With a rise in infrastructure expenses due to growing demand for artificial intelligence (AI), global geopolitical uncertainties and an uncertain software market putting pressure on the spending of software-as-a-service (SaaS) major Zoho, its founder, Sridhar Vembu, has announced that employees will not receive their usual annual salary increases this year.
In a post on X on Tuesday, Vembu said the company was facing a sharp rise in server prices, which had increased fourfold, adding to the costs of running data centres. In addition, higher expenses from increased AI usage and ongoing geopolitical challenges are affecting the company, and it has already reduced its marketing budget and informed employees that there will be no pay rise this year.
He also asked people to pray for the company, which is in the middle of reinventing itself, adding that the next three to five years would determine the success of this reinvention.
"The business outlook for software is uncertain and AI has raised costs dramatically with a) massive four-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.
He also thanked employees for understanding the crisis 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," he added.
He said the company would work hard to avoid mass layoffs, but the outlook for the software jobs market was grim. "We have not been growing our employee count for 18 months now," he added.