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The rise of flexible employment – Can automation-governed IT flexi staffing industry boost the economy?

Employment
Employment

Employment

The ‘Future of Jobs Report 2018’ by the WEF has yet again brought to the fore the discussion around impact of automation and newer technologies on jobs. According to it, automation and artificial intelligence (AI) could potentially displace 75 million jobs by 2022, as machines become integral to the workplace. But this is not all gloomy, as the same report says another 133 million new roles would get created as companies realign the work between their employees and machines, which will translate into 58 million net new jobs, over the next five years.

While naysayers have raised concerns on job losses, resulting from the accelerating pace of technology adoption and the disruption caused, many experts believe that machines cannot completely eliminate or remove humans from the workplace, as machines will be only deployed for non-value-added repetitive tasks, which can be automated to improve productivity and reduce cost. Humans would, therefore, be needed for jobs that require cognitive skills, emotional intelligence and decision-making capabilities.

What does this mean for India? Whilst in the developed world, labour is expensive and, therefore, machines prove to be cost-effective alternatives, in India the dependence on human labour has been always high, given that labour is comparatively cheaper here. But while labour is inexpensive, it is also a fact that India ranks low in labour productivity—according to an estimate by the ILO, India’s output per worker was $5,043.59 (Rs 4,03,487) in 2017 as compared to $25,026.67 (Rs 20,02,133) and $13,083.58 (Rs 10,46,686) for Brazil and China, respectively—owing to low level of skills and inadequate mechanisation and technology usage in most businesses. India’s manufacturing industry (contributing 17% to GDP) has traditionally suffered on account of this and is not globally competitive. But India’s services industry has done well in terms of productivity and contribution to GDP (57% contribution to India’s GDP)—as they have leveraged technology to a greater extent.

A large part of India’s economic success in the last two decades has been on account of the thriving IT and BPM industry, which is expected to grow to $350 billion by 2025. While India is the hub of technology innovation and digital capabilities—aiding creation and leverage of disruptive technologies in the areas of automation, AI, robotics, blockchain, IoT, cloud and mobility solutions—the industry itself is facing the threat of job losses. American research firm HfS, in one of its latest reports, has predicted that almost one-third of “low-skilled” jobs, or about 7 lakh, will be lost on account of automation in Indian IT and BPM industry by 2022. But this augurs well for the Indian IT flexi staffing industry. Indian IT and BPM firms, which had traditionally operated on a resource-bench model (where they kept full-time employees as standby resources for staffing any new projects), are increasingly looking at just-in-time hiring and hence leveraging the flexi staffing industry for their resource requirement. Given the rapidly-changing IT talent landscape and skill obsolescence, it makes business sense for them to tap into the flexi staffing industry—as IT companies don’t have to deal with the cyclical impact, or ramping up and ramping down challenges.

The IT/ITeS and BPM industry is in the midst of massive transformation—where margin pressures and rapidly-evolving client needs are forcing them to have a re-look at their talent strategy, business and service delivery models. They are automating their traditional service offerings and internal processes at an accelerated pace—to stay competitive. The ensuing volatility and uncertainty, and the need to stay relevant in a digital world, has made the industry look at flexi staffing options—as they don’t want to be stuck with their employees, where they know their skills will get outdated soon. This explains rapid growth of the IT flexi staffing industry. According to Indian Staffing Federation’s IT Staffing report, Indian IT flexi staff is expected to grow to 0.33 million by FY21. The IT flexi staff market is expected to grow in IT/ITeS sector by 15.8%, BFSI by 12.7%, manufacturing by 12.6%, chemical oil and gas by 11.5%, retail by 10.8%, healthcare by 14.1%, and start-up and e-commerce by 17.3% by the end of this year.

The industry provides win-win option for both employers and employees. For employees, the staffing industry provides a platform for recognised employment, work choice, even compensation and annual and health benefits for the temporary workforce. Indian IT companies are hiring fewer freshers, which is going to drop further as companies are seen steadily improving their (employee) utilisation rates, and in this scenario it makes sense for freshers to start their careers with IT staffing companies and build experience in relevant skills. This means the IT flexi staffing industry will become a net employment generator for the economy.
In addition, while automation will help drive demand for the staffing industry, the adoption of the same within their own organisation will help them greatly by improving productivity and operational efficiencies, which, in turn, will improve their performance and bottom line. Automation will help improve candidate sourcing and hiring, while streamlining the whole recruitment process—which will enable them to meet their clients’ needs effectively. The IT staffing industry has to also enable employees that it deploys with its clients to continuously upgrade their skills.

In short, the rising demand for automation, AI, big data, cloud computing and IoT in the industry will help IT flexi staffing accelerate its own growth. In doing so, it can act as a backbone and an insulation layer for the whole economy, while being a strong growth engine for the nation. All sectors within the economy are looking at tapping the power of technology and automation tools to accelerate their growth and they will be looking at the IT staffing industry for their requirements—so this industry has a direct role to play in the growth of the Indian economy.

For India to clock 7%-plus GDP growth consistently, it has to look at the farm-to-frontier model of development, invest in improving labour productivity through proper leverage of technology, drive the formalisation agenda, which will ultimately help India graduate to a middle-income country, and achieve three-fold increase in per-capita GDP—from $1,800 to $5,400 in the coming years. The IT flexi staffing industry will have a distinctive role to play in helping the Indian economy leapfrog into the future.

 

Read more: The Financial Express