Zoho’s Vembu Warns of Looming Disruption in Software Industry

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AI-Driven Disruption Looms Over Software Industry as Zoho’s Vembu and Microsoft’s Nadella Warn of Radical Shifts

By S JHA

MUMBAI, May 18, 2025 – The software development industry faces an unprecedented reckoning, with industry titans Sridhar Vembu of Zoho Corporation and Satya Nadella of Microsoft sounding alarms about the transformative impact of artificial intelligence (AI) and large language models (LLMs).

Their recent statements signal a structural shift that could reshape millions of jobs and the global software ecosystem, particularly in tech hubs like India.

In a sobering post on X, Sridhar Vembu, Zoho’s co-founder and Chief Scientist, cautioned that the software industry’s stability is far from guaranteed. “I have often said this to our employees: the fact that software engineers get paid better than mechanical engineers or civil engineers or chemists or school teachers is not some birthright and we cannot take that for granted, and we cannot assume it will last forever,” Vembu wrote.

He emphasized that customer demand for software products is equally precarious, urging vigilance against complacency. Quoting Intel’s Andy Grove, Vembu added, “Only the paranoid survive.”

Vembu highlighted the “productivity revolution” driven by LLMs and advanced tooling, warning that it “could destroy a lot of software jobs.” He described this as a “sobering but necessary” reality for the industry to internalize.

Vembu has previously also stated his concerns about inefficiencies in India’s IT sector. He has argued that India’s IT sector has been propped up by a decades-long asset bubble.

Microsoft CEO Satya Nadella, speaking on a recent BG Squared podcast, predicted a fundamental overhaul of traditional business applications. Satya Nadella said that traditional business apps will soon be replaced by AI agents.

Nadella explained that business apps are essentially “CRUD databases with business logic,” but “the business logic is all going to AI agents.” He foresaw a future where “once the logic is in the AI tier, all the backend will get replaced,” rendering much of traditional software development obsolete.

Nadella’s vision aligns with his earlier comments about agents—AI-driven systems—becoming central to software, reducing the need for conventional coding and interfaces. He suggested that developers should focus on building scalable databases that AI agents can interact with, signaling a shift in required skills.

Technology analyst @AnandTechInsight in a post on X commented, “Vembu’s point about LLMs is spot-on. The productivity gains from AI coding tools could reduce demand for traditional software roles by 30-40% in the next 5 years. India’s IT outsourcing model is particularly vulnerable.”

India’s reliance on labour-intensive software services is in spotlight amid AI-led changes in the sector. The IT sector has been pulling away talent from sectors like manufacturing and infrastructure for decades.

India’s software industry, a cornerstone of its economy with exports worth over $150 billion annually, faces a critical juncture. Vembu has repeatedly criticized the sector’s inefficiencies, noting in April 2025 that “the broader software industry has been quite inefficient, both in products and services,” with India adapting to these flaws to sustain jobs.

The International Monetary Fund’s January 2024 report, cited by Vembu, estimated that 40% of global employment is exposed to AI, with software development particularly at risk. Analysts predict that AI could make development more efficient, reducing the need for large teams and shrinking the economic influence of software exporters like India.

Both Vembu and Nadella urge proactive adaptation. Vembu, who stepped down as Zoho’s CEO in January 2025 to focus on R&D, emphasized the need for “fresh thinking” to navigate this “inflection point.”

The convergence of LLMs, AI agents, and shifting economic models threatens to upend traditional software development, but it also presents an opportunity for reinvention—if the industry can heed the call to evolve.

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