In-house automation to cut more jobs: Hexaware CEO – Economic Times

MUMBAI: Automation of information technology processes could lead to more work being moved back in-house, leading to further shrinking of the Indian IT industry in two to three years, said Hexaware CEO R Srikrishna.

Experts too feel the trend is here to stay for some time. At present, most companies work on a hybrid model with some work outsourced to IT companies and some work being done by captive units in-house. Automation of IT processes is expected to reduce the need of people at both the places.

In two-three years what will happen is that organisations would have done a lot of automation work in the captives. Suddenly, they will find that because of automation, 300 people of 1,000 employed by them have nothing to do, while they have 500 people outsourced, said Srikrishna, citing an example.

They have a choice to make about whether to bring that work back in house or let go of those people.

The Indian IT industry is struggling with a decline in traditional IT services as automation threatens their model of generating revenue by adding people. The focus now is to grow revenue faster than the number of employee additions. Companies are increasingly relying on digital deals, usually of smaller size, to make up for the slowness in large traditional deals. There could be a trend towards insourcing as more in-house capacity will be freed due to automation. For the industry as a whole, it will continue the trend of shrinking the industry. I mean, the work has got automated so that has shrunk, and if the remaining gets taken in-house, the outsourcing industry will continue to shrink, said Srikrishna.

Last month, Industry body National Association of Software and Services Companies (Nasscom) projected software export growth in fiscal 2017-18 at 7-8% in constant currency, down from 8.6% last year.

Automation is one reason to move work back. Another is that with so many changes in technology, you need in-house expertise and capability. Technology is now an integral part of business, it is no longer a support function, said Pareekh Jain, senior vice-president, research and India operations at HfS Research. Traditional IT functions will shrink but new opportunities are opening up in digital, cyber security, data analytics and Internet of Things.

IT firms are expected to report a muted growth in the first quarter ended June hurt by wage hikes, visa fees, stronger rupee and slower pace of large deal closures amid uncertainty surrounding protectionist measures in the United States.

The good news is that changes due to automation are not a tsunami. There is a slow riding tide that will not change direction. It will inch up every month, every week, every year, said Srikrishna.

The bad news is that it is not going to change direction for a decade. I don't think a time in the next three-five years whe re you can say this transfor mation is done and dusted. I think we are in for a long haul on transformation.

Srikrishna does not ex pect this financial year to be very different from the last for the IT industry. It could be a little bit better. Frankly, a lot of what gets called cyclical factors are ac tually structural fac tors. I don't think they are going to be away anytime soon, said Srikrishna.

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In-house automation to cut more jobs: Hexaware CEO - Economic Times