Zoho CEO Sridhar Vembu Urges Indian Tech Giants to Prioritize Revenue and Employee Well-Being Over Valuation

Zoho CEO Sridhar Vembu has been vocal about corporate practices and their impact on company growth and employee well-being. Recently, Vembu critiqued Intel’s focus on Wall Street returns at the expense of employee welfare, suggesting that this strategy is why the tech giant has fallen behind competitors like Nvidia, AMD, and TSMC. In a recent post on X (formerly Twitter), Vembu emphasized the importance of prioritizing employees over shareholders for sustainable success.

In a related context, Vembu also discussed the potential for India to create $100 billion revenue-generating tech companies. He argued that India needs companies with substantial revenue growth to uplift the nation’s living standards and compete globally, similar to China, which now boasts numerous billion-dollar tech champions.

Wall Street Versus Employee-Centered Strategies: Lessons from Nvidia, AMD, and TSMC

Vembu contrasted Intel’s Wall Street-driven approach with the employee-centered models of Nvidia, AMD, and TSMC. According to him, Intel’s rivals have excelled by investing in engineering talent rather than chasing short-term returns. This talent-focused approach has allowed these companies to produce highly innovative products, resulting in a dominant market position. Vembu pointed out that despite its smaller population, Taiwan has established a semiconductor powerhouse in TSMC by investing in its people and their technical expertise.

Similarly, he highlighted that India could benefit from a model focused on building $100 billion revenue companies. Rather than concentrating on short-term valuation, he believes companies should have visionary leaders who prioritize sustainable, long-term revenue growth. In his view, India requires a large number of such companies to elevate the country’s economic standing.

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The Shift in U.S. Business Practices: From Long-Term Building to Short-Term Gains

Reflecting on past American business practices, Vembu noted that U.S. companies once focused more on long-term growth through employee care. “This was not at all the norm in the US either 50 years ago,” he said, lamenting what he sees as a “perversion” of capitalism that prioritizes shareholder returns. According to him, this “shareholder-first” mindset can be detrimental to companies’ long-term stability.

He warned against an excessive focus on valuations, saying it detracts from revenue growth. “Endless focus on valuation won’t get us there,” he stated. Vembu stressed that companies should balance their long-term vision with the practical necessity of paying bills and maintaining daily operations. In his view, a stock bubble can distract management from this goal, as it creates an obsession with raising stock prices rather than sustainable business practices.

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Criticism of Short-Term Financial Engineering and Federal Reserve Bailouts

Vembu also criticized the broader U.S. financial system for encouraging short-term gains. He argued that the “perversion” of capitalism seen today often involves risky bets with other people’s money, where executives benefit greatly if successful but turn to the Federal Reserve for bailouts when they fail. Vembu also cautioned that stock bubbles and an overly loose funding environment contribute to this issue, as they shift companies’ focus to short-term valuation metrics rather than fostering a disciplined approach to expenses and long-term growth.

In reference to the discipline that companies need, he pointed out the importance of avoiding short-term distractions and staying committed to a balanced, long-term approach. He mentioned Goodhart’s Law, which states that once a metric becomes a target, it loses its effectiveness. “Valuation should be the long-term outcome of a million things done right,” Vembu said, stressing that focusing solely on valuation as a target can render it useless as a meaningful measure of success.

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A Call for “Real Capitalism”: Building Long-Term Value through Employee Care

For Vembu, a return to “real capitalism” is essential for sustainable growth. He envisions a business environment where companies invest in employees and prioritize revenue generation over fleeting stock prices. He stressed that visionary, long-term leaders are key to driving this change. As Vembu stated, “What will take us there are visionary dreamers and builders who are in it for the long haul.” He believes that such leaders, who can strike a balance between immediate operational needs and long-term aspirations, are the ones who will ultimately build sustainable companies.

He called on Indian companies to adopt this approach to build the next generation of global tech giants, focusing on revenue rather than valuation. To him, success should come from treating valuation as a natural byproduct of long-term excellence rather than the primary objective. This, he concluded, would be the ethical and practical way to grow a successful business, aligning with “dharma”—a concept of moral duty in Indian philosophy.

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Conclusion

Through his insights, Sridhar Vembu presents a strong argument for companies to focus on long-term sustainability and employee well-being. By contrasting Intel’s Wall Street-driven strategy with the success stories of Nvidia, AMD, and TSMC, he underscores the importance of investing in people and retaining talent. His broader message advocates for a model of “real capitalism” where Indian companies, too, can aim to build billion-dollar revenue giants without losing sight of their core values. For Vembu, these are the principles that lead to genuine, lasting success in an increasingly competitive global landscape.