Why We Compete with Google | Hacker News Reader

Why We Compete with Google

blogs.zoho.com

29 pointstimr19 comments

I will respond to Matt Maroon's argument directly: revenue per employee is one of the most important metrics in a software company, which is about as pure human labor as you can get. The eventual business goal of every such effort, including Y Combinator (if you define "revenue" to include the proceeds of an exit, which is accurate when you consider that Y Combinator itself is an ongoing business entity) is to maximize revenue per person.

So Google's management, having tons of cash to invest in growth, faces this question "What do our next 5000 employees do?"

My argument is that even with a monopoly in two areas, Microsoft is underachieving Google in that metric today. A new competitor to Office, Exchange, Sharepoint etc. will, by definition, not be a monopoly (at least at first, perhaps for a long long time), so their revenue/profit numbers will have to be lower than the monopoly's numbers.

Then there are markets like CRM etc. where very successful incumbents make a lot less than what Google makes today.

Put all these together, and the conclusion is obvious.

(I will ignore the irrelevant tangent on English - I have nothing to prove).

"I am saying support staff is absolutely vital to succeed in the business software market. That is one of the reasons revenue/employee numbers are lower."

Google does want to reap money from such low-margin, support-intensive "business software markets" too. But not directly. It enables 3rd parties to build such applications over it's platform (GAE). Such suites will soon show up to compete with the likes of Zoho/Salesforce/Intuit/SAP.

A quote from "Fear the Right Things" section in http://www.paulgraham.com/startuplessons.html

"What you should fear, as a startup, is not the established players, but other startups you don't know exist yet. They're way more dangerous than Google because, like you, they're cornered animals.

Looking just at existing competitors can give you a false sense of security. You should compete against what someone else could be doing, not just what you can see people doing. A corollary is that you shouldn't relax just because you have no visible competitors yet. No matter what your idea, there's someone else out there working on the same thing.

That's the downside of it being easier to start a startup: more people are doing it."

Google makes starting such startups easier and it becomes a mass market again, with apps competing against each other, running on its platform.

Whoever wins/loses, Google ends up making better revenue.

From the comment on the original post by the author.

"But a company like Google that has such sky-high margins today will find it hard to stomach to adjust to lower margins. That is my real point."

As far as I know financial statements don't reveal how many people are allocated per business unit ... curious how the author arrived at these numbers for the profit margins. How does Zoho plan to adjust to its own decreasing profit margins? Does Zoho believe that the off shore development cost advantage will last forever?

"Now it is clear why we compete with Google. Google is perhaps the most stunning technology success story ever, but we simply don’t believe Google has the rational business incentive to get too deep into the business/IT software category. The lower revenue and profit per employee figures would be tolerable if there were huge growth opportunities there, but when very successful companies like Adobe and Intuit pull in revenues well shy of a Yahoo, when even the enterprise software leader SAP is smaller, and slower growing than Google (Google makes nearly as much in profit per employee as SAP or Oracle Salesforce make in revenue per employee), it is fairly clear this market is not going to make a material contribution to Google’s growth and profitability objectives. So what is Google’s plan here? It is fairly obvious they are in it to put Microsoft on the defensive on its home turf, so that Microsoft’s offensive capability in the internet is diminished. It is also perfectly clear why Microsoft wants to be an internet player - as Google has shown, it is a higher margin business even than its monopoly-profit core business."

That spreadsheet FROZE my browser as it loaded.

Who cares about employee count when you can have profitability? Using their spreadsheet (which I like, but not all the shortcuts work in the browser):

        profit/revenue as %
  MS    29%
  ORCL  25%
  GOOG  25%

wtf! am i lost or does this blog post make absolutely no sense?

When daggers are pointed at innocent hearts And muskets are ready to fire When tyrants ride high and govern with fear As the forces of evil conspire Then from out of the night a hero must rise With courage that even a mask won't disguise They turn to . . . the man called Zoho One who's larger than life and defender of all Is this man who the people acclaim He's the one who strikes back for the poor and oppressed A hero . . . whose name is Zoho His name is Zoho

That is the worst logic I've ever seen. Loosely translated:

"Microsoft makes hit tons of money, both per employee and overall, a huge chunk of which comes from their Office products. Google makes slightly more money per employee, but far less overall, none of which comes from their Office products.

Therefore, Google would not want to succeed in the Office space. Why? Because Adobe doesn't make all that much."

Huh? I'm just going to assume, since the poster's name is Sridhar, that he actually just doesn't speak English well enough to express his thoughts coherently, because it is either that or he doesn't have them.

