‘Please pray for us,’ says Sridhar Vembu as Zoho skips pay hikes amid rising AI costs

Zoho employees will miss out on their annual pay increase this year as rising artificial intelligence (AI) costs squeeze the company, cofounder and chief scientist Sridhar Vembu said in a post on X. The company has cut its marketing budget and will work to avoid mass layoffs, he added, warning that the outlook for software jobs is grim.

Vembu said the company faced sharply higher server prices and growing expenses from AI usage, while an uncertain software outlook and a challenging geopolitical backdrop added to its difficulties.

"The business outlook for software is uncertain and AI has raised costs dramatically," Vembu wrote, pointing to a "massive four-fold increase in server prices" for data centre equipment.


He said AI usage was increasing rapidly, leading to higher expenses the company was trying to control.

"We have cut down on our marketing budget. We have also told our employees that we cannot have our usual pay increase this year," he wrote, adding he had apologised to employees.

AI and the workforce

Vembu said that the company has also gone 18 months without growing its employee count.

"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," Vembu wrote.

Asked in an earlier interview with ET AI about claims that AI agents would kill software as a service (SaaS), Vembu said Zoho was gaining customers worldwide and cited growth of about 45% to 50% in India.

"So if it (AI agents) is killing us, I think, I would like to be killed many, many times now," he had said in September.

Vembu had also described Zoho’s AI usage as a way to help employees work faster and improve output, including in customer support.

"But we will not actually displace a single support engineer. All the support people are still there," he had told ET AI.

Future tense

Vembu said most employees understood the situation and thanked them, acknowledging their response as the company tries to manage its expenses and navigate the uncertainty.

"Most of our employees understand the situation. I am thankful to them," he wrote.

Looking beyond the immediate spending decisions, Vembu described Zoho as being in the middle of a reinvention. He said the next three to five years would determine how that effort had worked, setting out a longer period for assessing the company’s changes.

"We are in the middle of reinventing ourselves. The next three-five years will decide how our reinvention has worked. Please pray for us," he wrote.