Zoho slows hiring, Vembu says tech bubble may burst

At present, Zoho has more than 11,000 employees across the world. In July, the company announced it would hire 2000 employees to expand its operations in India and globally. Vembu said the company has hired most of the employees as per its previously announced plans. “We’re still hiring but very slowly. But the first thing I want is to ensure that the jobs of our employees are safe,” Zoho co-founder and CEO Sridhar Vembu said in an interview on the sidelines of Zoholics India–the bootstrapped software-as-a-service (SaaS ) company’s annual user conference held in Delhi on 8 November.

In 2021, Zoho posted a consolidated revenue of more than $1 billion, jumping 77%. However, the company is seeing slow growth in 2022. Vembu said that nobody enjoys such growth forever.

The past few months have been tough for the global tech industry, with the tech-heavy Nasdaq Composite index down close to 30% this year. With wealth being eroded from public markets, most tech companies are now finding it difficult to raise capital as investors tighten their purse strings amid worsened macroeconomic conditions. Faced with a cash crunch, tech firms are now cutting costs. From putting a break on marketing spending to laying off employees, companies are resorting to multiple ways to ensure their longevity.

For instance, major global tech companies such as Meta, Twitter, Stripe, Salesforce, Coinbase, Lyft and Shopify are letting go of thousands to reduce spending and better margins. Indian startups operating in multiple segments, too, have cumulatively laid off more than 15,000 employees. Just last week, Indian SaaS unicorn Chargebee fired 10% of its staff citing macroeconomic conditions.

Drawing comparisons from the dotcom bubble burst, Vembu predicted it will take at least two years for things to go back to normalcy from here. “The bigger the bubble, the bigger the burst. That has been a historical experience,” he said. “Valuations are coming back to sanity. The process necessarily is painful,” he said, adding, “Fundamentals matter now more than ever, and our industry has to learn to lower the friction of technology, so that technology becomes far more affordable.”

On its part, Chennai and Texas-based Zoho, which has a suite of over 55 enterprise tech platforms, plans to lower its marketing costs to mitigate the impact of the unfavorable macroeconomic situation. It already spends only a third of its research and development (R&D) costs on marketing.

“We’re optimistic for the next few years but at the same time realistic due to the ongoing market conditions. The two factors that will decide Zoho’s future are the growth of its overall diversified portfolio and the global economic condition. Which factor will dominate will be the billion-dollar question. However, we can control the first factor and can leave it to whatever the global economic condition throws at us,” he said.

The company will continue to invest in R&D as it helps in boosting revenues as well as saving on energy expenses. “Zoho’s deployment of proprietary technology that runs on Graphic Processing Units (GPUs) has helped the company save on energy costs,” Vembu said. Zoho also doesn’t plan to increase the prices of its products and services, at least for now.