Automation in the global IT industry threatens to disrupt the sector in -India but it may be a blessing in heavy disguise. For the stagnant industry, robots may pave the way for the next round of growth. On March 19, news reports suggested Cognizant, the New-Jersey headquartered software services firm may fire between 6,000-10,000 workers in its bid to reduce redundant and non-performing workers. As the news spread and doomsday predictions started ringing, the firm's spokesperson sought to cool frayed nerves stating this was part of the company's annual appraisal process when the bad apples are weeded out. Yet, the number is surprisingly high. While it is true that IT companies that are big on hiring new employees also fire a few of them at the end of each year, the rate of layoffs at Cognizant was just 1 per cent two years ago. This year's tally represents 2.3-4.1 per cent of its total workforce. A majority 72 per cent of its 260,200 employees are based in Chennai, so whatever Cognizant does, India bears bulk of the brunt. Only a couple of days later another piece of news that the company would pay only 95 per cent of variable pay to its employees this year abruptly called the bluff on its spokesperson's claims. In an industry where retaining experienced talent has been such a problem, variable pay outs generally ranged between 150-200 per cent. This is no ordinary year and the writing on the wall is clear. The industry is shifting fast towards automation and other new digital streams and the churn has begun. Cognizant is obviously not alone. Last year, India's second largest IT firm Infosys released 9,000 employees because of automation of its lower end jobs. Arch rival Wipro also released 3,200 people in 2016 and the target is to release another 4,500 this year. At the same time, these companies are not hiring as many people as they were earlier. Estimates suggest that the top five IT services companies in India - TCS, Infosys, Wipro, Cognizant and HCL Technologies - have hired only 60,000 engineers from campuses this year as against over 100,000 last year. Infosys said it hired nearly 9000 people in the nine months of fiscal 2017 as against 17,000 in the corresponding period of last fiscal. Even the biggest in the business, Tata Consultancy Services with over 350,000 employees, has said its headcount addition peaked at around 90,000 in FY16 and that it would hire fewer people going forward. "The total headcount, which we all expect will continue to grow less, than our revenues moving forward, due to the factors of automation and productivity in our operations," said Pierre Nanterme, Chairman and CEO of Accenture. Only time will tell how much of that will actually impact India and whether robots would win the battle for jobs against humans but the predictions are dire. A research conducted by human resources (HR) solutions firm, PeopleStrong, says automation will eat up as much as a quarter of the jobs by 2021 in India. Industry body Nasscom also said that there is going to be a 20-25 per cent reduction in jobs over the next three years. Services research firm HfS says impact of the emergence of Intelligent Automation on the global industry of 15 million IT services and BPO workers would be a net decrease of 9 per cent and 1.4 million jobs. Its future workforce impact model predicts the likely impact or job lossdue to automation on IT Services and BPO industry in India at 3.5 million. "As companies begin to gain a better understanding of AI′s application for business, they will realise the significant impact of this transformative force,” says K. Ananth Krishnan, chief technology officer, TCS. “Given the increasing digital disruption across every industry and the public sector, AI should become a key and integrated component of an organisation′s strategy." Not all of it however, is bad news for India. The industry has in the past shown enough resilience to withstand technology changes and has adapted quickly to market dynamics. While fear of lay-offs or a sharp decline in hiring that is already being played out to some extent, may be true, it is all likely to be transient in nature as any new technology almost always creates more jobs. "Nobody has really seen what automation and robotics will really lead to. There will be some impact of automation but overall we believe that technology adoption will actually lead to more job creation across sectors," says Sangeeta Gupta, senior vice-president Nasscom. "Focus on talent increasingly has to be on skill and not scale. Jobs will exist in other places also, it′s not fair to say these many jobs will get eliminated." The Indian IT industry has been a tad late in embracing the change but off late the major players have all joined the bandwagon with gusto. The largest companies such as Tata Consultancy Services Ltd (TCS), Infosys, Wipro and Tech Mahindra Ltd are taking one step at a time to bring back technology to the core of their business and moving away from being a staffing agency of the past. For a start, the bigger companies have all invested in building their own automation or data analytics or AI platforms. At the same time, Infosys and Wipro are also tapping newer technologies brought by start-ups, by setting up corporate venture arms, which helps them sell disruptive technologies to Fortune 1000 clients. Companies are also creating teams to build applications around newer technologies such as blockchain and industrial Internet.
