Zoho Corporation will not give employees their usual annual salary hikes this year, as rising artificial intelligence (AI) expenses and an uncertain business environment put pressure on costs at the Indian software company. Co-founder and chief scientist Sridhar Vembu announced the decision on October 13, warning that the outlook for software jobs remains difficult as the industry undergoes rapid change.
In a post on social media platform X, Vembu said the company was facing a sharp rise in infrastructure expenses, including a fourfold increase in server prices required to run its data centres. Growing use of AI tools has added to operating costs, making it harder for the company to maintain its usual spending commitments.
“The business outlook for software is uncertain and AI has raised costs dramatically,” Vembu said, pointing to higher server prices and rapidly increasing AI usage. He also cited the challenging geopolitical environment as another factor affecting business decisions.
The decision to suspend annual pay increases marks a significant change for employees who would ordinarily expect salary revisions as part of the company’s yearly compensation cycle. Vembu said he had apologised to staff for being unable to avoid the freeze and expressed gratitude for their understanding as Zoho works to manage its expenses.
The company has also reduced its marketing budget as part of its cost-control measures. Vembu said Zoho had not increased its employee count for 18 months, signalling a cautious approach to recruitment as the software sector faces uncertainty over demand, costs and the impact of automation.
Despite the pressure, the company is trying to avoid mass layoffs. Vembu said Zoho would work hard to protect jobs, even as he warned that employment prospects across the software industry were looking grim. His comments highlight a growing concern among technology companies about balancing investment in AI with the costs of maintaining their existing workforce.
The rising cost of AI infrastructure has become a major challenge for businesses seeking to integrate the technology into their products and operations. AI applications require substantial computing power, specialised chips, data centre capacity and energy. As companies expand their use of AI models and services, the demand for servers and computing resources has increased, pushing up infrastructure expenses.
For software companies such as Zoho, the challenge is particularly complex. AI can help employees automate routine tasks, improve customer support and develop products more efficiently. However, those benefits must be weighed against the cost of running AI systems, maintaining data centres and upgrading technology infrastructure.
Zoho is among India’s prominent enterprise software providers, offering cloud-based applications for customer relationship management, finance, human resources, collaboration and other business functions. Its products compete in the global software-as-a-service (SaaS) market, where companies are increasingly integrating AI features into existing platforms.
The shift towards AI is also changing customer expectations. Businesses want software that can automate more work and deliver results faster, putting pressure on providers to innovate while keeping prices competitive. Companies that fail to adapt risk losing customers, but those that invest heavily in AI face the challenge of recovering the additional costs.
Vembu described Zoho as being in the middle of a broader business transformation. He said the next three to five years would be crucial in determining whether the company’s reinvention succeeds. His remarks suggest that the current spending restrictions are part of a longer effort to adapt to changes in the software market rather than a response to a single short-term difficulty.
The warning also comes as geopolitical uncertainty weighs on business planning worldwide. Companies face changing trade conditions, uneven economic growth and uncertainty over technology investment. These factors can make customers more cautious about spending on software, potentially affecting revenue growth and hiring decisions.
The employment outlook is becoming a wider concern across the technology sector. While AI is creating demand for specialists in machine learning, data infrastructure and automation, it is also changing the nature of traditional software development and support roles. Companies are reassessing the skills they need and how much work can be completed using AI-assisted systems.
Vembu’s comments do not mean that all software jobs will disappear, but they underline the uncertainty facing workers as businesses reorganise around AI. For employees, the immediate concern is the impact on salary growth, recruitment and job security. For employers, the challenge is to manage costs without losing the talent needed to compete.
