Zoho CEO: The End is Near for Microsoft's Office Monopoly

Zoho CEO Sridhar Vembu accused Microsoft (MSFT) this week in a blog post of having an "oxygen supply problem," claiming that "Microsoft Office has long been the de-facto monopoly."

"That is the nice thing about facing a monopoly in an adjacent market – every player other than the monopoly would win if they get a non-zero share of a massively shrunk market," he said. "If the $20 billion market shrinks to $2 billion, we at Zoho would celebrate it, as long as we can hope to get a share of that shrunken market."

Vembu clarified his comments with us in an interview by pointing to how companies can still innovate the office suite market through research and development (R&D) with smaller revenue.

"After all, Microsoft has 90 percent operating margin on the Office suite, which by definition means that a competitor making just 10 percent of the revenue can actually invest as much as they [Microsoft] do in R&D and innovate."

Vembu went on to say in his blog post that Microsoft's Windows and Office monopolies have "massively incentivized the broader ecosystem to come up with business models that drive down the value of those core Microsoft franchises to near zero."

"This is the price Microsoft has paid with its profoundly anti-competitive tactics of the 90s — every single player in the ecosystem, from their once slavishly loyal OEMs to would-be competitors all want to see their market shrunk to zero," he said.

Vembu concluded his post by saying that "Microsoft has punished itself more than the [U.S.] Justice Department could ever have done."

When asked why Zoho has made the decision to come out publicly against Microsoft, Vembu told Talkin' Cloud that Zoho believes that its cloud vision is "better" and its office suite is "compelling" with a great value attached to it.

"We are simply pointing out that [Microsoft's] model has run its course," he said. "The Windows monopoly is over, and the end of the Office monopoly is coming."

A Microsoft spokesperson responded to Vembu's comments by stating, "Microsoft Office continues to grow in popularity because customers want the rich capabilities and familiar experience Office provides," adding that "Only Microsoft offers familiar Office tools in the cloud, respect for file integrity and design when documents are edited by multiple people, and enterprise class security and privacy delivered on your terms from a company you can trust."

With regards to partners, the Microsoft spokesperson said "partners are an important part of our success with more than 150,000 enrolled to sell Office 365 and other Microsoft cloud services. Additionally, 50,000+ partners are using Office 365 to run their businesses, more than two times as many as a year ago."

Vembu disagreed, stating that Microsoft has an existential need to win at all costs, "even when it means screwing over every partner."

He went on: "This is why there is such a distrust of them across the industry. They have demonstrated through the course of their history that they can never be trusted."

Vembu denied any allegations of Zoho acting like a sore loser in the office suite market.