The massive ongoing automation across industries, especially in the technology space, may lead to domestic software firms that employ over 16 million people slashing headcounts by a massive 3 million by 2022. This would enable companies to save $100 billion mostly in salaries annually, said a Bank of America report on Wednesday (June 17).
Nasscom says the domestic IT sector employs around 16 million, of them around 9 million are employed in low-skilled services and BPO roles.
Mainly driven by the impact of robot process automation (RPO), 30 per cent or around 3 million of the 9 million low-skilled services and BPO roles, will be lost by next year. Roughly 0.7 million roles are expected to be replaced by RPA alone and the rest due to other technological upgrades and upskilling by the domestic IT players, according to a Bank of America report.
It said the RPA would have the worst impact in the US with a loss of almost 1 million jobs. Based on average fully-loaded employee costs of $25,000 per annum for India-based resources and $50,000 for US resources, this will release around USD 100 billion in annual salaries and associated expenses for corporates, says the report.
“TCS, Infosys, Wipro, HCL, Tech Mahindra and Cognizant and others appear to be planning for a 3 million reduction in low-skilled roles by 2022 because of RPA up-skilling. “This is a $100-billion in reduced salary and other costs, but on the flipside, it offers a likely a $10 billion boon for IT companies that successfully implement RPA, and another a $5 billion opportunity from a vibrant new software niche by 2022. Given that robots can function for 24 hrs a day, this represents a significant saving of up to 10:1 versus the human labor”, says the report.
Another key reason for the RPA-driven job loses is that many countries that had offshored their work in the past are likely to bring the jobs back to their own home markets. Developed countries will also look to increasingly bring back offshored IT jobs and either use native IT workers or domestic software robots like RPA to secure their digital supply chain and ensure future resiliency of their national technology infrastructure, reasons the report.
Robot process automation (RPA) is an application of software, not physical robots, to perform routine, high-volume tasks, allowing employees to focus on more differentiated work.
Offshoring helped the domestic IT sector to grow from around 1 per cent of GDP in 1998 to 7 per cent today, a highly strategic sector for its economy and has also significantly outgrown their western peers (mainly Accenture, Capgemini and Atos) with an annual revenue growth of 18 per cent between 2005 and 2019.
However, despite such massive automation, major economies like Germany (26 per cent shortage), China (7 per cent), India (5 per cent) Korea, Brazil, Thailand Malaysia and Russia will likely face labour shortages, warns the report, adding on the contrary South Africa, Greece, Indonesia and the Philippines will have surplus labour for the next 15 years.
Faster automation, the report said, is driven by the shrinking talent pool of high-skilled jobs in developing economies, the need for which will only increase, but the global high-skill talent pool is shrinking, exposing outmoded immigration systems. The report goes onto warn that emerging economies mostly India and China face the most risk of technology-driven disruptions which can impact up to 85 per cent of jobs in countries like Kenya and Bangladesh.