SaaS market faces oversupply now, leading to consolidation, says Zoho CEO Manikandan Vembu

Zoho, one of India’s largest software-as-a-service companies, recently underwent a significant leadership shift, with Sridhar Vembu stepping down as CEO to assume the role of chief scientist.

As part of this transition, Manikandan Vembu—who has been a key figure at Zoho since 1996 but has largely stayed out of the public eye—has now stepped in as CEO of Zoho.com, the company’s SaaS division.

Often referred to as Zoho’s ‘best-kept secret,’ Manikandan Vembu is known for his low-profile yet influential role within the company, mentoring key leaders and shaping Zoho’s product and engineering vision behind the scenes.

Speaking about the consolidation within the SaaS industry, Mani Vembu said that it is the result of oversupply of SaaS and he bets big on AI and vertical SaaS solutions.

In an interview with Moneycontrol, Manikandan Vembu discusses the leadership change, Zoho’s AI-driven vision, and the evolving SaaS landscape.

Edited Excerpts:

Sridhar Vembu has stepped down as CEO, and you have taken over. What changes at Zoho now, and what remains the same?

We see this as continuity. There is a major transformation happening with AI, and Sridhar, as Chief Scientist, wants to focus more on building foundational AI models. AI is integral to everything we do across our domain-specific app platforms and applications. In terms of our focus, we are shifting towards platform development, mid-market growth, and regional-led expansion. Instead of solely product-led growth, we will now emphasise growth in different vertical markets across various regions.

Was this transition planned, or was it a surprise, give us some back story?

There was no grand plan. We were looking at the market and figuring out how best to adapt to changes. Each of us wants to play to our strengths, and that’s how this transition was structured.

The SaaS industry is seeing increased M&A activity. Will Zoho explore acquisitions?

Acquisitions usually happen for two reasons—either to fill a technology or product gap or to meet financial market expectations. We have been building our technology and platform foundation for over 20 years, so we don’t need to acquire companies for that.

But with AI becoming more critical, would Zoho consider acquisitions in that space?

AI is indeed changing the landscape, but our strength lies in having all our apps built on the same platform. Our AI capabilities are built on a common data layer across our application suite, making AI-driven transformation easier for us and our customers. Companies using our suite can integrate third-party data and make better decisions with AI.

The SaaS industry has seen a funding boom, but is that era coming to an end?

From a technology perspective, SaaS, on-premise solutions, and AI are just different distribution models. Business needs remain the same—companies will always have employees, customers, and vendors. What changes is how technology helps solve business challenges. AI is now becoming an integral part of our offerings, just as cloud and mobile technologies did in the past.

Some experts, including Sridhar Vembu, have said macroeconomic factors will impact SaaS companies. Are we seeing a demand slowdown?

There has been an oversupply of SaaS solutions in the market, and consolidation is happening as a result. We are seeing a slowdown in overall market growth, which could continue until economic conditions improve. However, the value of technology itself will only increase over time.

Zoho has traditionally been strong in SMBs. You mentioned shifting towards large enterprises. What is Zoho’s strategy for maintaining demand?

We are investing in three key areas. Platform Development or Domain-specific platforms for CX, HR, finance, accounting, email, and collaboration. Vertical Focus wherein we expand in industries like healthcare, BFSI, auto DMS, and real estate across different geographies. And, AI integration. AI will be embedded into all our offerings, with industry- and function-specific AI agents to enhance our platforms.

Do you expect some SaaS segments to decline due to AI-driven automation?

SaaS is evolving rather than declining. Take CRM, for example—what used to be just a sales tool has expanded to cover the entire customer journey, including sales, service, and marketing. Businesses today want to own their customer relationships instead of outsourcing them. AI may automate some sales functions, but the real value will come from enhancing the entire customer experience.

So, Zoho’s bet is ‘all-in on AI’ across platforms?

Absolutely. AI will be embedded across all our platforms, making it a key driver of our future growth.

There is a lot of buzz around Zoho building a chip facility. Can you give us some timeline?

That is something the board is working on. I don’t have information to share now, but an announcement will come soon.

What is your leadership and mentorship style? Why do people inside Zoho call you ‘Zoho’s best kept seceret’?
I believe in giving people the freedom to discover their strengths and interests. Motivation comes from passion, and I encourage my mentees to work on their strengths rather than focusing on their weaknesses.

What’s your take on the 70-hour work week debate?

It depends on the individual. Passionate people will naturally put in extra hours, but forcing long work weeks in a knowledge industry doesn’t work. People need autonomy to be productive.

Will we see a ‘Zoho Mafia’—former employees starting their own ventures?

That’s a natural evolution. AI’s rise will encourage more entrepreneurial experiments. A healthy startup ecosystem is good for India and the market.

Zoho’s rural expansion model is well known. Will you expand further?

Rural talent development is key for us. We have expanded to locations like Tenkasi, Thirunelveli, Madurai, and Coimbatore. We will continue to explore more locations as we grow.

What will be Sridhar Vembu’s focus now?

Sridhar will focus on AI, specifically on building foundational AI layers for Zoho and ManageEngine. I will focus on regional growth and expanding Zoho’s success beyond India.

Will Zoho develop its own large language models (LLMs)?

We are conducting R&D in AI. While we don’t have a specific timeline, our focus is on agentic AI and ASIA (AI-powered software intelligence agents).

What’s the profitability and product roadmap for 2025?

We focus on self-sufficiency rather than chasing profitability milestones. We invest in R&D and expansion as needed.

What’s the big trend for SaaS in 2025?

Vertical SaaS powered by autonomous AI agents will be the biggest shift.