Zoho pauses pay hikes, cuts marketing spend amid rising AI costs: Sridhar Vembu

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Homegrown technology firm Zoho Corporation Founder Sridhar Vembu on Tuesday said employees will not receive their annual pay hikes, citing surging artificial intelligence (AI) infrastructure costs and geopolitical uncertainties. He added that the business outlook for the software sector is uncertain.

According to Vembu the server prices for data centres have registered a four-fold increase and the AI costs have also increased, which the company is trying to contain.

"The business outlook for software is uncertain, and AI has raised costs dramatically with a) A massive 4-fold increase in server prices which we need for data centres and b) AI usage increasing rapidly, leading to much higher expenses, which we are trying to control," Vembu said in a social media post on X.

He added that a "challenging geopolitical backdrop" has further added to these operational pressures.

Zoho cuts marketing spends, freezes pay hikes

The company has trimmed its marketing budget in an effort to cut costs he informed while adding that employees have been informed that their annual pay hikes have been paused 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 apologized for not being able to avoid this," he said.

Company trying to avoid layoffs

Vembu further said the job outlook for the software sector looks "grim" and the company has been striving to avoid job cuts. He added that the company has not been growing its headcount for the past 18 months given the uncertainties.

"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 said.

He added that most of the employees understood the situation and said, "I am thankful to them."

The chief scientist further said that the software company is trying to reinvent itself and the next three to five years will decide how it has fared with this exercise.

"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 said.