Zoho founder Sridhar Vembu has announced that there will be no salary hikes for employees this year. Vembu, 58, cited rising costs of running a business as the main reason for skipping the annual appraisal process.
In a post shared on the social media platform X, the founder and former CEO of Zoho explained that the advent of artificial intelligence (AI) systems that require a lot of compute has resulted in a four-fold increase in server prices. This, coupled with a challenging geopolitical situation, has impacted Zoho’s business costs.
Why Zoho employees will not get a salary hike this year
“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,” Vembu said in his post.
“On top of that is the challenging geopolitical backdrop,” he added.
He said that due to these reasons, employees would not get the usual salary hikes this year. Vembu said he had apologised to his workforce for not being able to avoid this.
“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,” he said.
Possible layoffs?
In an internal communication accessed by ET Now, the founder of Zoho claimed that many Zoho customers are now replacing the company’s software products with AI-built alternatives. Made through “vibe coding”, AI-built software products are often a cheaper alternative — a fact that has directly contributed to their rising popularity.
Vembu hinted at possible layoffs, saying that the outlook for software jobs is “grim”. Since the rise of AI in 2023, major tech companies have cut down their workforce.
(Also read: ‘Got laid off without notice’: Zoho breaks silence on employee’s viral allegation)
Although Zoho has never carried out mass layoffs in its three-decade history, Vembu hinted that a workforce reduction could come in the future. He said that no new employees have been inducted into the firm in the last 18 months.
“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,” the former CEO of Zoho said in his X post.
“Most of our employees understand the situation. I am thankful to them,” he added.
Sridhar Vembu said he is trying to reinvent Zoho, and the next three to five years will determine the company’s future. “Please pray for us,” he concluded.
