'More marketing than engineering': Zoho's Sridhar Vembu on why SaaS is cracking under AI

Zoho founder Sridhar Vembu on Wednesday weighed in on the growing gloom around SaaS companies as AI tools reshape how software is built. He argued that the industry's underlying model was "always vulnerable" even before the current AI disruption.

"The stock market is becoming very negative about the prospects of SaaS companies in the AI-assisted Code era," Vembu wrote, adding that long before the AI wave, he had maintained that the "SaaS industry is ripe for consolidation."

In his view, the model had structural weaknesses that were masked for years by easy money and market exuberance. "An industry that spends vastly more on sales and marketing than on engineering and product development was always vulnerable," he said.

Vembu, who is now the chief scientist at Zoho, also linked the current pressure on SaaS to the funding cycle that powered its expansion. "The venture capital bubble and then the stock market bubble funded a fundamentally flawed, unsustainable model for too long," he said, adding that "AI is the pin that is popping this inflated balloon."

The Zoho boss was responding to an X user who claimed SaaS firms are "continuing to get murdered", and predicted that within 24 months, most software would be built end-to-end using AI tools, reducing the need for IDEs, vibe coding, offshore development teams, and even routine maintenance work.

Against that backdrop, Vembu also addressed the key question facing Zoho. "Can Zoho survive the AI wave? It depends on our ability to adapt," he wrote. "I always ask our employees to calmly contemplate our death," he said. "When we accept that possibility, we become more fearless and that is when we can calmly chart our course."