Saturday, November 26, 2016

Will Automation turn out to be a serious worry for Indian IT industry?

Automation is one thing that sets tongues wagging in the Indian information and technology (IT) industry – the big question that is asked: How much deeper will ‘automation’ penetrate the country’s lucrative IT industry? Well, the $160 billion Indian IT industry has witnessed ‘effective’ implementation of automation, which has paved the way for companies to not just scale up productivity but also to remain cost-efficient. A market replete with cut-throat competition, Indian IT companies are feeling the ‘pressure’ to protect their margins and are increasingly using automation platforms to improve their profitability.

The so-called ‘artificial intelligence’ based platforms are changing the way IT firms manage their day-to-day affairs. Wipro became the first Indian IT services firm to launch an artificial intelligence platform – Holmes – last year. TCS launched its artificial intelligence platform – Ignio – while Infosys rolled out its artificial intelligence platform – Mano. The objective of IT firms is to achieve non-linear growth – growing revenue at a much faster pace than the number of employees. Thus increasing both revenue per employee and profitability.

The effective use of automation is seen as a ‘big disruptive threat’ to the Indian IT industry’s pyramid model, where companies generate revenue in a linear manner by adding employees. And as the current trend suggests, non-linear growth will be the main focus area of IT companies.

The use of automation platforms has been yielding positive results for IT companies. The industry added 200,000 employees in FY16 as compared to 230,000 in FY15. This is an ample indication that automation is beginning to replace jobs that were earlier done by humans. It also tells something about the future. The industry expects to add around 200,000 employees for FY17 – precisely the same number of employees added in FY 16.

According to a report released by Centrum Broking, the country’s top five IT companies have substantially reduced their hiring in 2015 by ‘aggressively walking the automation path’. The report further revealed that the combined net additions of employees of IT behemoths like TCS, Infosys, Wipro, HCL Technologies and Cognizant during the October-December period stood at 28,182, down 38 per cent from the year-ago period.

There is no denying the fact that automating tasks previously done by engineers has caused jitters among the Indian IT workforce. The general line of thought is that automation will kill jobs done by humans. The Indian IT industry is expected to witness a dynamic shift over the next five to seven years. If experts are to be believed, the rapid adoption of artificial intelligence platforms will create higher demand for up-skilled engineers in niche areas. Industry watchers believe the need for up-skilled engineers will result in a steady decrease in demand for entry-level or lower-level engineers for tasks such as coding, back office maintenance and applications testing.
On the other hand…

According to Malcolm Frank, executive vice-president of strategy and marketing at IT bellwether Cognizant, automation is yet unlikely to derail the traditional manpower-linked model of the IT sector, whose employee base touched 3.7 million in FY16. “To say that a significant portion of the industry will be automated, I think that’s more theory than reality. I can tell you this, it’s not gonna happen in the next three years,” he had said during an interview on the sidelines of the Nasscom India Leadership Forum in Mumbai.

One also has to understand that automation simply does not mean ‘sacking people and rendering them out of job’. The adoption of automation not only throws an opportunity for companies to optimize talent (within the organization) but also enables them to drive more innovation and to increase revenue per employee.

Automation is clearly the way forward for the Indian IT industry – the IT workforce will need to diversify beyond their ‘core skills’ and add new and ‘industry relevant’ skill sets.
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