Rising AI’s Costs Put SaaS Companies Between A Rock And A Hard Place

Zoho cofounder Sridhar Vembu has warned that rising AI infrastructure and usage costs are putting pressure on software companies, prompting tighter spending and a pause in routine salary hikes at Zoho.

AI productivity gains may not be enough to offset rising model, token and computing costs, leaving software companies to rethink hiring, salaries and investment priorities.

Freshworks’ proposed acquisition of Torii, alongside Perfios’ efforts to optimise AI models and track profitability, highlights how companies are trying to make AI adoption more cost-effective.

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Recently, Zoho cofounder Sridhar Vembu raised concerns over the economics of building software in an AI-driven market. In a post on X, Vembu said server prices have risen 4-5X in a year, while AI usage and token expenditure are pushing up operating costs.

Zoho, however, plans to respond by cutting its marketing budget, freezing headcount for........

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