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How Zendesk is gearing up for growth in APAC

Zendesk has its eye on Japan and the enterprise segment while building up its partner ecosystem to grow its business in the Asia-Pacific region

Wendy Johnstone, senior vice-president and chief operating officer (COO) for Asia-Pacific (APAC) and Japan at Zendesk, was appointed at an opportune time when organisations across the region have been spurred by the pandemic to deliver better customer experiences through digital channels.

According to IDC, many organisations in the region have been making new customer experience investments, particularly in data management and customer data platforms, to generate greater value out of customer data, improve resiliency and accelerate growth.

Zendesk, along with its rivals, has benefitted from the demand for customer experience management software, growing its global revenue by 29% year-on-year in the second quarter of 2021.

In an interview with Computer Weekly, Johnstone offers an update on Zendesk’s business in the region, its progress in penetrating the enterprise market and how the company is approaching mature and developing markets.

Could you give me a sense of Zendesk’s business in the region?

Johnstone: I joined the company at the onset of the pandemic as COO of APAC and it was the first time that we had appointed regional COOs. I’m responsible for the organisation here operationally, and very focused on our growth agenda in the region.

To give you a sense of the business momentum we're seeing at Zendesk, we were delighted at the end of last year to achieve the billion-dollar annual revenue goal. That was something that our CEO had established as a goal back in 2016. So, despite the global pandemic, we achieved that milestone.

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In our recent second quarter, we saw global revenues of $318m, with 29% year-over-year growth. That was a very strong quarter for us, with revenue growth accelerated compared to the 26% year-over-year growth in the first quarter of 2021.

In APAC, we contribute about 10% of the global business, which is a significant contribution to our global revenue numbers. We’re seeing really great demand for our solutions here in the region.

I understand that one of Zendesk’s strategies to grow the business is to penetrate the enterprise segment. How are things going on that front?

Johnstone: We have a balanced focus across segments. The SMB (small and medium-sized business) segment has been core for us, but more and more, we have a focus on the enterprise segment where we’re seeing good momentum and demand for our solutions in that segment.

To give you a sense of what that looks like globally, we’ve recently added 50 new customer accounts with annual recurring revenue (ARR) of over $250,000. That now represents about 35% of ARR, compared to about 29% a year ago, which is really encouraging.

We’re seeing that momentum here in the APAC region. We’re acquiring some great customers here through our Suite offering that was a response to a lot of things that our customers were facing as a result of the pandemic. Businesses, particularly in the enterprise space, wanted to deliver better, faster and easier customer service. We think there’s tremendous opportunity with larger organisations, and we're continuing to mature our business to support larger organisations that have more sophisticated needs.

Customer profile

What’s the typical profile of Zendesk’s enterprise customer? You talked about the need for them to respond faster and improve customer service amid the pandemic, but what’s driving them to Zendesk?

Johnstone: The pandemic was an opportunity for a lot of organisations to step back and refocus on the core and what was important to them. I think what we saw was acknowledgement and recognition of the importance of customer experience. Everybody had to move to a digital way of operating – there was no other option as more people wanted to engage with organisations digitally.

For one thing, we saw a big increase in the use of social messaging in APAC as a result of the pandemic. Our Suite offering enables us to deliver that ability for organisations to communicate with their customers through social and native messaging capabilities.

What we did with Suite was to streamline the pricing to meet a business’s budget or maturity. We’ve had great momentum with Suite, which now represents around 16% of our ARR. That's more than doubled since the first quarter of this year. We've had over 8,000 customers adopting it since it was launched in February.

Market share

Do Suite customers tend to switch from another competitor’s platform? Is Zendesk winning market share from competitors during this period of time with Suite?

Johnstone: It’s a combination of new and existing customers. From a competitive advantage perspective, we see conversational business as the future, and we are playing a leading role in enabling customers to engage with their customers effectively through messaging channels.

We also see self-service gaining a lot of momentum, so people can find answers to their questions on their own. That’s helping our customers increase their response times through capabilities like artificial intelligence. Those are some of the big trends we’re capitalising on with our solutions.

I understand that one of the key value propositions of the Zendesk platform is the ease of extensibility and connectivity to other applications, particularly through Zendesk Sunshine. Could you talk about that because that's something many enterprises would be interested in as they look to improve integration between customer experience systems and what’s going on elsewhere in their organisation.

Johnstone: You’re absolutely right. We’re offering the opportunity to extend our solutions through a unified Zendesk platform. This provides an opportunity not only for us to continue to innovate with our solutions, but also enabling customers to do it themselves. We continue to be very focused on that from a development point of view.

From an innovation point of view, we’re continuing to build strong partnerships with our ecosystem in the context of that move to messaging and the conversational business. We’ve also established a very strong partnership with Facebook, so that we can offer APIs (application programming interfaces) into a lot of Facebook’s messaging platforms.

Ultimately, it’s about listening to our customers. As you know, we’ve got two engineering hubs in the APAC region, which, I truly believe are a competitive advantage. We have one in Singapore and another one in Melbourne. That proximity to customers is gold and enables us to listen to customers so that we can continue to innovate to help them deliver customer experiences for their customers.

Engineering hubs

Could you share more about the work that goes on in these engineering hubs? Are they part of the global engineering team, or have they been tasked to perhaps develop localisation features?

Johnstone: It’s a combination of both. They’re part of the global organisation and we also have a distributed approach to engineering. They are also connected to local markets and engaged with customers, looking at things not just from a global perspective but also from a local perspective, because we know that APAC is an incredibly diverse region. There are many countries at many different levels of maturity, so it’s important that we have connections to local markets.

How is Zendesk bringing its partners along as it grows its business? I understand that the amount of business from your partners is relatively low compared to other players in the market.

Johnstone: We’ve recently hired a new senior leader here in the APAC region to head up our channel ecosystem team and strategy. She comes with a depth of experience and under her leadership, we’re now finalising our strategy to continue supporting the partners we have today.

We have some great partners across the APAC region already, from global systems integrators to boutique partners. We're also looking at the partner-first approach to help us scale and grow in some countries.

From a technology perspective, your partnership with AWS seems to have grown over the last two years, particularly through Zendesk Sunshine that allows customers to connect deeper into the AWS ecosystem. Could you talk about your partnership with AWS and what’s in it for Zendesk customers that might not be AWS customers?

Johnstone: If you look at datacentres and data locality, our infrastructure is built on the AWS platform. We’re continuing to look at how we can extend that as we grow and scale. At the moment, we have two points of delivery in the region, one in Japan and one in Australia. We've just recently announced an extension to data locality solutions for our customers and that's been well received.

Emerging versus mature markets

How are you doing things differently in emerging versus mature markets?

Johnstone: In terms of our focus across the APAC region, we're very focused on Australia, New Zealand, Singapore and India where we have a strong presence. At the moment, we are focusing a lot on Japan from a growth and operational perspective. We’ve made some early investments in Japan, and we've seen a lot of benefit in doing that in terms of the acquisition of customers.

We’re also very focused on making sure that we’re operationally set up to continue to support Japan in the right way, so we're doing all the right things from localisation to translation. We already do that from a product perspective today, but we want to make it easier for customers to do business with us in Japan and that’s something that I'm spending a lot of my time on at the moment.

We will continue to look at where the biggest opportunities are for growth across the region, such as smaller emerging markets where we may not have a presence today, and if there’s an opportunity for us to build a presence through a partner-first model.

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