Zoho founder Sridhar Vembu: Well before the AI revolution, I have said SaaS industry is …

Amid the massive software stock sell off, Zoho founder Sridhar Vembu said that the software as a service (SaaS) industry is facing a deeper structural challenge that goes beyond the threat of artificial intelligence (AI). In a post on X (formerly Twitter), Vembu said he had long believed the SaaS sector was vulnerable, even before AI began to reshape how software is built and sold. “The stock market is becoming very negative about the prospects of SaaS companies in the AI-assisted Code era. Well before the AI revolution, I have said SaaS industry is ripe for consolidation,” Vembu wrote in the post.Sridhar Vembu’s comments come at a time when software stocks are under pressure, with investors questioning how AI-assisted coding tools could disrupt existing business models. According to him, the challenges facing SaaS companies are not new, but AI is accelerating a correction that was already overdue.“An industry that spends vastly more on sales and marketing than on engineering and product development was always vulnerable. The venture capital bubble and then the stock market bubble funded a fundamentally flawed, unsustainable model for too long. AI is the pin that is popping this inflated balloon,” Vembu said.In the post, Sridhar Vembu also addressed Zoho’s future in the AI era. He said that the company’s survival depends on its “ability to adapt”. He shared that he often asks employees to think about the possibility of failure as a way to stay grounded.“Can Zoho survive the AI wave? It depends on our ability to adapt,” Vembu wrote, adding “I always ask our employees to calmly contemplate our death. When we accept that possibility, we become more fearless and that is when we can calmly chart our course.”The latest rout was triggered by worries that new AI tools could disrupt existing business models. As mentioned above, the selling accelerated after Anthropic released a new AI automation tool, raising concerns that many software companies could face stronger competition. Investors, per a Bloomberg report, are worried that advances in generative AI may reduce demand for traditional software products or weaken long-standing pricing models.