The US and European IT roles that were pushed to offshore service providers will increasingly be automated, as the outsourcing giants look to preserve their margins.
By 2016 almost 1.1 million IT jobs are expected to have been sent offshore by major US and European companies.
The drive to send jobs abroad has, in part, been fuelled by low labour costs relative to western countries, with recent entry-level salaries for engineers in India falling between $4,200 and $5,900.
However, after years of double digit growth in Indian IT workers’ wages and with western customers demanding more for less, offshore service provider margins are being squeezed.
To protect their profits, major providers are beginning to automate an increasing number of roles traditionally carried out by systems adminstrators.
Milind Govekar, VP with analyst firm Gartner specialising in IT operations, said the push towards automation is partly being driven by the complexity of IT systems these service providers run on behalf of their clients.
“I often call IT an archaeological science, because nothing dies. You have generations of applications and infrastructure buried in an organisation. There’s a bank in the UK that has applications running from 1957. You can imagine the complexity that particular environment has,” he said.
“It’s a combination of old systems, new systems and everything co-existing. At the same time demand is going up as well, as almost all organisations have launched digital business initiatives.”
Customer expectations of service providers are also rising. Govekar referenced a large European bank outsourced to India’s largest IT services company TCS that expects demand on its systems to grow by 25 – 30 percent each year but wanted its costs to increase by no more than five percent.
“A lot of these service providers are saying ‘It’s just not sustainable to hire people and get them to maintain these systems’.”
For example, the CEO of TCS recently said in an interview the firm is working on up to 15 platforms to automate different aspects of its work. For its part Wipro is building its FixOmatic framework, which it says will enable automation of up to 40 percent – 45 percent of all level 1 and level 2 support tasks, reduce downtime and lower operational cost.
What sort of roles are being automated?
Automation software maker IPSoft has deals with some of the largest IT companies operating in India – such as Wipro, Cognizant, Infosys and Accenture. The firm is one of a growing number of businesses providing automation technologies for running and maintaining an IT estate.
A look what IPSoft does demonstrates the types of tasks that are being automated. The firm’s main product is IPcenter, a software platform that is designed to monitor and automate the running of IT infrastructure, and respond appropriately when a problem arises.
“If you’re driving a car a light will come on to tell you to go to the garage. What IPSoft is doing with their technology is basically trying to solve any issues before it gets to the stage where the warning light needs to come on,” said Martijn Gribnau, chief change officer at IPSoft.
IPcenter relies upon “virtual engineers”, autonomic software that can handle incidents across the corporate infrastructure – from configuring a misbehaving firewall to reducing the load on a server running virtualised machines. Virtual engineers control their own operations, monitoring the network for incidents and are able to adapt and change tasks if a higher priority incident occurs.
“It’s basically a third generation expert system. It’s not cognitive yet, but it’s smart automation of virtual engineers. What we basically do is look at what an engineer is doing and automate it,” said Gribnau.
The product is designed to automate what Gribnau referred to as level one and two support engineers, as well as part of level three engineers’ responsibilities, as defined under the Information Technology Infrastructure Library service management practices.
IPSoft says that IPcenter autonomically resolves an average of 56 percent of incidents without human intervention and up to 90 percent of level one support incidents.
What effect is it having on IT hiring?
Fierce competition for the hundreds of thousands of newly qualified engineers India’s universities produce each year has pushed up salaries and encouraged service providers to poach staff from competitors.
Gartner’s Govekar said as demand grows for outsourcing and external services, including cloud, providers are looking at automation as a way of “not hiring more people”.
“They are also using automation as a way of buffering themselves against this huge turnover of people, where people are jumping from one organisation to the other. They look at automation as a way of filling those gaps, of making sure that certain repeatable tasks that systems administrators undertake are very much automated.”
The desire to control labour costs is already evident at the major service providers. After years of paying engineers double-digit salary increases, Infosys and its competitors are offering no more than 10 percent this year, in spite of projections by the Indian IT association Nasscom that the industry will grow by 15 percent, an improvement on 2013.
When contacted, Wipro had no comment to offer and Infosys declined to share its views.