“May we live in interesting times,” goes a Chinese proverb…
There is significant amount of excitement, as well as anxiety about the rapidly evolving business models. Having become the game changer in the industry today, automation is being widely deployed by companies that are aiming at high-quality, low-cost operations to transform their business. A prime reason for this is the substitution of rule-based work by automation, and the consequent transformation in business.
These are impacting our jobs, as well as our lifestyle, our habits, but most importantly the economic paradigm. According to a PwC estimate, automation can save $2 trillion in savings in workforce costs, with most work activities having the scope for automation. This is a staggering figure. But the future of automation in business hinges on several factors, with job losses and upskilling talent being the most obvious. This has raised concerns that there will be massive layoffs with its concomitant socio-political effects.
Over the past few years, disruptive technologies like analytics, digitization, virtualization, etc., have provided great value to businesses and service providers. Automation has been at the core of this innovation process. Many industry leaders are emphasizing the need to drive non-linear growth for higher levels of profitability. It may mean lower growth rates in the interim as we lose some low-end work to automation. But this is probably the best time to evolve and make this happen.
Automation isn’t only about jobs, but also about the socio-economic impact
So, what is automation? It’s the application of technology in production and in delivery of products and services. It replaces manual intervention with technology-led automation, with the potential to change the job landscape. But the moot point is some jobs are always better performed by humans despite advancement in technology. Surely, a future without jobs for the larger workforce is never an option. Taking the argument further, companies will not benefit from people not working; it would simply mean they will not have any income. Having said that, we will see AI-driven robots taking over small and monotonous tasks in many industries.
At a macro level, this will impact not only the industry but also governments. On the one hand, there will be a surplus of low-skilled workers because parts of their jobs will get automated, and on the other there will be a significant gap between supply and demand of highly skilled workers. This will lead to wage increases for the skilled staff and desperation followed by redundancy for the low-skilled. For governments, this will be of concern due to its socio-political impact. This could lead to problems such as a spike in crime because of the direct correlation between unemployment and crime rates.
“Artificial intelligence and increasing automation will decimate middle class jobs, worsening inequality and risking significant political upheaval,” says Stephen Hawking. A US-based research firm predicts India’s IT services industry will lose 6.4 lakh “low-skilled” jobs to automation in the next five years. HfS Research says that by 2021, the IT industry worldwide will see a net decrease of 9 percent in headcount, or about 1.4 million jobs, with countries like the Philippines, the UK, and the US taking hits. In the outsourcing industry, based on how high up a company is in the value chain, over the next few years, anywhere between 10–40 percent of work is highly vulnerable to automation.
We currently saw several regressive steps in some developed economies, such as introduction of trade barriers and tightening of immigration rules. One of the reasons for this is to counter job losses due to cost arbitrage that happened over the last couple of decades. With the advent of automation and its increased penetration in the next decade, we will find one causal factor being replaced by another. And trade barriers or tighter immigration control will do little or nothing to prevent this trend.
What’s the best way to deal with automation? Accept it!
There is only one way out of this conundrum, and that is to have a public-private partnership that invests in skill development. Those countries and industries that do this well face lesser impact than those that don’t. Insufficient understanding of automation leads to limited usage, costing the organization time, money, and manpower. But businesses should look at the benefits of automation — ease of deployment, enterprise speed, and agility. Ultimately, they will need automation for its economic value, workforce advantages, quality and control improvements, and flexible execution.
As businesses implement automation, their focus will revolve around cost savings, efficiency, better regulatory compliance, and ease of management. As automation moves into all areas of businesses, it will help in re-assessing the staff’s true skill and work capacity. Corporations that have operated learning programs as an employee welfare lever will need to embrace the paradigm shift that this is not “nice” to do anymore, but “need” to do so!
Governments and corporations should work together to enhance learning programs to target specific skills and knowledge, as well as EQ and IQ factors. This is the only way to hedge the emerging risks that are upon us. CSR spends will need to be focused on skill development for the public – both corporations and the larger society will benefit from it as a critical component to driving demand and resultant job creation. Finally, within the organization, there is a need to adopt automation to benefit the workforce. This will reduce apprehensions and develop positive attitudes among staff and enable opening of minds.
After all, an open mind is a fertile mind!
The author is Director, Operations, Concentrix India