AI bill bites: Zoho freezes annual pay hikes

Homegrown technology firm Zoho Corporation has paused its annual pay hikes and pruned its marketing expenditure, citing sharply escalating Artificial Intelligence (AI) infrastructure costs and an uncertain outlook for the software sector, founder Sridhar Vembu said on Tuesday.

In a post on social media platform X, Vembu described the global employment landscape for the software sector as "grim" and said that the company has kept its headcount flat for the past 18 months while making efforts to avoid mass layoffs.

"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.

He added that a "challenging geopolitical backdrop" has further compounded these operational pressures. Outlining the internal measures taken to navigate the headwinds, Vembu stated that the company has trimmed marketing outlays and communicated the wage freeze to its workforce. "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 said, adding that he was thankful to employees for understanding the situation.

He said the company will work hard to avoid mass layoffs but "the outlook for software jobs in general is grim". "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.

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The Hans India