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Zoho pauses salary hikes, cuts marketing as Vembu flags 4-fold server cost jump
Zoho has paused annual salary hikes and cut marketing spend this year, founder Sridhar Vembu said on October 13, citing surging AI infrastructure costs and an uncertain software outlook. The same day, Zoho’s ManageEngine partnered with TCS to support sovereign cloud deployments in India.
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Zoho Corporation has paused its annual salary hikes and cut marketing spend this year, founder Sridhar Vembu said on October 13, as the company tries to contain sharply higher costs tied to artificial intelligence and data-centre infrastructure.
In a series of remarks on X, Vembu said the outlook for software has turned uncertain and described the employment picture as “grim”. He said Zoho has kept headcount flat for the past 18 months and is trying to avoid layoffs.
“We want to avoid layoffs,” Vembu wrote, while telling employees the firm would not be able to do its usual pay increases this year. He said he had apologised to staff for the decision.
Vembu attributed the squeeze to two pressures he said have hit at the same time: higher prices for servers needed to run data centres, and rising AI usage that is pushing up operating expenses. He said server prices had seen a 4-fold increase.
Zoho, which sells business software and cloud services to companies globally, has built a reputation as a profitable, privately held Indian technology firm that grew without heavy reliance on outside capital. The latest cost-control steps signal how quickly AI-related spending is reshaping budgets even for companies that have traditionally been cautious with cash.
Pay freeze and cost squeeze
Vembu framed the salary decision as part of a broader attempt to keep the company stable through what he suggested could be a difficult stretch for the industry.
In his posts, he pointed to the “uncertain” business outlook for software and linked that uncertainty to the wider geopolitical environment. He also said AI is changing the economics of running modern software platforms, with more compute demand and more infrastructure required to support customers.
The combination, he indicated, has forced trade-offs. Marketing budgets have been trimmed, and compensation growth has been put on hold.
While Vembu did not announce job cuts, he acknowledged that the company is managing costs tightly. By emphasising that headcount has been flat for 18 months, he signalled that hiring has slowed and that Zoho is attempting to ride out the current period without the mass layoffs that have hit parts of the global tech sector.
Vembu’s language suggested the next few years will be decisive for the firm’s strategy. In another remark, he urged people to “pray for us” and said the coming three to five years would determine how the company reinvents itself, reflecting the scale of change he sees from AI and shifting software demand.
A fresh push into sovereign cloud
The cost-cutting message landed on the same day that Zoho’s enterprise IT management arm, ManageEngine, was announced as a partner in Tata Consultancy Services’ sovereign cloud offering.
Under the partnership, ManageEngine’s tools will be deployed within TCS SovereignSecure Cloud, a platform aimed at government bodies, public sector enterprises and regulated industries that need sensitive workloads and data kept within national borders.
The arrangement is positioned around operating and securing cloud and AI workloads while meeting India’s data-sovereignty requirements. ManageEngine said its experience in managing complex cloud infrastructure would help customers run sovereign cloud workloads with confidence and reliability.
For Zoho, the tie-up puts one of its key enterprise divisions closer to large government and regulated-industry deployments at a time when organisations are reworking their cloud strategies around security, compliance and location of data. For TCS, it adds an IT management layer to a sovereign cloud pitch that is designed for mission-critical systems.
The timing also reflects a broader split in the market that many software firms are navigating: investment is rising in AI and secure cloud infrastructure even as growth in some traditional software categories becomes harder to predict.
Vembu’s message to Indian talent abroad
Vembu also drew attention on October 13 for a separate post directed at Indians in the United States, urging those facing immigration uncertainty to return to India rather than remain in the country illegally.
“When another country tells you to go home, you come home. What is the alternative? Beg them to allow us to stay? Stay illegally?” he wrote.
He argued that India offers ample opportunities to build businesses and develop technology, even if the software industry were to saturate or decline. The post echoed comments he made days earlier, calling on Indians dealing with uncertainty over US visas to come back and contribute to building in India.
The remarks fit with Zoho’s long-running emphasis on building from India and expanding technology work beyond major metros, even as the company sells products internationally. Coming on a day when he was also warning of a grim employment environment and higher AI costs, the message carried a practical edge: if the global software cycle slows, he suggested, India still has plenty to build.
Zoho has not outlined a timeline for when annual pay increases might resume. Vembu’s posts, however, made clear that the company expects the pressure from AI infrastructure and operating costs to persist, and that leadership is prioritising expense control and job protection over compensation growth in the near term.
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