7 months ago
Zoho's Vembu: AI Not Killing Software
Sridhar Vembu, the founder of Zoho, says that artificial intelligence (AI) is not the main reason why software company stocks are falling.
He thinks the problem is that these companies were overpriced for a long time.
Vembu believes AI will make software cheaper and increase competition, but it won't destroy the industry.
He also thinks this could be a good chance for Indian IT services companies to help businesses save money by replacing expensive software.
Some people disagree and think AI will make traditional software models unnecessary.
The market is currently going through a big change as investors figure out what this means for the future of software.
Sridhar Vembu argues that the current sell-off in software stocks is due to overvaluation, not AI.
He believes AI will accelerate competition and reduce the cost of enterprise software.
Vembu criticizes large SaaS players for their high valuations and aggressive growth models.
Some analysts argue that AI makes traditional software business models obsolete.
Vembu sees an opportunity for Indian IT services firms to replace expensive SaaS subscriptions.
- Who
- Sridhar Vembu, founder of Zoho
- What
- Debate on the impact of AI on the software industry and current market sell-off
- Where
- Global software sector
- When
- Recent market sessions, with Vembu's comments on January 30, 2026
- Why
- Investors reassessing valuations and the role of AI in the software industry
Key facts
- Sridhar Vembu
- Founder of Zoho
- Software Sector
- Down over 20% from recent peaks
- Price-to-Earnings Multiples
- Vembu suggests 10-15 times earnings are more realistic
- AI's Impact
- Vembu sees AI as accelerating competition, not destroying the industry
- Indian IT Services
- Potential opportunity to replace expensive SaaS subscriptions
- Market Reaction
- Investors reassessing valuations and business models
- Examples of Affected Companies
- Microsoft, Salesforce, ServiceNow, SAP
- AI's Role in Market Shift
- Some argue AI makes traditional software models obsolete
Quotes
Sinjin Bowron
Portfolio manager and head of liquid credit strategies at Beach Point Capital Management LP
“Right now it seems like the market is kind of picking on the largest, most liquid structures and some of the more obvious ones that are vulnerable to disruption. Those are precisely the areas where deep diligence and an understanding of their competitive moat matter most.”
livemint.com
“These are incredibly deeply entrenched software suites in company processes. It would take potentially years to rip out and replace some of these.”
livemint.com
Scott Macklin
Head of US leveraged finance at asset manager Obra Capital Inc.
“A storm has hit the loan market. The heaviest calendar in months, largely repricing-driven but still overwhelming, has collided with mounting existential questions around software business models as AI reshapes the sector, which is the single largest in loans. Layer on an unusually heavy flow of BWICs [bids wanted in competition] and you have a full blown ‘loan-ageddon’.”
livemint.com
Pratik Gupta
Leads CLO and RMBS research at Bank of America Corp.
“There is a certain element of throwing the baby out with the bathwater. The software sell-off got pushed into names which likely are not going to be affected by AI.”
livemint.com
Ari Lefkovits
Managing partner at Delos Capital
“The businesses aren’t broken. It’s just the balance sheets are stressed too much.”
livemint.com
Sources
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