(The you read the Innovators Dilemma? They argue this point very well..) The logic goes something like this, as companies grow, they tend to move from lower profit margin businesses to higher profit margin businesses. Each company needs a specific profit margin over their overhead costs to justify investment of resources. Google with find it hard to invest in lower margin Office Suite business.

> 2. I'm just going to assume, since the poster's name is Sridhar, that he actually just doesn't speak English ...

Thats generally a wrong assumption, I have lived in India all my life, and >70% of my communication is in English. I am pretty sure everyone at Zoho uses English at Office

Wow, way to cut my sentence off and attack it. How does this get voted up? Read PG's article about how to argue.

Also, Office is an incredibly high-margin business. Google isn't moving into it because they don't expect it to return cash if it succeeds.

"Huh? I'm just going to assume, since the poster's name is Sridhar..."

I stopped reading after this, since I understand that you cant complete such a sentence into something which will make any sense. Yes, we can all use a reading/re-reading of PGs article on how to make/present an argument.

Well, perhaps that came off differently than I meant it. His article came across as rambling and incoherent, and I was saying that may be due to English not being his primary language rather than a poor thought process. It's very hard to argue in a second tongue. Much harder than simply conversing.

Nonetheless, I'm appalled that someone can cut my sentence in half, argue with an entirely different statement than the one I made, and get voted up that far.

So you're appalled when someone excerpts your own words in a threaded discussion, with the full quotation available above the excerpt, but you're fine with putting quotation marks around completely bogus "loose translations" of what other people say so you can argue against straw men instead of their actual statements? To quote you, if I may, "that is the worst logic I've ever seen."

The logic is that Google, whose Internet cash cow probably has more milk left in it than Microsoft's Office/OS cash cow, is already more profitable per employee than Microsoft, so its incursion into the Office space is not a serious quest for higher margins but rather a tactical move made primarily to put Microsoft on the defensive. It makes perfect sense.

Not knowing anything about you or your startup, I will nevertheless go out on a limb and guess that Sridhar Vembu's English is better than your Hindi, and that his fully bootstrapped startup's $40 million in revenues and $12 million in profits [1] puts it in better financial condition than your business.

Try to open your mind and learn something from the man behind one of the most successful fully bootstrapped tech businesses in the game today. Most entrepreneurs wouldn't consider going up against both Microsoft and Google with no investment backing, but Vembu saw an opportunity, took a big risk, and is now in a position to reap sizable and well-deserved rewards.

[1] http://www.forbes.com/technology/2008/02/22/mitra-zoho-india...

It doesn't make sense. Office is a very high margin business. Surely Google won't achieve the profit margins MS has even if they take it over, but it will still be substantial.

Revenue per employee is largely an arbitrary number as well, hence I object to its being used as evidence for anything. You could just as well use revenue per unit of cheese consumed in the cafeteria on Tuesdays to prove your point.

I didn't write a babbling incoherent article in Hindi, but if I do than that observation would make sense. He, however, wrote one in English.

Also, his startup success (or mine) doesn't have anything to do with whether or not that article is logically coherent.

I don't think the argument is about (or entirely about) attractiveness (or lack thereof) of high margin sectors. It's about being able to thrive in that kind of environment.

For example, Apple cannot thrive in the same kind of environment as Dell. Apple's corporate culture, habits & history would put it at a disadvantage in a world where margins are thin because it has not evolved or been optimised for that environment. In a world where competitively driving down costs via stock turnaround times & cheap production determine success Dell has the upper hand.

Similarly, in a world where revenue per employee is low, a company such as Google might be ill equipped.

I am not agreeing or disagreeing with this position (I don't really know enough to). I'm sure you could argue other forces at play might be more significant or that his assumptions about Google's tactics are incorrect. But it's not nonsensical.

What I did find unclear was which category he places himself in: SMB software or enterprise. But that's a limitation of the medium (personal blogs). Some background is assumed. I'm willing to take that as it means writers don't have to start from scratch.

>> Revenue per employee is largely an arbitrary number as well, hence I object to its being used as evidence for anything.

I disagree. It is a pretty good quantitative measure of how your business is setup. How much money a company has obviously affects its decisions in a big way, and it is only logical that how much money a company has to spend per empolyee affects the business decisions it makes. I am not taking a position for/against the rest of the article, but you argument that revenue per employee shouldn't be used as evidence for anything does not pass muster.

All business is about adding value, so that your output is bigger than your input. The most important input in a tech company is human labor.

Google is the most efficient at this game today, as measured by how they transform their human labor into value. Revenue per employee is the best proxy for value-added per employee.

Reply on news.ycombinator.com