Zoho Employees to Miss Annual Pay Hike Amid Rising Costs, Says Sridhar Vembu

New Delhi, October 13 (Daily Kiran) : Sridhar Vembu, the co-founder and chief scientist of Zoho, announced on Tuesday that the company will not provide its employees with the usual annual pay increase this year. This decision stems from escalating costs and uncertain business conditions. Vembu also noted that the company has reduced its marketing budget.

In a post on social media platform X, he highlighted the uncertain business landscape in the software industry, exacerbated by the growing use of artificial intelligence (AI), which has significantly increased costs.

Vembu pointed out that prices for servers necessary for data centers have surged nearly fourfold. The rapid adoption of AI has also led to a substantial rise in operational expenses. Furthermore, global geopolitical factors continue to pose challenges for businesses.

“We have cut our marketing budget and informed employees that an annual pay hike will not be possible this year. I apologize for this unavoidable situation,” Vembu said.

He added that the company is making every effort to avoid large-scale layoffs, although the job outlook in the software sector appears challenging at this time. He mentioned that Zoho has not seen a significant increase in its workforce over the past 18 months.

Vembu expressed gratitude to employees, noting that most understand the current circumstances. “We are in the process of reorienting ourselves. The next three to five years will determine how successful this transformation will be,” he stated.

Earlier in May, Vembu had raised concerns about the soaring valuations of tech companies driven by AI. He warned that the enthusiasm among investors could lead to situations reminiscent of the dot-com bubble, with companies like Nvidia, Apple, Alphabet, Microsoft, Meta Platforms, and Micron Technology trading at high valuations compared to their annual revenues.

He referenced a statement from Scott McNealy following the dot-com era, emphasizing that if investors place a tenfold valuation on a company’s annual revenue, the company must deliver exceptional performance over an extended period to justify that valuation.