Recent data is for half a million employees being made redundant over the next 5 yrs. due to automation. Is it true? And what is that the industry, companies and employees can do about it.
The first half of the next decade will bring a lot of pain to the Indian IT business as automation sets in and we go through the transition from people to technology + people. But the real opportunity is still available to people, as the enterprise still craves more human-centric skills at scale that cannot be fed into an AI platforms. These are challenging times, but the change brings the opportunity.
The Manpower Shrinkage
Technology has and will continue to fundamentally reshape the world. But the largest move is not from more people creating more technology but of machines creating technology and delivering services. As that happens, the job market shrinks. World Bank President Jim Kim said in March 2017 that technology could fundamentally disrupt the pattern of traditional economic path in many societies and threatens 69 per cent of the jobs in India and 77 per cent in China. However it the relative wage that will determine the relative pace of automation and it is here that the Indian IT industry is most vulnerable since the cost structure is closely linked to the ability of the customer in developed economies to absorb this cost.
In the technology-led businesses AI and Automation are already present — whether as the evolution of autonomous cars or as software that writes itself. Consider this,
- Google’s Deepmind can now read lips better than humans and play and beat different 30 video games at the same time. It is writing its own algorithms to better itself. And to translate languages where no translation has previously existed.
- IBM Watson can now not only read a physician’s notes but also go through a massive library of related information and figure out, say, a particular type of rare cancer.
- Chatbots are already being used by Amazon and Facebook to automate responses.
And this is just the tip of the iceberg. However, a large part of the Indian IT outsourcing industry is directly being impacted by different levels of automation creeping into its customers. To expand their operations a US-based customer today is not looking at additional headcount, but at automation. More insurance claims processing requires a platform to scale for the extra work. Greater IT infrastructure management requires more cloud-based orchestration tools then. Not more people. So the scale and/or productivity gain is coming from autonomics management, and not headcount.
Worldwide the total IT Service and BPO industry employed 15 million people in 2015, with ~3.5 million in India, ~1 million in Philippines, ~5 million in North America and ~4 million in Europe. The impact of automation on this global industry of 15 million IT services and BPO employees is expected to be a net decrease of 9% or ~1.4 million jobs. Of this, India’s services industry workforce is expected to shrink 500,000 by 2021 – a decline of 14-15% (explained below)
The workforce is in three categories: low-skilled, medium-skilled, and high- skilled. Low-skilled employees conduct simple entry-level, process-driven tasks that require little abstract thinking or autonomy. Medium and high-level employees undertake more complicated tasks that require experience, complex problem-solving, the ability to learn on-the-job, and to work autonomously. In terms of impact, it is the low-skilled Indian services workforces that will be most impacted.