Will Tenkasi model reach North India? Is AI a threat? Hear it from Zoho's Sridhar Vembu

Chennai-based global SaaS major Zoho has made two big launches at its annual user conference, Zoholics 2024, in Bengaluru.

One is Vikra, a seller app launched on the Open Network for Digital Commerce (ONDC), and the other is Zoho IoT, a user-friendly low-code platform for custom IoT solutions.

The company said it saw a customer growth of 31 per cent in India in 2023.

On the sidelines of the conference on Wednesday (September 25), Zoho’s founder and CEO, Sridhar Vembu, took time out for an exclusive interview with The Federal.

He discussed the company’s recent product launches, its ambitions in the digital payments sector, the importance of developing deep tech solutions in India, the impact of artificial intelligence (AI) on the tech industry, and India’s potential in chip manufacturing.

Here are some (edited) excerpts from the interview:

Q. You’ve just launched Vikra, a seller app on the ONDC network. What do you think makes it a potential gamechanger for the e-commerce sector?

A. Vikra is designed to empower sellers to enter the online marketplace via the ONDC platform. ONDC, with its robust logistics framework, is poised for significant growth, parallel to the transformative impact of UPI within India’s digital public infrastructure.

Our primary challenge is to onboard a large number of sellers; as we achieve this, we anticipate a corresponding influx of buyers. A key objective of ONDC is to reduce the cost of doing business online, as many major platforms impose fees of up to 40 per cent. By leveraging ONDC, we can dramatically lower these costs. We are excited to contribute to this initiative through Vikra and support the evolution of online commerce in India.

Q. Zoho is venturing into new sectors, having recently launched Zoho Payments at the Global Fintech Festival, and Zakya, a POS solution platform, earlier this year. This clearly positions Zoho to tap into India’s booming digital payments market. Can you share your thoughts on the opportunities in this space and how these new offerings will synergize with existing products such as Zoho Books, Zoho Billing, and Zoho Invoice?

A. In addition to Vikra, we offer sellers access to the Zoho Commerce suite, which includes essential tools such as Zoho Inventory, Zoho Books, and Zoho Invoice. While other seller apps are available, our comprehensive product suite stands out as part of the Zoho ecosystem. We aim to demystify the process of selling online, especially considering that only 7 per cent of Indian commerce is currently conducted through e-commerce. Our goal is to be a key enabler in transforming this landscape, making online selling accessible and straightforward for all.

Q. You have invested in Yali Aerospace and Karuvi this year. You have talked a lot about your interest in deep tech solutions. What potential do you really look for in startups before committing to an investment?

A. What we truly seek is a passionate and committed team. Are you dedicated to solving this problem and willing to stay the course for 10–20 years, no matter what it takes? That’s the first step.

Certain areas of technology are critical for the country, especially deep tech, with drone technology being particularly vital. Yali has a strong team that returned from Europe with valuable experience, and I’m excited to invest in them. Their base in Thanjavur aligns perfectly with my vision of fostering deep tech in rural areas. This is exactly the kind of company I want to support.

Q. Tamil Nadu contributes 17 per cent of India’s engineers annually, possibly the highest among the states. With the intervention of AI, there’s a consensus that the workforce must shift towards higher skill levels. Given the challenges of graduate unemployability, how optimistic are you about sourcing high-tech talent in Tamil Nadu? You have been a huge proponent of hiring rural talent; do you think you would be able to replicate your Tenkasi model in lesser-developed states such as UP and Bihar?

A. We’re first replicating the Tenkasi model in Thirunelveli, Palladam, and Tharuvai in Tamil Nadu, and I’m now taking this initiative to the north (in India) with confidence.

Regarding the AI challenge, I believe that the number of software engineering jobs may decrease as AI significantly boosts productivity. We’re already witnessing 30–50 per cent gains, and I’m optimistic this trend will continue, with potential tenfold productivity increases. I liken this to the shift from handloom weaving to power looms, which drastically reduced labour requirements.

While software development may remain stagnant, I anticipate that the demand for professionals focused on customer engagement and delivering specific value will actually rise. Overall, I remain optimistic about the productivity enhancements across the sector. At Zoho, we’re seeing this shift firsthand, with an increasing number of people dedicated to enhancing our products for customers.

Q. You’ve expressed interest in establishing semiconductor fabs in India. However, there’s a prevailing view that India should focus on its strengths in chip design rather than chase the chip manufacturing mirage. What’s your perspective on this?

A. We need both chip design and manufacturing capabilities in India. While we’ve made significant strides in chip design, establishing fabs is crucial. Consider this: India’s population leads to about 23 million births annually, compared to 9 million in China, while Taiwan’s population is just around 230,000. Tamil Nadu alone has a population three to four times that of Taiwan. Currently, most of our chips are sourced from Taiwan, which emphasizes the importance of building our own fabs for national sovereignty and security. We absolutely need these facilities; we can only inspect chips for vulnerabilities within India.

Q. As India aims for a “Viksit Bharat” in 2047, where do you see Zoho in that same year?

A. The next 25 years are set to be a period of major growth, and India stands out as the most youthful country, offering a vast talent pool to the world. Just yesterday, I learned that a Swiss company has relocated its R&D to Pune, which speaks volumes about our capabilities. I’m optimistic that this will accelerate VC investment in Tamil Nadu.

Moreover, global firms are eyeing Coimbatore for R&D centres to tap into our manufacturing talent. However, a key challenge remains: how do we ensure this success extends to rural areas? We need to bring these opportunities to places like Thanjavur and Kumbakonam, not just focus on Chennai and Coimbatore. By doing so, we can pave the way for India to become one of the richest nations on Earth.