Tech executives have increased their decibel levels on automation in information technology (IT) services and industry observers are wondering how much will it reduce hiring in a sector that accounts for about a quarter of employment in the organized private sector in India.
However, the absolute revenue and employee numbers of Indian IT services offer a sobering counter-balance to the automation euphoria. Revenue and employee numbers continue to be in line, their growth mirroring each other (graph 1).
Further, even with a nine-fold increase in IT exports in the last 11 years, revenue per employee has, more or less, remained flat (graph 2).
The numbers for 2013-14 show revenue growth outpacing employee growth, but it’s difficult to attribute it all to automation. There’s another factor at play: employee utilization rate, or the percentage of an IT company’s workforce that worked on projects during the period.
As the demand for IT services became unpredictable following the 2008 economic crisis, IT companies started tweaking their utilization rates to cut costs and maintain operating margins. When demand increased, rather than hire more and add costs, they used more of their bench strength, as reflected in the higher utilization rates (graph 3).
IT hiring continues to be more a function of demand for IT services and utilization rates. That doesn’t mean automation will have no impact on hiring. It will. But the IT sector is not there as yet.
The writer is co-founder of howindialives.com, a start-up that aims to make public data more accessible to decision-makers
