Is automation a new threat to India's IT sector?

Some view automation as the new threat to India's $108-billion-in-revenues IT sector. Do you agree?

A new trend is gathering force in the Indian IT services industry, even as some of the biggest firms -- Infosys, Cognizant, and Wipro -- recently signed collaborations with IPsoft, a New York-based firm with development in Bangalore, which provides autonomic solutions that can shave off a third or more on the cost of engineers.

Take the case of Infosys. Some months ago, the top-tier outsourcing firm struck a revenue-sharing partnership with IPsoft “to help reduce costs of IT operations and generate greater value for clients,” it said. The two are setting up a center at Infosys’ Mysore campus, a three-hour drive from its Bangalore headquarters, to focus on developing autonomic technologies and to train 5,000 Infosys employees.

For the IT industry, an autonomics-driven service delivery could ultimately equal a white collar workforce disruption of the kind that robotics brought to the manufacturing industry’s blue collar labor force.

 Companies like IPsoft are using software robots to automate recurring manual IT tasks and to manage applications and deliver back office services. By substantially reducing and replacing humans in managing routine tasks, they maximize the efficiency of IT operations. “A mix of virtual and real engineers could bring cost saving upwards of 30% for enterprises,” said Uday Chinta, the India-based managing director of IPsoft.

Autonomics could further shift the ground beneath the IT services industry which, after a three decade-long boom, has been struggling. Indian firms have been recently grappling with decreasing profitability and talent challenges as they try to transition from the traditional model of billing for the number of engineers deployed on a customer’s project.

Some view automation as the new threat to India’s $108-billion-in-revenues IT sector as tasks can be executed at a fraction of what top-tier Indian IT services companies bill their customers for their engineers’ services. That certainly calls for an overhaul of the industry’s current business model.

“Automation is a massive, massive threat that lessens manual intervention and could disintermediate the need for offshoring,” said Siddharth Pai, partner and president, Asia Pacific, of technology advisory firm ISG. “In infrastructure management, for instance, what is a 15-engineer job could be accomplished by automated software that then sends an alert to two engineers,” said Pai.

 Technology research firm Gartner Inc. had predicted that a fourth of labour hours could get eliminated by tools and automation by 2015. However, many IT companies are still in the early-adopter phase, automating 10-15% of the tasks for clients in the past year to 18 months, said Milind Govekar, a managing vice president with Gartner Research. “It will get bigger,” Govekar predicted. “The islands of automation will have to slowly come together as managing complex interdependencies becomes difficult manually.”

   Top-tier outsourcing firm Wipro is investing significantly to drive automation across applications, infrastructure, security, and cloud computing. In the last 12 to 18 months, Wipro is seeing a substantial increase in adoption of automation, and it is fast becoming a fairly standard part of clients’ requirements, said G.K Prasanna, global head, global infrastructure services and product engineering services. 

As customers demand efficiency gains, both adoption and automation technology improvement will accelerate in the medium term. “Differentiation based on labor arbitrage will become less and less important. Intellectual property, integrated operations, and scale will become crucial," Prasanna said. 

Indian IT companies could stand to benefit from automation, which frees up valuable resources from routine tasks and deploy them to innovate. Assigning engineers to do boring monotonous tasks is such as waste of intellectual capital, said Chinta of IPsoft.  But companies will have to plan the transition, and it may not be such as an easy evolution.