Sridhar Vembu: IT Sector Slowdown Affected by More than AI and Trump Tariffs
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Synopsis
On April 18, Sridhar Vembu highlighted that the downturn in India's IT sector is not solely due to AI disruptions or Trump tariffs. He emphasized long-standing inefficiencies in the software industry and called for new thinking to navigate the challenges ahead.
Key Takeaways
- The slowdown in India's IT sector results from multiple factors.
- AI and tariffs are not the only culprits.
- Long-standing inefficiencies have accumulated over decades.
- Employment in IT has relied on these inefficiencies.
- New thinking is necessary for future success.
New Delhi, April 18 (NationPress) The slowdown observed in the quarterly results of India's information technology (IT) firms cannot be solely attributed to the disruptions caused by artificial intelligence (AI) and Donald Trump's tariffs. It also stems from the inefficiencies in the products and services within the wider software industry, asserted Zoho founder Sridhar Vembu on Friday.
In a statement on the X social media platform, Vembu remarked: “My operating thesis: what we are witnessing is not merely a cyclical downturn nor is it solely related to AI. Even in the absence of tariff-induced uncertainties, challenges were looming. The broader software sector has been significantly inefficient, both in terms of products and services.”
He added that these inefficiencies have built up over decades of a prolonged asset bubble.
“Unfortunately, we have acclimated to many of these inefficiencies in India. Our employment has come to rely on them. The IT sector has absorbed talent that could have been directed towards manufacturing or infrastructure, for instance,” Vembu noted.
“We are merely at the initial stages of a lengthy reckoning. My assertion is that the past 30 years are not a reliable indicator of the next 30 years. We are genuinely at a turning point,” he continued.
He emphasized, “We must question our assumptions and embrace new thinking.”
Indian IT giants such as Tata Consultancy Services Ltd., Infosys, and Wipro announced their fourth quarter and full year financial results this week, presenting a bleak outlook that has disappointed investors.
The IT companies have been operating under the constraints of tariffs, which have stalled new orders and project expansions.
Infosys, a leading player in India's IT sector, reported an 11.7 percent year-on-year (YoY) decline in its consolidated net profit for the fourth quarter of the fiscal year 2024-25 (Q4 FY25), amounting to Rs 7,033 crore, down from Rs 7,969 crore in the same quarter last year.
Nonetheless, Infosys' revenue increased by nearly 8 percent YoY to Rs 40,925 crore, as compared to Rs 37,923 crore in the same period a year ago.
The firm reported an operating margin of 21 percent, slightly lower than the 21.3 percent margin from the previous quarter, yet an improvement from the 20.1 percent margin a year ago.
