India’s IT industry
& automation angst
There
has been some worrying news on the side of the economy which has remained
confined to the business newspapers. It concerns India’s large information
technology and software industry and companies like Infosys, TCS and Wipro.
These firms, which were expanding quickly for the last two decades, have all
slowed down.
They are now
growing at single digits annually and even that is a struggle. This has caused
speculation that the industry is in a death spiral in India. One reason for
this slowing down is that automation is replacing human capital. This affects
the services being offered by these companies and their hundreds of thousands
of employees.
The former Infosys leader T.V. Mohandas Pai wrote a fine explanation of the issue and put it in perspective. He says that though there is a change in the offing, it is still three to five years away and that India’s IT companies are in a good position to address it. He says:
The former Infosys leader T.V. Mohandas Pai wrote a fine explanation of the issue and put it in perspective. He says that though there is a change in the offing, it is still three to five years away and that India’s IT companies are in a good position to address it. He says:
“Let us take
stock of the situation today. The Indian software export industry is about $110
billion. It employs around 4.25 million people. It has a 60 per cent market
share of global outsourcing and is globally dominant. Of the 10 top software
service companies globally ranked by market cap, five are Indian. Of the top
five, three are Indian. All of them have a massive presence in India. Of the
total number of employees, amounting to nearly two million, in these top 10
companies, about 70 per cent are based in India or travel out of India. The
Indian offshore software industry dominates the software services world and has
no parallel.”
The
big Indian companies have experience of being global leaders and also have
exceptionally talented management so we should all expect that they will
counter the change in the best way they can. However, it is also the case that
many think that the change is structural and disruptive.
I was
speaking at a seminar in Hyderabad a few weeks ago. The man who was in charge
of the IBM artificial intelligence programme Watson, Manoj Saxena, also spoke
at the event and what he said was quite alarming. Mr Saxena explained the
changes in technology coming in the next decade. He thought our IT companies
were not geared to transformation of the sort that was required while
continuing to focus on their multi-billion dollar existing businesses. It was
like changing the tyres on a car moving at a hundred miles an hour, he said.
Automation
is coming upon us more rapidly than most of us imagine. In an interview to the
Press Trust of India in July Mr Pai said: “There are today lots of people
(middle-level managers) earning between Rs 30 lakhs and Rs 70 lakhs per year.
Half of them will lose their jobs in the next 10 years.”
According to
him, middle-level managers account for 10 per cent — or 450,000 people — of IT
industry in India. And of these, 225,000 would lose jobs over the next one
decade as their work would get automated. This is grim news for many reasons.
First, this means that even if India’s IT companies are able to retain their
market share of software work, it is going to be automated, meaning requiring
less employees.
Second,
manufacturing jobs are already in decline the world over because of automation
and, in fact, robotics technology has made it possible for some manufacturing
jobs to return to the West. Third, the HB Services transformation comes at a
time when India has been struggling to create jobs. All the numbers on job
creation are alarming.
Fourth,
there is already unrest in large sections of the population on the issue of
jobs. The dominant communities in three of our most industrialised states,
Gujarat, Haryana and Maharashtra, are agitating on this issue already.
Patidars, Jats and Marathas feel they need state assistance for employment.
They are not urban communities to any large extent. The IT industry, which is
based in Bengaluru, Mumbai, Chennai, Hyderabad and Gurgaon, employs the urban
upper castes
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