Zoho founder Sridhar Vembu has defended the company’s decision to skip its usual annual salary increments this year, pointing to increasing AI-related expenses and an uncertain business environment. While warning that the outlook for software jobs is bleak, Vembu said India has numerous opportunities to pursue even if the software industry becomes saturated or contracts.
“When another country tells you to go home, you come home. What is the alternative? Beg them to allow us to stay? Stay illegally?” Vembu wrote on X. He added, “There are a million things to build in India, even if software is saturated or goes away.”
His remarks come after Zoho decided not to provide its regular annual pay hikes this year because of rising costs and uncertainty about the business outlook. The company has also reduced its marketing expenditure and is attempting to avoid large-scale layoffs, Vembu said in another post.
Zoho struggles with rising AI costs
“The business outlook for software is uncertain and AI has raised costs dramatically,” Vembu wrote, highlighting a fourfold rise in server prices and increasing expenses driven by greater AI usage.
Zoho has not expanded its workforce over the past 18 months. Vembu said the company would make every effort to prevent mass layoffs, although he acknowledged that the overall outlook for software employment remained grim.
He also apologised to employees for being unable to offer their customary salary increases this year. Zoho is undergoing a business transformation, he said, adding that the next three to five years would be crucial in determining the success of these efforts.
In August, Vembu warned that memory prices had increased fivefold over 12 months, reaching 10 times their lowest level. He said the rising costs of memory and AI were making business operations increasingly challenging.
Vembu had previously pointed out that India’s IT sector, including Zoho, had generated relatively few new jobs in recent years. Companies are investing more in AI infrastructure, while customers are also shifting a greater share of their technology budgets towards AI.
He argued that faster software development does not automatically translate into greater demand for software products. With the global market already crowded, companies could find it difficult to attract buyers for additional products, potentially slowing business growth and recruitment.
Manufacturing may not entirely make up for the shortfall, either. Vembu observed that automation enables factories to manufacture goods at lower costs but also reduces the number of workers required.
India must build beyond software
Vembu’s latest comments reflect his view that India should not rely solely on the software industry to generate employment and drive economic growth. He believes the country has numerous areas to develop, even if the global software market reaches saturation or demand declines.
In an earlier post, he highlighted teaching, childcare, elderly care, farming, forest conservation and classical music as pursuits that offer purpose beyond monetary rewards. According to Vembu, these activities are likely to remain protected from AI-driven disruption.
Vembu has also discussed universal basic income (UBI) as a potential response to an economy in which automation makes goods cheaper while reducing the demand for human labour. However, ensuring that people have sufficient income to purchase those goods remains a significant economic challenge.
