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Last Updated : Oct 06, 2016 07:49 AM IST | Source: CNBC-TV18

Workload in IT to come down due to AI; jobs to reduce: Genpact

But along with that the employment growth rates have started to dip, NV 'Tiger' Tyagarajan says. The percentage addition of employees in India will not be same as past. And due to advancements, a workforce with higher skill sets is required for the IT industry, he says.

The amount of work in the IT industry is reducing due to advances in artificial intelligence, robotic solutions and machine learning, says Genpact's President and Chief Executive Director, NV 'Tiger' Tyagarajan. So the value of work has considerably risen. 

But along with that the employment growth rates have started to dip, he says. The percentage addition of employees in India will not be the same as past. And due to advancements, a workforce with higher skill sets is required for the IT industry, he says.

Since the amount of work is reducing, industry growth will be impacted, says Tiger. "High growth rates of the past is possibly over for IT industry," he says. 

The competitive landscape in the IT sector is changing. The winners in the sector from the past may start losing. The IT Industry will again see a new list of winners and losers, he adds.

Below is the verbatim transcript of Tiger Tyagarajan's interview to Ronojoy Banerjee on CNBC-TV18.

Q: Very recently you said that we are living in an uncertain low growth world, uncertainty of course stemming from a whole variety of factors geopolitical, political and economic because secular stagnation continues in a developed world. What does it mean for an industry like yours, I know you don't like calling yourself the IT or the BPO industry, so first tell me what according to you what is it the industry that you represent and what is the larger the bigger picture as far as the sector is concerned?

A: We call ourselves of business and technology solutions provider because our objective is to partner with clients to help them solve tough problems, to create value for them, to partner with them on changing the way they approach their business, the way they run their business, so that the way we call ourselves and these days it actually helping client transform themselves into digitally disruptive business in their industry, because everything is getting disrupted by digital and technology.

I will answer the question on the volatility, but I just wanted to correct one thing, you are not at the headquarters of Genpact. We don't have headquarter. On June 17, 2011 when I took over as a CEO one of the things, I couldn't change many things because the company was being run really well. My boss was great, but the one of the things I changed was this notion of headquarters.

I don't think a 21st century company that's virtual and technology driven should have headquarter. I don't think companies should have headquarters.

Q: That's interesting so maybe we can take that forward firstly, why is that so?

A: Because tell me where our markets are, our markets are global, it's all over the world it is dispersed, where is our population of intellectual talent delivering services it is in many countries. It here in India, but in India it is not in Delhi alone it is in Bangalore, it is in Calcutta, it is in Jaipur, it is in Bombay, it is in Philippines, it is in China, it is in Bucharest it is all over.

Q: The whole notion of headquarter is becoming anachronistic in globalised world?

A: Completely anachronistic and it is for us to do what we did, which we are very young company so we just stood up one day and say no headquarters, so what is that means it means that there is no concentration of our leaders. All leaders are distributed, so I just finished leadership meeting, my leadership meeting of 20 of us last week on Monday. We had four locations joining on videoconference, we started at 4:00 am in the morning New York time and we ended at 2 in the afternoon, because that was the best way to make sure everyone had little bit of pain, but not too much pain.

Q: Since you were talking about how globalised the world has become, given the political rhetoric from that part of the world from where you have come recently, suddenly there is this concern trepidation, people are being far more cautious even a leader like Hillary Clinton for instance who actually openly had supported the Trans-Pacific Partnership (TPP) at one point is now saying that now she is being more ambivalent about it. What does it mean for industries in a time when globalisation, the very notion of globalisation has come under so much scrutiny?

A: That's a deeply fundamental question, problem that world is grappling with and leaders are grappling with. Globalisation is real, it's come to be here, the assumption has always been that globalisation will raise the population of every society.

It hasn't been able to do that across the board. The distribution of that has been uneven by geography, by class, by all kinds of thing and clearly when you have politics and people who are standing for positions, there are groups of people who are feeling disenfranchised. It goes back to skills, it goes back to they getting dislocated and they not being retrained and not knowing what to do they can't deal with the new world. They still have a working life they have to deal with, so it's real. It could go in many directions. I am an optimist in general about many things in life. I don't think globalisation can be reversed.

Q: It cannot be reversed but clearly there are challenges that globalisation is facing today and what does it mean for an industry like yours, which is of course the direct by-product of globalisation, so what does it mean for a sector like yours especially in this environment?

