Zendesk’s Adrian McDermott on building CRM tools for next-gen companies

US-headquartered Zendesk is one of the largest companies in the customer experience space globally. Listed on the New York Stock Exchange, it started out as a customer-service software company. Of late, it has been launching products in the customer relationship management (CRM) space where it competes with larger players such as Salesforce and Zoho. 

Zendesk entered India two years ago and competes locally with Chennai-based Freshworks, which also started out as a helpdesk software company before diversifying. 

During a recent visit to India, Zendesk's president of products Adrian McDermott told TechCircle about how the company goes about tackling enterprise software giants and also said that it was exploring potential acquisitions in India to kick-start research and development (R&D) operations in the country. 

Edited excerpts:

What brings you to India?

We recently launched a whole bunch of new products and some of our key prospective and current customers are in the Indian market. Also, we're doing product research, because there is a series of things going on in the Indian market that make it incredibly interesting. 

We've been here for a couple of years with a direct presence on the ground and have been working across traditional and non-traditional industries. So we have customers like Ola, Zomato, 1mg and then many of the international multinational companies that we work with have a presence here like Airbnb, Vodafone and Uber.

This market has the most challenging conditions for customers who are trying to grow fast and right. The population is rapidly digitising and becoming connected through mobile. 

We're seeing a rise in terms of the number of consumers and those consumers have characteristics in terms of price sensitivity and tolerance for friction and high expectations around customer service that make the business we are in — the business of delivering customer experiences — particularly challenging. And so as we look at our technology stack, we really have to focus on what can we learn from the Indian market.

What are the main characteristics that you see in the market?

The innovation here is moving very rapidly. With the influx of venture capital and money being available to try ideas and launch startups, it's a great time for us to be focussing on that market and listening to their needs. 

We think that our new products are particularly relevant to startups and traditional businesses in India. The most important among them include the Sunshine CRM platform, a sales-force automation product called Sell, and a new business intelligence tool for our customers that allows them to measure and analyse customer data called Zendesk Explore. We are also integrating WhatsApp into new communication channels.

How has the role of customer experience management transformed in the digital world?

Lots of companies are focusing on customer experience. From a business process point of view, companies have innovated but technology hasn't kept up with that kind of innovation. 

The early pioneers of these industries were well funded and could build their own platforms using public cloud technology. The next generation of companies that are coming along in the digital market space may not be as well funded. So we have been trying to build a customer relationship management platform for the next generation of companies. 

Where do you see companies like yours going in an era where cloud has facilitated platform-as-a-service (PaaS) as the most dominant theme? Do you see these cloud players eating into your business?

Amazon is known for being able to survive on lower margins and that's a key part of their innovation. They're actually climbing up the value chain. I think that the challenge for vendors who build on top of AWS or on top of any cloud platform is to really ask themselves what is their value and intellectual property.

We talk about AI innovation a lot. You might invent a really good learning algorithm, but no one really cares because there's going to be another better learning algorithm from Facebook or Google before you know it. So it's not your algorithm that's going to differentiate you. Both the problem space that you will apply the algorithm to and the data that you have is the asset.

As for Zendesk, we manage the conversations that brands have with their consumers through support tools and our chat tool. We help them organise those conversations and have them be of high quality and analyse them to standardise them. And then, ultimately, we that data as fuel for machine learning algorithms, so that you can provide the next generation of better experiences and the next generation of tools.

But then all these large players such as SAP and Oracle are also becoming cloud platforms working with large enterprise customers with tonnes of data. How do you differentiate other than through pricing?

There are plenty of market alternatives for the services we offer. So why do we have 120,000 customers? It's because we provide a better customer experience. We understand that companies have very little time to hire professional services for implementing software. Our pace of innovation and the way that we make the data open and easy to consume is radically different.

When large companies move to the cloud, do you see a tendency to stick with larger providers rather than smaller or emerging companies like Zendesk?

If I think about a growing digital business, it isn't going to pick up SAP or Microsoft. They might be already running several applications on AWS or Azure but they are not going to move entirely to the cloud of one such large player. 

The more traditional businesses have a tremendous amount of legacy intellectual property tied up in old-school tools and products from Microsoft, SAP or IBM. What we need to do is innovate faster because our customers and our consumers have a different ethos. And I think the industry term for that movement, which every company is doing now, is called digital transformation because they're going direct to consumer, for which they're not looking to that traditional tool set. They want to build customer experiences, which is unique.

Could you tell us about Zendesk’s India growth? How do you see the domestic competition with Freshworks?

For the last two years, we have had a hockey-stick kind of growth. Our global growth is around 38%. We started our journey in India back in late-2016, with 1,700 customers. We have since added another 900 to 1,000 customers to the list. That is rapid growth. We work with traditional companies such as ITC and Tata Chemicals. India was among the top 10 markets for Zendesk globally. Any competition is good for the market. 

Do you have any plans for an R&D centre in India?

We've acquired companies in Singapore, Poland and France so far. With India being such a hot startup market, it would not be unlikely that we would eventually acquire some talent here locally. I think it would be great for us actually to have a base or an anchor here. And that's a much better way to get started in R&D in a market rather than beginning from scratch.