Zoho's Vembu Says AI Server Costs Are Eating IT Jobs

Zoho founder Sridhar Vembu said the money that would have gone to hiring new IT employees is instead being spent on artificial intelligence and data center infrastructure. He blamed “a steep rise in server and memory prices” for the shift.

“Sadly, the IT industry, including Zoho, have not created many jobs in recent years,” Vembu wrote on X. “We have not laid off people but we are not creating new jobs either.”

Vembu said automation makes software cheaper and more accessible, but the hard question is how to structure the economy so people have the income to buy those goods. He pointed to Universal Basic Income as one idea, calling some of India’s existing welfare programs a form of UBI. “We can expect the political pressure to do a lot more,” he said.

His comments come as IT hiring in India has slowed sharply. Infosys, Wipro, and HCLTech have all pulled back on campus recruitment over the past two years while boosting AI-related spending. The National Association of Software and Service Companies reported net hiring in the sector shrank for the first time in a decade in fiscal 2024.

Vembu’s post drew a range of responses. One user said the real problem is spending on imports and foreign travel, not automation. Another argued that manufacturing can still create jobs if the government treats it as a national priority. A third pointed to Sri Lanka and Pakistan as examples of what happens when freebies get out of control. A fourth countered that layoffs were happening before AI and that AI just accelerated a trend that started after the pandemic hiring boom faded.

Zoho, which has long prided itself on avoiding layoffs, has kept its headcount roughly flat. The company had about 15,000 employees as of its last disclosure. Its hiring freeze mirrors a broader industry pattern: Indian IT firms added fewer than 10,000 net jobs in the fiscal year ended March 2025, down from more than 60,000 two years earlier, according to data from staffing firm TeamLease.

Vembu is not the first tech founder to flag the trade-off between AI investment and employment. TCS CEO K Krithivasan said in January that AI would not eliminate jobs but would change the skills required. Infosys CEO Salil Parekh told analysts in April that the company was investing $500 million in AI tools while cutting back on bench strength.

Indian IT services companies spend roughly 8-10% of revenue on infrastructure, including data centers and cloud services. That share is rising as they train large language models and build AI agents. Memory and server costs have climbed 15-20% year over year, driven by demand for Nvidia’s H100 and Blackwell chips, according to Gartner.

Vembu’s framing puts the capital allocation problem squarely on the hardware bill. Every dollar spent on a GPU is a dollar not spent on a junior developer. The question is whether the productivity gains from AI ultimately create enough economic surplus to reemploy displaced workers, or whether the industry is simply substituting capital for labor at a faster rate than the economy can absorb.