Article: The Era of Automation

Technology

The Era of Automation

Businesses are hugely investing in technology. But is technology a threat to the human capital or does it complement the skills of the employees?
The Era of Automation

You can’t live with it or without it. It’s a boom for businesses. But it’s a threat to us.

It’s our Nemesis. Automation.

Answering the ‘why’ part is really a formality here. We all know it. The recent report that came across stating Wipro, Infosys & TCS have lost about 100,000 people in the last four quarters is actually the real picture, irrespective of how much scaling or expansion the industry giants are undertaking. IT, manufacturing and financial services sector are the three major areas to have seen this trend recently.

Today, businesses are hugely investing in technology. The 2015 Investment News Adviser Technology Study reveals that “most financially successful firms stay well ahead of the curve when it comes to their technology, allocating more of their resources to technology (11.3% of their overhead versus 9.4% for all others), with no plans to slow down in the future. Fifty-six percent of top performing firms say they will increase their tech spending in 2015, with just 2% planning to decrease it, versus 55% and 7%, respectively, for all others.” According to PwC’s 2015 Digital IQ Survey, main technologies that companies are investing in this year are cybersecurity (69%), private cloud (61%), and data mining and analysis (54%); along with customer mobile applications (24%), public cloud applications (18%), and public cloud infrastructure (16%). IT companies specifically are investing in automation, digital technologies and artificial intelligence. Nasscom report states that “Indian IT industry hired 14350 engineers for each billion dollars in revenues during the year ended March 2015. In 2003, the figures were nearly thrice as much at close to 3800.” The latest addition to the trend is investment in HR technology. The People Matters HR Technology Study 2015 reveals that 6 out of 10 companies have proposed to increase their tech budgets on strategic HR.

Automation is fast moving in and businesses today want to ensure a distinct place in the market. Although technology is instrumental in enabling productivity, amplifying capabilities and makes a competitive difference, it is also a catalyst for attrition. Companies are adopting new technologies for automating work processes, as a result of which employees are laid off or employees leave due to the nature of tech skills required. Today, an attrition rate of 19% to 20% is considered normal. According to an Economic Times report, Infosys’ attrition rate was 22.3% on a consolidated basis and it lost 8,553 employees, with a net addition of only 3,336 employees.  N Chandrasekaran, CEO at TCS, stated that “In FY10, we had revenue of $6.3 billion with a headcount of 160,000. In FY15, we doubled the headcount to 320,000. But the revenue did not just double. We generated revenues of $15.5 billion, representing a productivity gain of nearly $3 billion.” Earlier this year, when Wipro planned a $300 million cost cut, CEO TK Kurien stated that “what we are doing is taking the artificial intelligence platforms, putting them together and actually reducing the amount of labour that is supplied for a job. In three years, people deployment will come down by 35% for the same scope of work.” Wipro refers to this as “the factory model of delivery.” TK Kurien also stated  that “Wipro is moving its automation focus from service desk to application services, which would lead to a reduction of 30% of its headcount in the next three years, adding that this would not mean more employees will get fired, but that attrition would be balanced with redeployment to new, high growth revenue streams.” But does this really happen in comparison with the number of attrition cases?

It is seen that the number of employment opportunities is also on a decline. With lower-end jobs getting automated, the entire focus has changed to domain knowledge expertise, soft skills and then technical knowledge – in order of priority. Long term investment in technology for lower end jobs has higher ROI compared to the average $60 per day labor cost companies have to bear towards its human capital. And it is not just the IT companies which are going to be affected by this – the manufacturing automation will soon eliminate human workers. According to a source, it is estimated that in 1900, 41 percent of Americans worked in agriculture; by 2000, it was only 2 percent. Similarly, the proportion of Americans employed in manufacturing dropped from 30 percent in the post–World War II years to around 10 percent today—partly because of increasing automation, especially during the 1980s.

But the impact of technology is different on different sectors and varies from job to job. Business dependence on costs is also a factor which determines whether jobs will be replaced by technology or not. Technology can pair with capital and labor to product great output, can complement the skills of the worker and also aid in innovation. According to the Economist, “Firms are constantly experimenting with new technologies and production processes. Experimentation with different techniques and business models requires flexibility, which is one critical advantage of a human worker.” 

 

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Topics: Technology, Strategic HR

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