Zoho Corporation Founder and Chief Executive Officer Sridhar Vembu said that the software-as-a-service (SaaS ) ecosystem should be prepared for a re-run of the global financial crisis of 2008 for the next two to three years. The Chennai-based global technology company is already seeing a 10 per cent decline in growth during the current year.
Zoho has also reduced its hiring growth from around 25 per cent per year till last year to around 10 per cent this year. “My expectation is that we are going to have a rerun of the financial crisis of 2008. It will be in a different flavour, but with equal severity. Our eco-system has to be prepared. For a couple of years, funding will dry up and markets will be dull. We will have to be ready for this,” Vembu told Business Standard on the sidelines of the 15th edition of TiE Chennai’s flagship event – TiECON Chennai 2022. “We are still optimistic. SaaS industry is still healthy, and there are customers. I want to be cautious looking forward,” he added.
According to the media reports, the company’s revenue from operations was seen up 22.3 per cent in FY21, while its profit too climbed 140 per cent. For the company, the major revenue drivers are rise in sales through the cloud software suite licenses and software subscription fee. The company posted a profit of Rs 1,918 crore in FY21, as against Rs 800.8 crore in FY20.
“We have seen a definite slowdown. Compared to last year, our growth rate has dropped from 30 per cent to below 25 per cent. We are seeing 8-10 per cent reduction in growth. It is still growing, but we are seeing the reduction. I expect growth rates to come down even further. Not just the US, Europe and Japan too are in a sorry state, there is a bubble burst in China,” he added.
There were reports that Indian information technology companies may hire up to 20 per cent fewer people in campus placements and entry-level hiring in FY24. Going in line with this, Zoho said, it is already hiring at a slower pace, as the rate of hiring was higher during the last one-and-a-half years. “Along with our growth rate, our hiring has also slowed down. We are hiring, but at a slower pace. We used to grow at 20-25 per cent per year and it has come down to 10 per cent now,” Vembu added.
The company is betting big on tier II and tier II cities as it believes that the majority of the talent pool comes from those places. In advice to growing SaaS companies, Vembu said that such players should focus on survival rather than growth in preparing to tide over the current global crisis.
“When central banks do not control inflation, we could see a 1970 situation of stagflation — with inflation and economic stagnation. That also is possible. Basically, the Central banks have put us in a very tough situation. The blame is with them, I blame the Central banks,” he added.