(Image courtesy: Zoho Corporation)
NEW DELHI: Zoho Corporation has put its usual annual salary increases on hold for employees this year, citing a sharp rise in costs driven by artificial intelligence and an uncertain outlook for the software industry.
Founder Sridhar Vembu announced the decision in a post on X, while also stating that the company has cut its marketing budget and has not increased its employee headcount for the past 18 months.
Vembu attributed the pressure primarily to AI-related expenses. “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,” he wrote.
Cost Control Measures and Apology to Employees
As part of efforts to manage expenses, Zoho has reduced its marketing spend. Vembu informed employees that the company would not be able to provide the regular annual pay rise this year. “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 apologised for not being able to avoid this,” he said.
He expressed gratitude to the workforce for their understanding: “Most of our employees understand the situation. I am thankful to them.”
Focus on Avoiding Layoffs Amid Industry-Wide Concerns
Vembu stressed that Zoho would strive to protect jobs. “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,” he noted.
The company is currently in a phase of reinvention. “We are in the middle of reinventing ourselves. The next 3-5 years will decide how our reinvention has worked. Please pray for us,” Vembu added.
The announcement comes just days after Vembu had urged Indian technology professionals in the United States to return home and help “build India,” following uncertainty around US green card processes for several IT firms.
Some users on X pointed to the contrast between that appeal and the current freeze on hiring and salary hikes at Zoho, questioning the opportunities available for returning talent.
Vembu’s comments highlight the dual impact of AI on software companies: while it promises higher productivity, the associated infrastructure costs, particularly for servers and compute are rising sharply, forcing even established product companies to tighten spending.
Zoho, known for its bootstrapped model and focus on building software from India, is navigating these pressures by prioritising cost control and internal transformation rather than large-scale workforce reductions at this stage. The coming years are expected to test how effectively the company adapts to the AI-driven changes in the software landscape.
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