Zoho’s Sridhar Vembu tells staff no hike this year, tries to avoid layoffs

ZOHO Founder Sridhar Vembu

Zoho founder Sridhar Vembu has informed the employees that they will not receive the company’s usual annual salary hikes this year, as the company grapples with the increasing costs related to artificial intelligence and the uncertain business environment and global geopolitical challenges.

In a post shared on social media platform X (formerly known as Twitter) Vembu said that the outlook for the software industry remains uncertain and that AI has significantly increased operating expenses for companies such as Zoho. As per Vembu, the server prices required for data centers have surged four-fold, while increasing usage of AI tools has led to much higher expenses that the company is attempting to control.

He also added that these pressures have been compounded by a challenging geopolitical backdrop.

No salary hikes at Zoho this year

As part of its efforts to manage costs, Zoho has reduced its marketing budget and paused annual salary increases for employees. Vembu said the decision was difficult and acknowledged that he had apologised to employees for not being able to avoid suspending pay hikes this year. The comments offer a rare glimpse into the financial pressures faced by software companies as they invest heavily in AI infrastructure while navigating an increasingly competitive technology landscape.

We will work hard to avoid mass layoffs: Zoho founder Sridhar Vembu

While warning that the broader outlook for software jobs is "grim", Vembu stressed that Zoho is trying to avoid large-scale workforce reductions. "We will work hard to avoid mass layoffs," he said, even as he cautioned that employment prospects across the software sector are becoming more challenging.Vembu also revealed that Zoho has not increased its employee headcount for the last 18 months, signalling a prolonged hiring slowdown at the Chennai-headquartered software company. He added that most employees understand the situation and expressed gratitude for their support during a difficult period

Read Sridhar Vembu’s complete post here

The business outlook for software is uncertain and AI has raised costs dramatically with a) massive 4-fold increase in server prices which we need for data centers b) AI usage increasing rapidly, leading to much higher expenses, which we are trying to control.On top of that is the challenging geopolitical backdrop.We have cut down on our marketing budget. We have also told our employees that we cannot have our usual pay increase this year. I have apolgized for not being able to avoid this.We will work hard to avoid mass layoffs but the outlook for software jobs in general is grim. We have not been growing our employee count for 18 months now.Most of our employees understand the situation. I am thankful to them.We are in the middle of reinventing ourselves. The next 3-5 years will decide how our reinvention has worked. Please pray for us 🙏