Vembu said the SaaS industry was “ripe for consolidation” even before the AI wave gathered pace. He argued that a business model which spent far more on sales and marketing than on engineering and product development was always vulnerable. According to him, years of venture capital and stock market excess had propped up a ‘fundamentally flawed, unsustainable model’ for far too long.
Also read: Rs 2 lakh crore SaaSpocalypse for IT stocks explained: What it means for investors
Vembu also struck a philosophical note on Zoho’s own future. Whether the company survives the AI wave, he said, depends entirely on its ability to adapt. He added that he often asks employees to calmly contemplate the company’s death, arguing that accepting such a possibility makes people more fearless and better equipped to chart a clear path forward.
His comments came as Indian IT stocks faced a sharp and sudden selloff after American AI startup Anthropic unveiled 11 new plugins designed to automate a wide range of professional tasks. The announcement reignited fears that AI could erode both profitability and competitive advantages of established IT and software firms, triggering a wave of risk-off selling.
Shares of IT companies were battered on Dalal Street on Wednesday, with the Nifty IT index plunging as much as 8% with Rs 2 lakh crore in market value being wiped out. This marked the sector’s worst single-day fall since the March 2020 Covid-19 crash.
Historical data underscores the severity of the move. Over the past 15 years, the sharpest single-day crash in the Nifty IT index was recorded on April 12, 2013, when it plunged 12%, according to ACE Equity data. The closest comparable selloff in recent years came in 2022, when the index fell 6% in a single session, making Wednesday’s decline the steepest in six years.
Also read: Infosys, Wipro, TCS and other IT stocks tumble up to 7%. Here’s why
The selloff was broad-based. Persistent Systems fell over 6%, while heavyweights such as Infosys, LTIMindtree, Coforge, TCS, Mphasis and HCL Tech declined between 6-8%. Wipro slid 4% and Tech Mahindra dropped 6%. As a result, the combined market value of Nifty IT index constituents shrank from Rs 31.75 lakh crore to about Rs 30 lakh crore in a single session.
At the heart of the market reaction is a growing belief that AI could fundamentally reshape the competitive landscape for software and IT services companies. Industries once considered relatively insulated from automation, including legal services, data analytics and customer support, are now seen as vulnerable.
If AI can take over large parts of this work, the massive IT services ecosystem built around delivering these functions could face existential pressure. Jefferies described the selloff as a
“SaaSpocalypse,” highlighting a swift shift in sentiment, from the belief that AI would help these companies to the fear that it could replace them entirely. Jeffrey Favuzza of Jefferies’ equity trading desk characterised the mood as outright panic, describing the selling as a rush to exit positions.
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