AI isn’t to blame, says Zoho’s founder Sridhar Vembu – It’s inefficiency that’s hurting Software Jobs – Start Ups News

Sridhar Vembu, the founder of Zoho Corporation, recently took to X (formerly Twitter) to emphasise that the current issues are not just about AI replacing jobs, but deeper inefficiencies that have built up over decades in the enterprise software sector. Vembu, an industry veteran with over 30 years of experience, highlighted the factors contributing to the precarious job market in IT services. 

Vembu argues that the software industry saw a massive over-expansion over the years, fueled by a flood of venture capital, private equity, and IPO money. This influx of capital led to extensive marketing campaigns by software vendors, which created a climate of fear, uncertainty, and doubt among corporate customers. “Fear, uncertainty, and doubt were spread among corporate customers, leading them to overspend on IT systems,” he explained. The result was that large corporations ended up with redundant and inefficient IT systems, requiring vast human resources to maintain them.

As companies sought to manage these increasingly complex IT infrastructures, many outsourced the work to India. However, Vembu points out that this outsourcing, rather than solving the problem, often exacerbated the inefficiencies. “IT budgets were kept fixed in dollar terms, and more people were hired in India to ‘get more done,’” he said. This approach led to a “multiplied inefficiency,” where additional personnel in India were hired to deal with the same inefficient systems, without addressing the root causes of the problem.

Despite this, Vembu notes that Indian firms, especially banks and financial institutions, have managed to become much more efficient than their Western counterparts, largely due to necessity. “Indian firms did not have the luxury of large budgets, so they had to be highly efficient,” he explained. Today, these institutions are not only more cost-effective but are able to fend off competition from global players.

Vembu also emphasised the productivity of smaller, focused teams in software development, noting that a two-person team can often outperform a larger team of 20 or more. The industry’s reliance on input-based metrics, such as billable hours or the number of people employed, rather than focusing on results, has only perpetuated inefficiencies.

While acknowledging the potential of AI to improve productivity—especially in automating repetitive tasks—Vembu argues that the inefficiencies accumulated over decades are the real cause of the current challenges in the software job market. “The flood of money into enterprise IT has now dried up, leaving a serious drought,” he concluded, suggesting that the industry is now facing a much-needed reckoning.

For Vembu, it is clear that the software job market’s struggles stem more from historical inefficiencies than from the immediate impact of AI, a problem that has been building for decades.

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