Chennai: Software-as-a-service company Zoho has paused employee pay hikes and cut marketing costs due to rising AI-related expenses and a challenging geopolitical environment.In a post on X this Tuesday, founder and CEO Sridhar Vembu stated that AI usage has driven up costs significantly amid uncertain market conditions for software services. He said that the company will work hard to avoid mass layoffs and that employees have been informed of the situation.“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 apologised for not being able to avoid this,” Vembu said. “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 noted that overall expenses have risen dramatically, largely driven by massive increases in data centre and AI usage costs, which the company is actively trying to control. “We are in the middle of reinventing ourselves. The next 3-5 years will decide how our reinvention has worked. Please pray for us,” he concluded.The announcement comes as a surprise given Vembu’s historically conservative approach to hiring. He has long been a staunch critic of mass layoffs in the software industry, frequently contrasting the profit-driven, shareholder-first model of publicly listed companies with Zoho’s privately held structure.During Zoho’s annual event in September, Vembu had already acknowledged that AI spending, macroeconomic headwinds, and global conflicts were impacting the company’s margins.
