Zoho's Sridhar Vembu thinks AI isn’t killing software jobs, but these inefficiencies are

Zoho founder and Chief Scientist Sridhar Vembu said on Tuesday that AI has not yet impacted the software job market. Instead, he attributed increasing job losses in the software industry to massive over-capacity, fear-driven spending, inefficiency transfer, frugality-led efficiency, team productivity disparity, and perverse incentives.

"What is ailing the software job market is not AI taking away jobs (not yet anyway)," Vembu, who stepped down as Zoho CEO in January 2025, wrote in a post on X. As a participant and observer of software for 30 years, he noted that massive over-capacity steadily developed in enterprise software due to a flood of VC, PE, and IPO money.

Vembu, who is quite vocal about issues about the tech industry on X, explained that software vendors applied "liberal doses" of marketing spending to spread Fear (of missing out), Uncertainty ("tech is changing, you need us"), and Doubt ("are you confused? trust us") among corporate customers, leading to ever-growing IT spending.

"Enterprise IT budgets kept rising because which CIO or Board would want to be seen as lagging? Major corporations in the West have layers and layers of duplicated IT systems, lots of money spent to acquire them and even more money spent to get the disparate systems to work together. The more inefficient IT systems ended up becoming permanent resource drains, requiring vast human resources to simply keep them running," he said.

According to Vembu, large enterprises in the West found these human resources in India, transferring inefficiencies to Indian IT services firms, often multiplied by three or four times. This "multiplied inefficiency" occurred because IT budgets were fixed in dollar terms, and more people were hired in India to "get more done."

As a result, a large number of IT jobs in India became dependent on these inefficiencies, he said.

Discussing frugality-led efficiency, Vembu highlighted how Indian banks and financial institutions are more IT-savvy while spending far less than major financial firms in the US. "Indian firms did not have the budgets to splurge! Necessity made them highly efficient and today India's financial institutions are able to fend off foreign competition easily."

He also pointed out that a two-person team can often outperform a 20-person team, and a 10-person team can do the work of a 200-person team. "This is not just due to talent disparity - even when the large teams have equivalent talented people, they can easily end up being wasted on unproductive projects," he

Vembu noted that in IT services, where people are billed by the hour or staff month (input metrics), there is zero incentive to remove inefficiencies or empower a two-person team over hiring 20. "It is those multiplied inefficiencies in IT, built up over decades, that are facing a reckoning now."

He added that AI is particularly effective at handling boilerplate code in projects and can currently offer 10-20% productivity gains. "Significant, but not the 10x or 100x leap yet to destroy jobs on a vast scale. But those AI gains today pale in comparison to the 'multiplied inefficiencies' built up over decades."

Vembu said this reckoning nearly happened after the Global Financial Crisis (GFC) of 2008-09 but was postponed as central banks flooded the world with money, some of which went into enterprise IT.

He reiterated his pessimism about the software job market, even before factoring in AI. "The pandemic unleashed another flood of money into enterprise IT. Those floods are now history, and we have a serious drought. That is why I am pessimistic about the software job market, even before accounting for AI."