Will AI disrupt India’s technology outsourcing business?
India’s renowned tech hub is facing the imminent arrival of AI. India’s technology outsourcing business is being disrupted by artificial intelligence. The industry is undergoing a significant transformation, which may result in the loss of many highly sought-after positions.
The country’s major outsourcing companies have already embraced AI and are actively working on incorporating it into all aspects of their operations. It is uncertain whether this will be enough to protect the lower-level operations in the business process outsourcing sector, such as call centers and basic tasks.
“If I am just doing a simple contact center service then generative AI is going to replace that person very quickly,” stated Keshav Murugesh, the CEO of WNS, a tech-services company based in India and listed in the U.S. It’s really that straightforward.
AI poses a significant threat to businesses worldwide, extending beyond India’s $250 billion outsourcing industry. The outsourcing boom in India over the past few decades led to a significant increase in jobs being transferred to India, resulting in many Americans losing their jobs to more affordable Indian talent. This phenomenon has been commonly referred to as the “getting Bangalore-d” phenomenon in the U.S.
The impact of AI could have significant repercussions as the industry employs 5.4 million individuals, as reported by tech-industry body Nasscom, and plays a crucial role in contributing approximately 8% to the country’s economy. A significant majority of companies in the S&P 500 entrust certain operations to India, as reported by HSBC.
Vin Kumar, a tech consultant at Hackett Group, emphasized the importance for U.S. companies to prioritize automation over human resources when it comes to outsourcing to Indian businesses. “If Indian firms are unable to accomplish this, they will bring these operations back in-house,” he stated.
According to the latest data from Nasscom, more than 1.4 million people were employed in the most vulnerable operations in 2021. One-third of these jobs are in call centers. “The goal is to advance in the value chain and pursue new processes,” Murugesh stated.
AI could potentially speed up the progression of trends that have already reduced the need for labor in the industry. Around ten years ago, companies used to require approximately 27 employees in order to generate $1 million in annual revenue. According to Nasscom data, the number of employees has now decreased to 21.
Companies usually billed clients according to the number of employees involved in their projects. Now, fees in certain situations are tied to the results achieved.
There will be a decline in global demand for individuals. India’s contribution to this decline remains uncertain, but Danielle Li, a professor at the Massachusetts Institute of Technology’s Sloan School of Management and co-author of the paper “Generative AI at Work,” expressed a slightly pessimistic view.
According to Nasscom, the industry saw its lowest annual increase in more than a decade, with only 60,000 jobs added in the year ending in March. During the same period, the combined head count at three of India’s largest tech companies, Tata Consultancy Services, Infosys, and Wipro, decreased by over 60,000.
The industry primarily attributes the slowdown to excessive hiring following the pandemic, with the addition of 450,000 employees in just one year, rather than automation. There is an expectation that hiring will increase this year.
“It is important to recognize that the future will demand individuals with enhanced critical thinking abilities, design expertise, strategic goal setting capabilities, and creative problem-solving skills,” stated Harrick Vin, the chief technology officer at TCS.
Industry executives are filled with hope as they foresee the creation of new businesses through the use of AI tools, even though it may result in the cannibalization of some existing operations.
Balakrishna D. R., the global head of AI at Infosys, mentioned that they have successfully implemented various projects for their clients. These projects involve AI assistance for code generation and development support, as well as a customized GPT designed specifically for a bank to handle internal staff queries. “More organizations will inevitably follow,” he said.
Tech Mahindra, a smaller Indian tech company, has created an AI chat tool that simplifies the process of installing fiber networks for on-site engineers of a telecom client. This innovative tool replaces the need for a lengthy 70-page manual, making the installation process more efficient and user-friendly. In addition, a substantial language model in Hindi has been developed with the intention of offering it to clients for customer support and content creation purposes.
“Generative AI provides a significant advantage to the programming workforce,” stated Mohit Joshi, the CEO of Tech Mahindra. “If companies are investing more in technology, it presents a significant opportunity for us, even if individual projects require fewer people.”
Job seekers are already experiencing a sense of pressure and growing negativity.
On a recent July day, numerous young individuals seeking employment were waiting in line with their résumés in a dilapidated and poorly lit mall in Bengaluru, India’s outsourcing hub. A staffing company was conducting interviews for entry-level tech positions.
“I was hoping to find a job at an information-technology company, but unfortunately, it seems that no one is currently hiring,” expressed Pooja K.S., a 24-year-old individual who was waiting in the line. She expressed her belief that even if she secures a call-center job, it is unlikely that she will be able to retain it for an extended period of time. “ChatGPT will, in any case, complete the BPOs.”
