At the recent ZohoDay26 Analyst conference (Feb 2026), Chief Strategy Officer Vijay Sundaram delivered a strategic assessment of the enterprise software market. He opened the session with a humorous anecdote regarding his college musical background before transitioning into a direct analysis of the industry's current state, specifically addressing the growing narrative that the traditional SaaS model is in decline.
Five Macro Trends Reshaping Enterprise Software
Sundaram identified five structural trends dominating the software landscape over the past year:
- AI Operationalization: Artificial intelligence has transitioned from an experimental phase into a core operational requirement, moving toward full institutional integration within companies.
- The Accountability Expectation: As the pace of innovation accelerates, customer expectations for vendor accountability regarding these new automated tools have risen proportionately.
- The End of App Sprawl: The strategy of assembling fragmented, specialized applications is unwinding. Organizations are actively seeking consolidated systems and unified platforms of record.
- The Value Imperative: In a constrained spending environment, buyers are demanding clear, outcome-based value from their software investments.
- The Foundation of AI: Core systems of record and their associated data structures have gained new prominence. While these foundational databases may seem ordinary, they are now recognized as the critical fuel required for AI tools to function effectively.
Addressing the "SaaS is Dying" Narrative
One of the most insightful segments of the presentation addressed the industry chatter predicting the death of SaaS. The market is currently facing intense pressures, including margin erosion, pricing compression, and the threat of AI empowering a "do-it-yourself" movement where customers generate their own code and custom solutions.
Rather than focusing solely on software distribution, the conversation was reframed around the concept of risk allocation. Historically, the transition to cloud-based SaaS was fundamentally about transferring risk from the customer to the vendor. Vendors absorbed the economic risk, security and compliance responsibilities, operational scaling, and modernization efforts.
The AI Risk Reversal
With the rise of autonomous AI agents, organizations increasingly want to dictate how their software behaves rather than simply consuming pre-packaged interfaces. They seek to design their own workflows and define exactly how agents operate within their environments. However, a critical dynamic emerges: when architectural control moves back to the customer, the associated operational risk moves back as well. The defining question for the industry is whether traditional enterprises are actually prepared to manage this internalized security, maintenance, and DevOps risk.
Zoho's AI Posture
In response to these market shifts, Zoho is anchoring its AI strategy on its deep systems of record. AI requires vast amounts of historical and structural context to function accurately. The strategy relies on the intrinsic knowledge embedded within these systems, encompassing structured data, unstructured communications, and historical workloads.
The approach involves opening the platform to allow an ecosystem of third parties to build sophisticated applications. The company plans to embed AI agents throughout its infrastructure while also supporting external agents, granting organizations the exact functionality they require.
Ultimately, the strategy is to provide the underlying system of record and allow customers the flexibility to build what they need, while the vendor continues to maintain the security boundaries and absorb the underlying infrastructural risk. This ensures organizations gain the value of AI automation without taking on the heavy operational burdens of maintaining it.
Sundaram covered all aspects of Zoho strategy and expansion under NDA. It is heartening to see a private company be so upfront with anaysts. Without breaking the confidentiality.
Zoho Announcements today
Zoho today announced that it has surpassed one million paying customers and more than 150 million users globally as part of its 30th-anniversary celebration. These milestones follow significant growth in 2025, during which the company saw a 32% year-over-year increase in customers and 20% growth in revenue.
Customer and User Milestones: Zoho Corporation now serves over one million paying customers and more than 150 million users worldwide
Anniversary Context: The milestones were shared in conjunction with Zoho's 30th anniversary
In-House Foundation: Co-founder Sridhar Vembu emphasized that being bootstrapped, private, and built entirely in-house makes Zoho an outlier among its competitors
Customer Loyalty: The company expressed gratitude to its customers, highlighting long-term partnerships with organizations such as CIMCO, GardaWorld, and Lakeland Dairies
Recent Enterprise Additions: New customers across various regions include Mercedes-Benz India, Union Bank of India, and Atout France
The Shashi Take: Key Analyst Takeaways
Beyond the macro trends and AI posture, Sundaram's presentation revealed several strategic operational shifts that define Zoho's next phase of growth. Here are the core takeaways from an analyst perspective:
1. Aggressive Global Expansion
Zoho has significantly broadened its global infrastructure footprint, expanding deeply into previously underserved continents. They have established new operations across South America, Africa, Asia, and Australia, reflecting a strong commitment to data sovereignty and localized presence. India remains a standout, emerging as their fastest-growing market with nearly a six-fold increase over the past five years.
2. Product Consolidation and the ERP Push
While Zoho has historically focused on proliferating individual applications, the strategy is pivoting toward unification. The market demand is shifting from disjointed apps to integrated, unified platforms. A major milestone in this product evolution is the introduction of their first ERP solution in the Indian market, positioning them to capture larger, more complex enterprise workloads.
3. Channel Strategy Driving Higher LTV
The channel and partner ecosystem is a major growth engine. This strategy is directly impacting customer lifetime value. Customers acquired through the channel tend to stay longer. This higher retention is driven by the localized hand-holding and support that partners provide, as well as the channel's tendency to serve larger customers, which inherently churn less than smaller businesses.
4. Winning with Vertical Customization
A significant win for Zoho's horizontal platform is its successful penetration into specific industry verticals. The franchise model has proven to be an interesting and highly successful target, with Zoho securing multiple large franchises boasting 500 or more locations. Furthermore, they have built tailored solutions for automotive, healthcare, manufacturing, and retail, utilizing India as a testbed to refine these industry-specific capabilities before global rollout.
