Indian IT services firms have been battling a severe crisis for some years now -- that of decreasing productivity while witnessing a significant linear increase in employee hires in order to take on new businesses.
As I wrote last year, the average revenue per employee in 2008 for the industry was $44,775. By 2015, it slumped to $41,619, while revenues more than doubled from $67.7 billion to $146.5 billion.
For Indian IT, this is an unenviable position to be in, caught between a rock and a hard place, having to not just deal with the supreme difficulty of managing armies of people on projects but to keep hiring so they can win more projects. It also has to weather the aggravation of watching some 30 percent of their workforce cool their heels on the "bench" at any given time waiting to be deployed. Meanwhile, contracts are won and lost on the smallest of price differences, making this the next big commoditized wave in technology services.
Therefore, the new mantra proclaimed with missionary fervour by Indian IT firms in the last few years has been "automation" and "artificial intelligence", but it is unclear if anyone has implemented anything in any of these departments that has resulted in major traction.
A few days ago, Indian IT services company Wipro announced it hopes to achieve a significant milestone for financial year 2016-17 by successfully deploying Holmes. The AI platform looks to take over the more mundane tasks in its business lines, such as software maintenance that some 3,000 of its engineers used to slave over, especially on fixed-price contracts. This reportedly could save the firm $46.5 million, which is no mean sum by any standards. The company also introduced its "Data Discovery Platform", a machine-learning, analytics solution system that provides business insights through specially designed apps.
It is chuckle-worthy that Wipro had the gall to name their cognitive learning platform in a nod to the grand-pappy of them all, the question-answering Watson, designed by IBM, which uses natural language processing and machine learning to glean insights from large amounts of data. Watson made a name for itself by being able to comprehensively beat humans in Jeopardy and by now has been used in a dizzying range of applications, from wealth management to medical research and cancer cures. (To blunt the Holmes-Watson irony a little is the fact that IBM's Watson is not in fact named after Sherlock Holmes' assistant but in honour of IBM's founder and CEO from 1914 to 1956, Thomas John Watson. But Wipro won't probably care.)
What the Indian IT firm will care about, however, is how good an understudy Sherlock is to Watson -- and so far, it seems that Holmes has performed above expectations. It has, for instance, been placed in the service of banks to speedily approve and process loans by using cognitive search to compare the customer's vital statistics with that of the bank's other customers before signing off on the loan process.
If anyone needed the talents of Holmes most it is Wipro. Generally regarded as a laggard to the other Indian biggies -- Infosys, TCS, and more recently Cognizant -- and thought to have been a slow mover in the relatively newer areas of big data, analytics, AI, and cloud, the company has stuttered in the growth department. This financial year, the company is slated to grow by 4.2 percent at best (in dollar terms) which marks the slowest pace of growth for the company since 2009-10, when it grew 1.6 percent.
Wipro's biggest and most urgent concern has been its inability to ramp up business from the big tech spenders -- banks and insurance firms. Tack on the inability to increase clients amongst oil companies -- which, along with banks, makes up one of the two biggest industry clients for Wipro -- and the situation couldn't be more grim (the previous plummeting price of oil not helping the IT company's mission).
Meanwhile, Wipro's competitors have also waded into the AI field. TCS launched its intelligent platform Ignio a few years ago while Infosys did so with Mana. According to Infosys chief Vishal Sikka, this move enabled his firm to disengage some 4,000 of his full-time engineers from projects that required the more humdrum tasks of automation and maintenance.
This is the precarious situation confronting Wipro's new chief executive Abidali Neemuchwala when he took over the reins early this year. He has chalked out an ambitious campaign that includes tripling revenue growth (to 12-14 percent) for 2017 and boosting operating margins to 23 percent (from today's 20.5 percent).
Neemuchwala has realised that the world that his company finds itself in is one where automation is very rapidly erasing the gains from labour arbitrage that Indian companies once enjoyed. Moreover, clients these days are insisting on digital solutions built in to contracts, since their own offerings are going that route, and having an elegant platform could prove to be a crucial differentiator. AI can also become a standalone generator of much-needed additional cash flow, boosting profit margins: Wirpo plans to generate at least $60-70 million in extra revenue from its platform.
Right now, Holmes is still in its infancy and Wipro's competitors will be firing their AI solutions on all cylinders. Therefore, it may be some time before Holmes proves to the world that it can crack the case of how to resuscitate the fortunes of its moribund parent.