Zoho Co-Founder and CEO Sridhar Vembu has confirmed that his company has no plans to lay off employees even amid slowing revenue growth. In an interview with CNBC-TV18, Vembu stated that despite the challenging economic conditions, Zoho’s employees can be assured that they won’t lose their jobs.

“We expect difficult economic conditions to continue and are not out of the woods, our growth rates have reduced from 30 percent to between 12 and 15 percent,” said Sridhar, “But our employees need not worry about losing jobs — we were prudent during the bubble and did not go overboard like other firms.”

Over the course of the recent economic downturn, Zoho has garnered praise for not resorting to layoffs. Even on the hiring front, Zoho has adopted the approach of hiring solely in order to honour previous contracts made. The company claims that it hasn’t resorted to firing employees even as a means of eliminating redundancies — a recently common practice across start-ups.

“Start-ups are laying employees off because VCs aren’t willing to fund losses,” said Sridhar, “VCs are calling the shots today and demanding that their companies cut the burn rate. At Zoho, I would gladly much rather cut profits instead of people and take a loss during the downturn.”

He added, “Zoho is profit-making. I’m now willing to take a profit-reduction and even losses during a downturn instead of resorting to layoffs.”

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A lot of Zoho’s success even amid a downturn can be put down to diversification. For instance, the company doesn’t see a bulk of its revenues arising from one geography or product. However, Sridhar is the first to acknowledge that all companies, including his, live in a massive earthquake zone called the “global economy”.

“However strong a house you build, it will shake during an earthquake,” he said. That is perhaps why although Zoho’s customer count has hit an all-time high, its spend per customer has drastically reduced.

“We are seeing a 20 to 30 percent growth in customer counts, but with much less revenue growth,” said Sridhar, who expects the company to have grown by 20 percent in FY-23, but with much less revenue growth projection for FY-24.“We are, however, adding a few employees to our headcount in FY-24,” he said, “Continuing AI integration and readying for new product launches will be some of the things we will focus on.”

That said, Vembu a rather glum outlook on the future of the IT workforce. “AI-related disruptions could mean the start of yet another downturn,” he said, adding, “AI could push software productivity to between 10x or even 100x in the future. If revenue also grows by 10x, we wouldn’t have a problem. But if you see productivity growth of 10x and revenue growth of just 3x, companies will have a problem.”

Sridhar Vembu lives in a tiny village called Mathalamparai, on the outskirts of Tenkasi. Unlikely as it is, for a tech founder to live in what can only be described in the middle of nowhere — or “a tier-one village” as Vembu likes calling Tenkasi — the Zoho boss is slowly building one of his strongest bases from the foothills of the Western Ghats in rural Tamil Nadu.

For over half a decade, Sridhar has embraced the rural life himself, making the farm his home. Through this time, he has overseen the development a small school, Kalaivani Kalvi Maiyam, on the farm, catering to the academic needs of 150 students belonging to the local population.

“I actually enjoy working from Rural India — it isn’t the sacrifice that everyone thinks it is,” Sridhar said, “Rural life is one that involves naturally less consumption and energy use; I enjoy having more time to think and plan for new challenges like AI and the financial crisis.”

Since its inception a bit over a decade ago, Zoho’s Tenkasi ‘hub’ has around a thousand employees, today. “A couple of hundred” more employees, Sridhar said, are expected to move from bigger cities, like Chennai, to the company’s Tenkasi hub.

“Tenkasi is a remote tier-1 village, but also an experiment that is working,” said Sridhar, as we sit down to chat in his Chettinad-styled guest house on a 400-acre farm. “We want to build software here that can compete in the global market,” he added.

While Zoho’s Tenkasi hub has been operational even before the pandemic hit in 2020, the years that followed the COVID outbreak have seen Sridhar actively endorse his company’s ‘hub-and-spoke’ model of hybrid working. He holds firm to the approach despite tech firms all over charting an across-the-board return to physical workplaces.

“The hub-and-spoke model is the future of hybrid working,” he said, “It lets companies engage better with the local market.” In a nutshell, the approach sees employees have the option of working out of tiny villages or ‘spokes’, where Zoho offices see smaller headcounts of 5 to 10 employees per spoke.

‘Hubs’ on the other hand, are larger centres where the headcount is higher. Tenkasi is Zoho’s largest hub outside of its global headquarters in Chennai. The company also has upcoming hubs near Tirunelveli, Tiruchirapalli, Madurai and Coimbatore. “We have nearly 2,000 employees working at smaller centres, and I expect 50 percent of Zoho’s headcount to work from small towns in the next three to five years,” said Sridhar.

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Back at the farm, we paid a visit to the school Sridhar helped set up during the pandemic, which has metamorphosed into more than just a passion project. "I enjoy interacting with the children once a week, our school has 150 students today and is growing rapidly," he said.

Unwinding in a small town, not surprisingly, is drastically different from what it’s like in the big city. "I attend temple festivals here, every now and then," Sridhar added, "They’re the equivalent of partying in the city!"