Slowdown in IT sector not just due to AI, Trump tariffs: Sridhar Vembu

IANS April 18, 2025 286 views

Zoho founder Sridhar Vembu has highlighted critical challenges facing India's IT sector beyond artificial intelligence and trade tensions. He argues that deep-rooted inefficiencies have accumulated over decades, potentially misallocating talent from critical sectors like manufacturing and infrastructure. Vembu suggests the technology industry is at a significant inflection point, requiring fundamental reimagining of business strategies. His insights come amid disappointing quarterly results from major IT companies like TCS, Infosys, and Wipro, signaling potential systemic changes ahead.

"We are only in the early stages of a long reckoning" - Sridhar Vembu
Slowdown in IT sector not just due to AI, Trump tariffs: Sridhar Vembu
New Delhi, April 18: The slowdown seen in the quarterly results by India's information technology (IT) companies is not just a result of disruption due to artificial intelligence (AI) and Donald Trump’s reciprocal tariffs but also inefficiency in products and services of the broader software industry, Zoho founder Sridhar Vembu said on Friday.

Key Points

1

Structural inefficiencies plague Indian IT sector beyond AI impact

2

Talent allocation needs strategic redirection

3

Technological transformation demands fresh thinking

4

Traditional business models facing critical challenges

In a post on X social media platform, Vembu said: “My operating thesis: what we are seeing is not just a cyclical downturn and it is not just AI related. Even without the uncertainty induced by tariffs, there was trouble ahead. The broader software industry has been quite inefficient, both in products and services”.

He further stated that these inefficiencies have accumulated over decades of a prolonged asset bubble.

“Sadly, we adapted to a lot of those inefficiencies in India. Our jobs came to depend on them. The IT industry sucked in talent that may have gone into manufacturing or infrastructure (for example),” said Vembu.

“We are only in the early stages of a long reckoning. My thesis is that the last 30 years are not a good guide post to the next 30 years. We are truly at an inflection point,” he added.

According to him, “We have to challenge our assumptions and do fresh thinking”.

Indian IT majors Tata Consultancy Services Ltd., Infosys and Wipro reported their fourth quarter and full year financial results this week and gave a weak outlook, sparking disappointment on the street.

The IT companies have been under the tariff cloud, which has delayed new orders and project ramp-ups.

Infosys, one of India’s top IT companies, reported a 11.7 per cent year-on-year (YoY) drop in its consolidated net profit for the fourth quarter of the financial year 2024-25 (Q4 FY25) to Rs 7,033 crore, compared to Rs 7,969 crore in the same quarter last year.

However, Infosys' revenue rose by nearly 8 per cent YoY to Rs 40,925 crore as compared to Rs 37,923 crore in a year-ago period.

The company reported an operating margin of 21 per cent, slightly lower than the 21.3 percent margin in the previous quarter but up from 20.1 percent in the same quarter a year ago.

—IANS

Reader Comments

R
Rahul K.
Vembu makes some valid points about inefficiencies in the IT sector. We've been too comfortable with the outsourcing model for too long. Time for some real innovation! 💡
P
Priya M.
As someone working in IT for 15 years, this hits hard. We did get complacent. But change is always painful before it gets better. Hoping companies take this as a wake-up call.
A
Arjun S.
Interesting perspective, though I think he's underestimating the impact of AI. The combination of tech disruption AND inefficiencies is what's really hurting the sector.
S
Sanjana T.
Respectfully disagree with parts of this analysis. The IT sector created millions of jobs and lifted many out of poverty. Not all growth was inefficient. We need balanced reforms, not complete overhaul.
V
Vikram P.
Finally someone said it! The writing was on the wall for years. Time to move beyond body shopping and focus on real product innovation. Zoho is leading by example here. 👏
N
Neha R.
As a fresher looking for IT jobs, this is scary but also exciting. Maybe this shift will create new opportunities in different areas? The sector definitely needs to evolve.

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Tags:
IT Sector Sridhar Vembu Zoho AI Disruption Indian Technology Economic Transformation
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