Zoho founder explains why India's IT boom is no longer creating jobs

Sharing his views on the changing dynamics of the technology sector and its impact on employment, Vembu wrote on X: "The real issue facing our nation is how to create jobs for our massive cohort of youth in this very uncertain global landscape."

He added: "Sadly, the IT industry, including Zoho, has not created many jobs in recent years. We have not laid off people but we are not creating new jobs either."

According to Vembu, money that would previously have been spent on hiring new employees is now being diverted towards building artificial intelligence (AI) infrastructure and expanding data centre capacity.

"The money that would have gone to new employees is now going to AI and data center costs, the latter due to the steep rise in server and memory prices. We are trying to control those costs but a lot of that is out of our control," he said.

Vembu said that while AI has made software development significantly faster, it remains uncertain whether the global market needs substantially more software.

"While AI allows us to produce more software quicker, does the over-saturated global software market need a lot more software? Like any commodity industry, the focus shifts to quality, reliability, brand and so on, and growth will be much slower," he wrote.

He also noted that large and mid-sized enterprise customers are increasingly redirecting their IT budgets towards AI investments.

"Software customers (large and mid-sized enterprises) also have redirected their own IT spending towards AI. Even the AI companies which are growing very rapidly are borrowing and spending huge amounts of money in capex, and it is not clear they will achieve the massive profits they need to justify all the capex," he said.

Warning of the broader implications for employment, Vembu said extensive automation has reduced the ability of large-scale manufacturing to generate significant numbers of jobs.

"What other industry can pick up the slack? Extensive automation means that large-scale manufacturing produces few jobs," he said.

Vembu added that while creating more jobs appears to be the obvious solution, implementing it is far from straightforward.

"That 'only' question, simple in theory, is not easy in practice. Some people think the answer is Universal Basic Income (UBI), and some of that is already happening in India (we call them freebies). We can expect the political pressure to do a lot more," he wrote