Software jobs will be tough, says Zoho co-founder Sridhar Vembu, but AI isn’t to blame
Sridhar Vembu, founder and chief scientist of Zoho, believes the current challenges in the software job market are rooted not in artificial intelligence replacing jobs but in deeper systemic inefficiencies. In a detailed post on X, Vembu, who has been part of the software industry for three decades, pointed to how excessive venture capital, private equity, and IPO-driven funding have led to an overcapitalized and inefficient software sector.
According to Vembu, this overcapitalization artificially expanded the software market, resulting in duplicated IT systems, excessive hiring, and misplaced incentives. One major contributor to this inefficiency has been aggressive marketing by software vendors, who have often used fear, uncertainty, and doubt (FUD) tactics to influence corporate spending. Companies were led to believe that missing out on the latest tech trends would be detrimental, pushing them to invest heavily in IT systems that didn’t necessarily enhance efficiency. He explained that vendors capitalized on these fears to drive ever-increasing IT spending.
Vembu also highlighted how large Western enterprises fell into a pattern of acquiring multiple software solutions, only to face growing challenges in integrating and maintaining these systems. Instead of streamlining operations, the complex IT infrastructures became resource-intensive, requiring significant human capital just to keep functioning. Many of these inefficiencies were eventually outsourced to Indian IT service firms, where the focus shifted to maximizing billable hours. Vembu noted that for every inefficient process that needed five employees in the West, Indian firms would allocate three or four times as many workers, further entrenching inefficiencies.
Interestingly, Vembu pointed out that Indian banks and financial institutions managed to develop leaner, more cost-effective IT systems. With limited budgets and less external funding, these institutions were forced to prioritize efficiency, making their operations more resilient. He argued that a fundamental flaw in the software industry is the lack of incentives to enhance productivity. Since IT service models typically rely on billing based on staff hours rather than project outcomes, there is little motivation to streamline processes or reduce team sizes.
AI is now beginning to impact the industry, although not yet on a massive scale. Vembu explained that AI is already improving productivity by 10-20%, particularly in tasks involving repetitive code. While this level of efficiency isn’t enough to cause widespread job losses, it is sufficient to disrupt traditional hiring patterns and expose long-standing inefficiencies. He pointed out that earlier crises, such as the 2008 financial collapse and the COVID-19 pandemic, were mitigated by massive liquidity injections that sustained growth in the IT sector. However, with those financial cushions gone, the market is now facing a stark reality.
Vembu expressed concern about the future of software jobs, stating that the industry’s inefficiencies are being laid bare, and with no financial safety net remaining, the sector is confronting the collapse of an unsustainable business model. While AI might eventually lead to job displacement, he believes the immediate challenge lies in addressing the outdated structure that has prioritized headcount over genuine efficiency.
Vembu, an alumnus of IIT Madras with a PhD from Princeton University, began his career at Qualcomm before founding AdventNet in 1996, which later became Zoho Corporation in 2009.
