Automation Is Taking Away Jobs In India's Top IT Firms

by CXOtoday News Desk    Mar 07, 2016

automation

Automation, which leads to higher productivity is reducing the need for people in the IT industry, says a new report. The Big Five software exporters — TCS, Infosys, Wipro, HCL and Cognizant — together added net 24 percent fewer employees in 2015 at 77,265, owing to this automation drive, according to brokerage Centrum Broking.

The massive plunge in net additions was led by Cognizant Technologies (down 74.6 percent from 2014) and HCL Technologies (down 71 per cent) which have been keenly focusing on improving utilisation rates through automation. Software vendors across the pack are focusing on automation and we believe that FY16 will be an inflection point. We see rapid scope for vendors improving efficiencies through expanding automation across multiple projects and service lines owing to sheer competitive pressure,” the report noted stating that the result is that these five companies have net added 24 per cent fewer employees in 2015 and their combined dollar revenue grew 9.8 per cent.

The report, published in PTI, also noted that the drop would have been much higher had it not been for Infosys, which made a whopping 111.4 per cent net addition at 23,745 in the year. But this is understandable due to the massive attrition the company was facing in the past many years.

Against the hiring spree by Infosys, market leader TCS saw its net additions dip by 6.6 per cent at 26,066. While Cognizant saw a massive 74. 6 per cent plunge in net employee additions at 10,200, HCL saw the same dipping by 71 per cent to 3,456 in 2015. At the end of December 2015, these five companies had a headcount of 1.34 million.

These companies are vocal about improving delivery efficiency and revenue productivity using automation as their revenue per reported employee stands at $45,000-52,000 per year, which is lower than their global peers. Riding on automation, Infosys has given a guidance to take this to $80,000 per annum by 2020, according to the agency report.

Even though each of these companies have their own automation platforms — Infosys has Infosys Automation Platform, Wipro has Holmes, HCL Tech operates Dry Ice, and TCS has Ignio — their focus on this line of business has seen the emergence of many independent players offering automation services or virtual engineers. Companies offering such services include IPSoft, Blue Prism, Genfour and Automation Anywhere.

According to the report, though Infosys and Wipro are the most vocal on “freeing up resources” across their IMS/ BPO service lines, they have shown relatively higher net employee addition in 2015. The report also noted that FY16 could be a year of transition in the sector on the automation front and tangible benefits can flow down from FY17 as vendors focus on re-training the resources freed up from the traditional service lines.

On the revenue side, the report predicted that the focus on automation will ease pressure on wage hikes. “With automation enabling improved delivery efficiency and productivity, the IT sector could be facing a scenario of lower net additions in FY17/FY18,” it said.

In an interview, Sangeeta Gupta, senior vice-president, Nasscom, told TNN, “It will take about five years to see a significant impact of automation on industry , in terms of revenue growth or costcutting. But automation platforms will require higher capabilities, which all grads may not be equipped to handle. Old methodologies followed in colleges and unemployability issues have to be looked at carefully to fit industry requirements,” she said.

Growth in revenue due to automation alone has so far been less than 10%, she said, but companies were investing in automation to drive higher levels of productivity.

(With inputs from agencies)