Automation – Impact on IT sector

Sometime in July last year, a majority of mid-level IT engineers gulped down their morning coffee digesting cold facts released by a noted research firm, published across newspapers in the country.

HfS, a US based research firm predicted that India’s IT services industry will lose 6.4 lakh low-skilled jobs to automation by 2021. Worldwide, the firm predicts there will be 1.4 million IT jobs slashed, which is a decrease of 9 percent in headcount. For an industry that grew from $ 100 million in 1992 to $146 billion in 2016 in India, the research was an eye opener for many IT sector employees on what steps they should take next, after spending a monotonous 10 or 15 years in the flourishing industry.

Despite the rapid growth in innovation, technology and demand in the industry, automation-which has been catching up in every sector- will hit IT once an efficient and progressive program replaces the low-skilled work forces. This will aide companies drive their operating margins higher, increase efficiency and concentrate on the mid-level and high-level employees to garner the best results.

Impact of Automation

Infosys hired 5,719 people in the first nine months of this fiscal, down from 17,196 in the same period a year earlier. CEO Vishal Sikka stressed that the company will relentlessly focus on introducing automation across projects, which is bound to reflect in future hiring.

So where are these IT employees- despite their decade long experience- going wrong? In an industry that is rapidly growing, the need to grow skills and stay updated becomes a mandate. The lack of which may pull the employee to the low-skill cadre.

At the Annual National Association of Software and Services Companies (Nasscom) Summit, McKinsey India’s Managing Director Noshir Kaka said if 30 percent of the engineers don’t re-skill themselves they would be redundant. The Indian IT industry, during its growth towards a $100-billion sector, added 3 million people, but will add less than a million people for the next $100 billion in revenues. Sandeep Aggarwal, Chief Marketing Officer of Serco, a UK-headquartered BPO firm, seconded his statement and said that it is the curve of growth and is inevitable. But the real question is, how to solve it.

When TCS announced a 1-2 percent job cut which majorly consisted of engineers with at least ten years of experience, industry watchers said that it could be because they focused too much on managing a team and too little on honing their skills.

The HfS report, based on a survey of 1477 industry stakeholders, states that though “low-skilled” jobs will fall by 30 percent, “medium-skilled” jobs will increase by 8 percent and high-skilled jobs will rise by 56percent.

To differentiate these cadres, low-skills are defined as those that follow a set process and are repetitive and do not require much in the way of educational qualifications. Medium skills are those that require some amount of human judgment in the process, dealing with more challenging problems. High-skilled jobs require creative problem solving, analytics and critical thinking.

Automation Skills
Impact on floor

Industry analysts believe that the most affected would be the BPO sector, which employs 3.7 million and the impact of automation will mainly fall on those working in the BPO and infrastructure management space, both of which are adopting automation.”The BPO industry is going to be facing the problem of robotic process automation in the next two years. This is a challenge the industry and the country will face,” AsheeshMehra, CEO of BPO firm Antworks, said to Gadgetsnow.

For those with mid-level jobs, who focus more on client-based issues, there still might be a way around.  There are umpteen courses, MOOC programs, additional short-term courses that can be taken during their free times. With their prior experience, guidance and already existing skills, the jump to a high-level job is not impossible.

In an interview with Economic Times, Rituparna Chakraborty, Senior Vice President, TeamLease Services said,”Short-term courses in integration and management services, advanced excel, web research and content management can increase their employability quotient.” This is evinced by the rapidly increasing growth rate of online certificate course providers.

In short, process-oriented jobs will be replaced by automation, which accommodates a rapid growth for high-skill jobs. With the evolution of the ubiquitous Internet of Things in all sectors, the industry will demand polished and skilled employees for various areas. Analysts predict big data, analytics, machine learning, mobility, design, Internet of Things and artificial intelligence to be some of the areas to fetch lucrative packages.

Image from Pixabay

On the bright side, demand for skilled engineers and analysts to focus on newer technologies imply fresh jobs. In this process of job creation, the industry will be introduced with more innovation, growth and efficiency.  “Nobody’s 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,” Sangeeta Gupta, senior vice president at Nasscom, told ET.

However, automation as it is still is a baffling concept. As Gupta states, automation is still in beta, but research points to the positive. Initially, it might be a challenge, similar to what was faced in the manufacturing sector in the early 90s. The results may be modest and the delivery may fluctuate, a risk companies are ready to take.
For the company, this means growth in revenue, better utilization of human resources and more platforms for innovation. This change will also help companies increase efficiency, lower costs and control production. In a recent post earnings call, PierreNanterme, Chairman and CEO of Accenture said “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”.

Tata Consultancy Services, which has over 350,000 employees, said headcount addition had peaked at around 90,000 in FY16 and that it would hire fewer people going forward.

Despite what these numbers indicate, automation and job cuts will force employees to adapt, step out of their shell and get creative. In the process of letting go of redundant employees, several opportunities are created for those who are creative, can interact and think. Internal placements and opportunities to grow increase, provided the employee pushes himself and ups his skills periodically.

In the first industrial revolution, automation helped various sectors become stronger. In the second, it made us faster. With intelligent machines, analytics, technology and the flourishing concept of Internet of Things, the possibilities are endless.