AdventNet recently released a major update to Zoho Writer, which improved collaboration among users and fixed a bug that was reported earlier this year. Following the release, some respected bloggers such as Pandurang Nayak and Robert Scoble expressed doubts about Zoho’s business value and AdventNet’s viability as a company, as reported by AdventNet’s CEO. Unlike my peers, I believe that Zoho is on the verge of delivering one of the most powerful productivity enhancers the office world has seen in years, and AdventNet is better positioned than most companies to rip the benefits of the evolution towards Office 2.0. Here is why.

Regarding the business case for an Office 2.0 productivity suite, look no further than this Rationale for Office 2.0 article that was published back in January. It outlines benefits such as fewer applications to pay for, ability to share your data, mobility across computers, no need to backup data yourself, no fear of loss or theft, no more problems with viruses and worms, and no painful software upgrades. But make no mistake. The debate regarding Office 2.0 vs. Office 1.0 will never end. To these benefits, proponents of traditional office productivity software will be quick to raise classical objections to Office 2.0, such as the fact that Office 2.0 does not work when you are offline, does not provide applications with complete feature sets, and does not offer any privacy protection for user data. They might even point to the ever-growing list of bugs that are documented in the Office 2.0 bug tracker. Yet, this will not prevent Office 2.0 to become the standard. It might take five years for this to happen, or maybe ten, but it will happen eventually. It’s only a matter of time.

First, objections will be overcome and bugs will be fixed. More and more users will discover the benefits of Office 2.0, switch to it for a couple of applications (low hanging fruits), keep using Office 1.0 applications for things that don’t work yet with Office 2.0 — I’m still waiting for the next update to Zoho Sheet to deliver a first presentation to my Board of Directors using it — and before they know it, they will have migrated most of their office work to the brave new world of online productivity suites.

Second, and whether they know it or not, Office 2.0 companies will use an envelopment strategy to attack the positions of Office 1.0 vendors. They will enter the market from both ends. At the low end, they will target individual users that cannot afford to pay $400 for an office productivity suite and like the convenience of using a tool they do not have to manage themselves, without having to worry about worms, viruses, and disk crashes. At the high end, they will target large corporations that are using office productivity suites for tasks that would be better served with a Blog, a Wiki, or a CRM system, and are increasingly worried that the chaotic workflow patterns enabled by traditional office productivity suites make it impossible to comply to regulations such as SoX or Basel II. Ask any IT manager of a large financial institution if she would like to get rid of Microsoft Office if she could, and you’ll know what I am talking about.

Third, Google has called the shots for the switch to Office 2.0 with the acquisition of Writely and the release of Google Spreadsheets, and Microsoft has made it clear with Ray Ozzie’s promotion as Chief Software Architect that its future is in selling services, not software. Salesforce.com’s head honcho Marc Benioff’s memo sent to his staff today (transcript available here) is a clear sign that the industry has taken notice. Again, Office 2.0 will happen, the only questions are when, how fast, and when you’ll get on board.

Now, a couple of words on AdventNet’s ability to deliver on the vision and get the proper reward for it. Quite frankly, it’s a little bit early to tell for sure, and there are so many parameters that could tilt the balance one way or the other — many of which being outside of AdventNet’s control, that any prediction is doomed to fail. Nevertheless, here are a couple reasons why I believe that AdventNet is in a great position today.

First, AdventNet is dedicating more resources to the development of the first integrated Office 2.0 productivity suite than any competitor beside Google and Microsoft. At present time, about 150 people are working on it. I would be surprised if the next competitor in line has a fifth of that today. The suite that AdventNet is building is very comprehensive and provides many components (Zoho Writer, Zoho Sheets, Zoho Show, Zoho Virtual Office, etc.), but it’s doing so by leveraging a common infrastructure, something that Google’s acquisition strategy is making a lot harder. As a result, AdventNet’s limited resources are better utilized, and applications are improving at a faster rate. If you’ve been using Zoho Writer for more than three months, you know what I am talking about.

Second, AdventNet has made sure to address scalability issues from the get go. Even though initial versions of its applications were deployed on traditional clusters, its engineers were quitly working on a grid infrastructure in parallel, and pushed it live a couple of months ago. It did not go without a glitch at first — and nobody expected it would, but after some bottleneck issues were fixed, it started to work and scale in a perfectly linear fashion. Once you get such a grid infrastructure in place, there is virtually no limit to how many users you can handle, especially if you can establish a business model that will allow you to put more and more servers to the job. At this point, it’s only a matter of how fast you can build your datacenters, as Google knows all too well.

Third, AdventNet is in no rush. As Sridhar explained in his post, it’s a self-funded and profitable company that is investing the profits of its legacy business into a new venture called Zoho. As long as he keeps the financial discipline he has demonstrated until now, and as long as he finds ways to keep his staff motivated — fighting a good fight against giants is as good as it gets — Sridhar should remain on the path to success. At this point, my only advice would be to accelerate the release of a hosted version of Zoho Virtual Office that corporate users will have to pay for when having more than two to three user accounts, and to hire a good PR firm in order to get the word out at a larger scale. BusinessWeek published a couple of articles on the Web Office a couple of weeks ago, and it’s a shame that Zoho was not mentioned.

Keep up the good work guys!

UPDATE 7/14/2006: Zoho Show got its first major update. That was fast!