India’s Dying Cheap Labor Based IT Service Model, How About New Digital Labor Model?

Vineet Nayyar, former CEO of HCL Technologies once said

Let’s not forget, the IT industry in India was built on the back of cheap labour

India has largely capitalized on its large pool of English speaking IT engineering graduates to attract enough outsourcing work from US, Europe, and other geographies, but now this traditional IT Service Model is under serious threat and all this is going to change sooner than you can think of.

and now, Infosys CEO Vishal Sikka, a Ph.D. in artificial intelligence from Stanford University, says

India’s “IT miracle” as we know it. It is dead; It is over.

The future of IT Services Model has a lot of automation, artificial intelligence and machine learning, and these technologies will be used excessively to improve customer’s business efficiencies and will replace humans for much of what we do now.

What Is Changing?

Have a look at some of these recent news articles and you will realize the impact of automation on (un)employment

  • In fiscal 2015–16, Infosys released nearly 4,000 full-time employees from projects as a result of automation of underlying services.
  • Another report says that automation reduces hiring of TCS, Infosys, Wipro, HCL and Cognizant by 24%.
  • IT sector to lose 6.4 lakh “low-skilled” jobs to automation by 2021
  • Wipro to reduce headcount by 30% in next 3 years with investments in automation, artificial intelligence, and digital technology
  • Wipro’s AI Platform Holmes Will Replace 3300 Engineers’ Jobs!

What Can You Do?

High margins are still possible, but not by linearly increasing head-count. If it can be done by a machine there is no point getting it done by fresh engineering graduate. Look for the futuristic wave of opportunities rather than protecting underperforming legacy models.

You are replacing your jobs with algorithms. Why would anyone settle for a human worker when faster and efficient 24*7*365 working algorithms can be implemented?

According to NASSCOM, The big implications for companies are:

  • The need to develop new service lines. New service lines will account for 40% of all revenues by 2025
  • Shifting portfolios to advanced, disruptive technologies
  • Managing customer digitization at different speeds. Companies will need to cater to customers who are Digital leaders, Smart followers as well as the Digital laggards
  • Re-skilling of people as revenues decouple from headcount
  • Forging new capabilities through M&A, partnerships, incubators, and open innovation

What Can (Will) Go Wrong?

Companies, so far were labor biased will become capital-biased and that will take wealth away from the labor; that means more and money will be spent on automation and technologies and less on the human workforce. So with larger margins due to new technologies, owner of the technologies will grow richer while available human labor has to compete with robots/automation for the lowest wages as long as it can.

So with increasing use of technology and decreasing use of human workforce, wealth will move towards the owners of those technologies.

Most of the workforce feel that they are over-educated for their current occupations and under-skilled for the future technologies, and with diminishing returns on education, this problem will only grow more acutely.

Over To You Now

Robots are not the problem, humans are, because we are pathologically addicted to ‘old style’ of work and our psychological worth is tied to our titles. The fact is that “Work is Worship” is no longer true.

We need to be an entrepreneur within the organization and create “labour-absorbing” technologies as opposed to “capital-intensive” technologies so that the surplus population can be employed.

The real story of the future is not going to be a clash between technology and unemployment impact, but will definitely become even more difficult to address for our policy makers and associations like NASSCOM.