A: First of all we have to therefore make sure that we truly characterise our business as we are solving problems and we are creating value for our clients in the partnership we have with them, so if our client is grappling with low growth uncertain volatile world, which is how we started this discussion and I agree with you that's the way we described the world and we have described it that way for 6 years thinking that at some point of time it will change, but it hasn't changed, continues to be low , uncertain and volatile.

The reason for volatility has changed, but it still volatile and uncertain and in that world our clients grapple with many situation where they need new thinking depending on the industry it about I need to deal with new regulations. If it's a consumer product and FMCG type company I don't have any growth anywhere in the world and yet I want to launch new products and I want to have more advertising, because I want to grab more market share for my clients, so all of that mean I have to change the way my business runs, but the single biggest disruption that our clients are dealing with is technology and digital.

Q: What about the challenges that your sector and your industry is also facing?

A: If one positions oneself as not a BPO player or an IT player, as not a player who delivers the same thing that you do except that I deliver it from some other global location, if you position yourself that way then there is a problem because then your job is to do this job from somewhere else. So, the classic approach of our industry in the past which used to be we will just take work and deliver it from a different place and that is what globalisation allowed us to do is not a good position.

Q: So, the location advantage is sort of disappearing now?

A: No. Location advantage is there, I am not talking about the way you position yourself, the way you approach clients, the way you approach the market and the way you talk about your business and the way you actually add value. It cannot be that the reason for our engagement between us and our clients is because I am going to deliver the service from somewhere else. If that is the reason for engagement and that is the way you talk about the business then you could be painted with a brush which is actually wrong because we do many more things for our clients. So, we should position ourselves that way.

Q: Domestically many of the top domestic IT firms specially with Infosys, Cognizant, Mindtree, they have all been lowering their growth guidance. Do you think we now need to get used to the new normal which low growth? The 20 percent plus growth, that era is over?

A: Industry, possibly yes because the amount of work potentially continues to reduce, the value of work goes up and there is a reshaping of the total amount of work that any company needs to do. If that work is reducing then share of the work that goes to the industry obviously will be not growing at the same pace, at a level of maturity that industry has reached. However that doesn't mean that everyone in the industry will therefore get to a similar lower growth. I think winners and losers in this journey are going to get segregated out. The average may go down.

Q: So, many winners of the past may find themselves not winning anymore?

A: Yes and many winners of the past will continue to be winners. So, if you have 20 people who were winning earlier and the industry growth rate was say 17-18 percent, the industry growth rate may actually come down to 11-12 percent and you will have amongst those 20, you will have 5 who will continue to be great winners and you may have 10 who are average and you may have 5 who are actually completely losing out. So, the segregation of winners and losers is going to get far starker than it used to be.

Q: Is the pie getting smaller?

A: The rate of growth of that pie is getting smaller if you define it as people. However that is true of everything in the world. The number of people needed to do anything in today's world is lesser than it used to be.

Q: Therefore you are saying that because the IT and the outsourcing industry has been a big sort of employment generator for India, you don't see the growth forecast, growth rates as far as employment generation is concerned is not going to be as high as what we have traditionally seen?

A: I don't what the latest projections on those growth numbers are that the industry is giving but if I were to do the projections, I would say the percentage addition of  employees in that sector in India will not be the same as it was in the past because there is artificial intelligence, there is machine learning, there is robotic automation, there is mobility solutions that get implemented in the field that actually makes back office and mid office work easier to do. So, a bunch of those technologies will mean lesser work needs to be done because we have used technology to actually lessen the work that needs to be done. However the calibre of people needed is going to increase, the complexity of the work is going to change and increase. The infiltration of analytics and technology is going to increase. So, all of that is good stuff. The skills of people actually has to go up, all of that is good news.

If the expectation is that, if the industry was adding 20 percent extra employment every year, I don't think that should be the expectation.

Q: In the last financial year NASSCOM said that the industry hired 13 percent less than what it did in the previous financial year. Still it is not as apocalyptic as some may lead us to believe. However you are saying going forward the employment growth generation numbers will be on the lower side than what we have seen in the past?

A: Absolutely. Employment growth generation number but remember it is still employment growth generation and that is better than many other economies in the world where you are talking about reduction in employment.

For entire interview, watch accompanying videos...
First Published on Oct 5, 2016 01:39 pm