The Smartest Unknown Indian Entrepreneur

The Smartest Unknown Indian Entrepreneur


Sramana Mitra / Forbes
02.22.08, 2:00 PM ET

pic 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!

Sramana Mitra is a technology entrepreneur and strategy consultant
in Silicon Valley. She has founded three companies and writes a
business blog, Sramana Mitra on Strategy. She has a master’s degree in electrical engineering and computer science from the Massachusetts Institute of Technology.

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