;DR
If you prefer watching the interview to reading, find the full video here.
The Macroeconomic Squeeze on the SMB
The software market does not exist in a vacuum, and the broader economic climate over the past year or so has been challenging for businesses. Historically, SMB segment has been Zoho’s mainstay. However, Tony noted that especially this demographic is facing severe headwinds. Tony pointed to the K-shaped economy, where large enterprises continue to see gains while smaller businesses and large segments of the populace are struggling or being left behind.
Small businesses have "taken it on the chin", battered by general economic uncertainty and the specter of tariffs, casting doubt on the speed of their recovery. Consequently, while Zoho is still acquiring new SMB customers who are actively seeking better value, the existing customer base at the lower end of the market is undeniably feeling a squeeze. Zoho’s way of delivering value helps these companies.
Moving Upmarket: From Products to Solutions
In spite of these uncertainties, Zoho has continued its push upmarket, finding significant traction in the mid-market and enterprise tiers. But succeeding in this space requires a fundamental structural shift in how a vendor engages with its buyers.
As Tony explains, small businesses generally lack the budget and time for lengthy software deployments; they demand products that work out of the box. With growing size, however, businesses don't buy out-of-the-box products; they buy solutions instead. These larger organizations demand software that is tailored, verticalized, and aligned with their strategic differentiators, in other words, requires an implementation project. For Zoho, this means adopting a heavier-touch engagement model by investing the time to deeply understand a customer’s specific business requirements and customize their offerings, whether directly or through partners.
Currently, Zoho’s sweet spot in the US is definitively the mid-market rather than the top-tier, Fortune 500 enterprises, which remain tethered to legacy incumbents. Mid-sized businesses of increasing size, however, are coming to Zoho seeking integrated, cost-effective architectures infused with modern AI capabilities.
The Vanishing UI and the AppOS Strategy, and Fixing the Disturbed Value Equation
With the combination of generative AI and no-code and low-code environments, we can see what I call the disturbed value equation. A company might purchase a highly capable software platform at a low licensing cost, only to watch the total cost of ownership balloon drastically due to massive implementation and systems integration fees that can get avoided by adopting these technologies, either directly in the software or by system integrators. This chasm of low subscription costs and comparatively high implementation costs reduces the software's perceived upfront value drastically.
When pressed on how Zoho plans to correct this imbalance, Tony acknowledged the intense pricing pressure surrounding implementations and pointed out a new emerging reality: as customers are increasingly required to pay for advanced AI and intelligence layers, their tolerance for bloated implementation fees is vanishing.
Zoho’s answer is to use AI to compress the cost and time of these deployments, starting from the early stages of the implementation projects. Tony shared that Zoho’s solution teams are already using AI to record customer calls and automatically generate system specifications. While this AI-driven efficiency is currently most effective in the mid-market, bypassing the sluggish steering committees of massive enterprises, it represents a clear path toward restoring the value equation. By bringing implementation costs down, Zoho aims to free up customer budgets for high-value intelligence features. I am looking forward to these specifications being used
Coupled with this is the rise of generative AI and no-code tools, which are democratizing app development. I challenged Tony on how this "DIY" capability impacts Zoho’s business model. He countered that while users will undoubtedly experiment with building their own apps, companies will quickly hit a wall of chaos. True enterprise applications require strict governance, security, and deep integration with core company data.
On top of this, we are currently witnessing a Titanic battle between different vendors to dominate AI orchestration layers and the access to the user who increasingly bypass traditional software interfaces in favor of interacting with data through chat platforms like Teams or Slack.
To manage this, Zoho is positioning its AppOS architecture as the foundational platform. Zoho intends to be the bedrock, providing the essential, compliance-heavy core applications like finance and ERP that are simply too risky to vibe-code from scratch. On top of this secure foundation, Zoho will empower customers to build dynamic, context-specific AI applications, ensuring the core data remains governed and trusted.
Looking Ahead
Zoho operates distinctly differently from its peers in the CRM and enterprise spaces. To thrive in this new era, the company is transitioning from a product-centric, best-of-breed mentality to a holistic model combining platform, product, and deep, customer-centric intelligence. Helping customers navigate the K-shaped economy while fundamentally disrupting the cost of enterprise software implementation is no small feat, but Zoho's philosophy makes it a vendor well worth watching.
Three Main Learnings for Enterprise Software Buyers
The Value Equation is Shifting from Implementation to Intelligence: Historically, a massive portion of a software budget went toward implementation and IT consulting fees. Today, the real differentiator is artificial intelligence and advanced analytics. If buyers spend their entire budget on getting the software up and running, they won't have the resources left to invest in the intelligence layers that actually drive competitive advantage.
Vibe-Coding Requires a Foundation of Strict Governance: Generative AI and no-code tools are allowing end-users to build custom apps quickly. However, doing this in isolation creates shadow IT chaos. For mission-critical systems involving financial compliance, data security, and legal requirements, organizations cannot rely on ad-hoc DIY apps. They need a heavily governed core platform that safely manages the data while allowing for flexible edge applications.
The Application UI is Evolving, Not Disappearing: The market is seeing a push toward headless apps and conversational UIs, where users interact with business applications via platforms like Cliq, Slack or Teams rather than logging into dedicated software frames. However, complex tasks like data analysis or chart visualization will still require traditional interfaces. The future is probably multi-modal, not exclusively conversational.
What to Look for When Evaluating Enterprise Software
When you are assessing new enterprise software platforms, keep these criteria front and center to ensure long-term viability and value:
Vendor-Driven Implementation Efficiencies: Ask the vendor how they are actively driving implementation costs down. Look for vendors who use AI to compress deployment times and cost, so you can invest your budget into value-add intelligence rather than the plumbing.
Platform Architecture: Evaluate the software's underlying architecture. Does it offer a robust, secure, and compliant cross application foundation for core business data, while simultaneously providing safe, integrated AI and no-code tools for your teams to build customized workflows on top?
Omnichannel User Experiences: Don't get locked into software that only offers one way to work. Ensure the vendor supports traditional and modern work interfaces and offers frictionless orchestration layers.
Pre-Built Compliance and Certifications: Evaluate the vendor's commitment to keeping up with regulatory compliance. You want a vendor that absorbs the cost of updating rules, tax codes, and security certifications so your internal IT team doesn't have to constantly rebuild workflows to stay compliant.
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