“In the next 10 years, we don′t think there will not be a white-collar job that will not be touched by artificial intelligence. In our estimate, around 12% of the jobs will go away due to the bot and automation,” says Malcolm Frank, executive vice president, strategy and marketing, Cognizant. “But, it′s going to be all okay. There will be 13% of net new jobs which will emerge which we don′t know about yet.” The adoption of automation not only throws an opportunity for companies to optimize talent (within the organisation) but also enables them to drive more innovation and to increase revenue per employee. Infosys for example, has set a target of increasing its revenue per employee from Rs 50,000 to Rs 80,000 ($760-$1,300) by 2020. The logic is simple. Companies want to adopt automation for low skilled work freeing up their workforce for more complex and creative tasks. It is for this reason that Infosys and Wipro terms its employees that are displaced by their automation platforms as “released” rather than laid off. “In 2015, we launched - Wipro HOLMES and brought together existing automation platforms, niche partner solutions to bring cognitive robotic interventions in infrastructure, applications, testing and BPS services,” says Anurag Srivastava, Senior Vice-President and Business Head, Business Outcome Services, Wipro. The lower pace of hiring also has a positive spin off as it brings down the cost incurred by the companies. At the same time, robotics is helping companies become more efficient and generate extra revenue. According to NASSCOM, the industry is estimated to have acquired 16,055 engineers to generate additional $1 billion export revenue in 2015-16, as against 31,846 engineers in 2009-10. "We continue to see many promising signs that we are executing along our strategy, and indeed our longer-term path to thrive in the times of AI," says Vishal Sikka, CEO, Infosys. “Instead of 10 people, what if we have three people to work on it. If we don't have the software, then some others will take the advantage.There is disruption happening around the world which is IT led and ironically even the big IT companies are threatened by it. But I see it as a very big opportunity.” Ironically, the initial hit from automation is in areas where Indian IT firms excelled, which is what makes these companies so vulnerable to the change. Globally robotics is replacing the work that was being done mechanically or manually-administrative work, infrastructure management, BPO related services, maintenance and support oriented functions-- that are all becoming automated. Industry experts however believe since the Indian companies know this kind of work better than anybody else, they can profit from this change if they can get their act together. “We can be the services company that can be the enabler of the change that is upon us. More manual labour oriented task is now possible to be done automatically. We have to transcend this and become creators of automation,” Sikka adds. “We have to eliminate our own work to automation, improve productivity, deploy the improved productivity to innovationIt is not a zero sum game because the man hours saved due to automation can actually be used for more complex and creative work.” Any change in the established process of a profitable business can be painful but unlike some other industrial sectors that are still grappling with it, Indian IT firms as Sikka says are aware of what needs to be done. The big companies have already started massive re-skilling of their employees to prepare them for the changing landscape. As far back as 2015, TCS re-trained nearly 100,000 employees-a third of its workforce-in digital technologies. A similar number has been re-trained in Infosys at its Mysore campus as well in design thinking while Mphasis has been educating at least 1000 of its employees every quarter in newer generation technologies. "Traditionally an IT firm would spend about 1-2 per cent towards training its freshers. Now the percentage would definitely be higher as companies are doing mid-career training, design thinking, product management and some of those newer things which would be through the employee life cycle and not entry level where the bulk of training costs were earlier concentrated," says Gupta of Nasscom. Back in the 80s, computers forced India to get rid of the ledgers and log books and paved the way to the germination of the $143 billion IT sector that employs close to 4 million people. Now, the same sector finds itself in that position with robots knocking on the door. Before they barge in, the Indian industry with its ingenuity may just have the key to unlock the next level.