• Big Data & Technology
  • Harpreet Singh
  • JUN 14, 2017

Artificial Intelligence and the Death of Indian IT Sector

Over the last 25 years, India has emerged as an important destination for information technology—the low-cost counterpart for IT services that China is to low-cost manufacturing. But the low-end IT services niche that India occupies is highly vulnerable to the next phase of technological disruption in automation and artificial intelligence as novel capabilities such as self-repairing code reduce the need for the large-scale deployment of cheap IT professionals. Voice-enabled everything and increasing customization will make near-sourcing both practical and desirable which in turn lessens if not eliminates demand for the call centers that India has become famous for. Fully 69% of the jobs in India are at risk of displacement due to the emerging revolution in artificial intelligence and automation. India’s IT industry which is based upon a strong and perhaps excessive commitment to the study of highly technical subjects in its schools and universities needs to adapt to a new era in which technical acumen must be balanced with the creative insights and empathy that flow from the study of the humanities. It is the latter skillset that empowers one to climb the value chain to become a software architect rather than a tester; a systems designer rather than a low-end coder; a creator of content rather than a grunt IT worker.

The tragic disappearance of the humanities from India is real. In his famous essay, “Crisis in the Classics,” Columbia University Professor Sheldon Pollock provided a cautionary note by showing that there exist no notable centers of learning in India that teach the classical languages in which South Asia once produced some of the most subtle knowledge that this world had ever seen. According to Pollock:

[I]f Indian education and scholarship continue along their current trajectory, the number of citizens capable of reading and understanding the texts and documents of the classical era…will very soon approach a statistical zero. India is about to become the only major world culture whose literary patrimony, and indeed history, are in the custodianship of scholars outside the country: in Berkeley, Chicago, and New York; Oxford, Paris, and Vienna.

The importance of the study of humanities to spark human creativity cannot be overstated. Despite the banishment of education in liberal arts, this capacity for creativity is not alien to India as it is self-evident in the numerous examples of “jugaad” innovation that the poor routinely manifest in order to survive. However, this can take one only so far and there must be a conscious, institutional effort to refocus the educational priorities of the country. Just like the effort that led to the establishment of the Indian Institutes of Technology, there is an urgent need to establish national institutes of humanities and classical studies to reinvent India’s educational system. India can learn from China, which has been investing heavily in the humanities. For example, according to Stephen Owen at Harvard, "The [Chinese] state has spent and continues to spend huge sums supporting students, scholarly projects and scholars...Virtually every printed book . . . since the eleventh century has been at least photo-reprinted, and available in digital form—sometimes free online." In sharp contrast, no such support and resources exist in India. Scholars are on their own and digitization of manuscripts is not a national priority. India's archives are being moth-eaten and in a state of ruin.

After years of existing as a quasi-socialist closed economy, in the 1990s, Indian policymakers made the decision to aggressively enter the global economy. They were inspired by China’s success in attracting foreign direct investment to catalyze its manufacturing sector and they correctly identified low-end information technology services as a large niche that could capitalize on the countries unique advantages: highly trained IT graduates produced by the famed Indian Institutes of Technology and a myriad of other institutions; the colonial legacy of English as a widely-spoken language that made it relatively easy for Indians to work in call centers and to collaborate with international actors in global supply chains; and the 12-hour time difference between India and North America that facilitated 24-hour work regimes. These salient competitive advantages and the low-cost of Indian labor have made India an information technology services superpower which accounts for the rise of technopoles such as Bangalore. It also accounts for the rise of information technology service firms such as Wipro that have attracted hostility of political demagogues, as American technology professionals sometimes find themselves replaced by cheaper Indian alternatives. It is no secret that Indian outsourcing companies have been gaming the American visa system and recently proposed changes to the H1B visa program are likely to end this practice. Unfortunately, it now appears that the jobs of Indian IT professionals are also at risk from global changes such as the revolution in artificial intelligence and automation as well as from the political backlash embodied in rising anti-immigration sentiment in Europe and North America.

Despite the success of the information technology industry in India, it has attracted criticism on a number of fronts. Firstly, there is concern that Indian policymakers have been content to allow manufacturing to decline to the point where it only accounts for 15% of India’s GDP. Competence in manufacturing remains important if India is to effectively respond to the challenges and opportunities posed by automation. In addition, as the entry of Google and Microsoft into the hardware market demonstrates, increasingly, the Apple model of tight integration of software and hardware is essential to get the most out of services such as software development. The second concern has to do with the over-emphasis in the Indian educational system on technical subjects. While the national competency in information technology has served the country well in attracting foreign direct investment as part of its effort to establish a niche in low-end IT services, the repeatable and programmable nature of these jobs makes them highly vulnerable to displacement from automation and artificial intelligence. Indeed, it has been estimated that 69% of the jobs in India are at risk which is only about 10% better than the 77% at risk in China. Moreover, as wages rise in India, the cost advantages of offshoring will decrease. Those technological and financial realities along with political pressure to keep IT services jobs in the hands of US citizens will dramatically reduce the impetus of firms to offshore IT services to India. Thus, it is imperative that India’s population upskill by developing the creativity and social intelligence skills that future jobs in information technology will require and that machines simply cannot emulate.

One of the great ironies of our age is that Steve Jobs, the founder of one the most important technology companies, was not an engineer. But it was his understanding of human beings through his embrace of design and user experience that enabled him to lead the development of revolutionary products. Indian schools must emphasize non-technical subjects such as arts, humanities, and design. These are not alien to many diverse and ancient civilizations that once existed in South Asia. Lastly, the Indian IT industry has been criticized for its failure of refusal to climb the value chain. An initial focus on low-end services is fine but Indians have not advanced to create a Baidu or Alibaba, Chinese giants who are increasingly competing in high-end services globally and who have their own independent presence in Silicon Valley. Baidu is actually a leader in artificial intelligence. Rather, Indians remain providers of low-end, low-cost services to other companies who have offshored or outsourced portions of their operations but that is precisely the functionality that will be eliminated as artificial intelligence and automation mature.

Why the majority of Indian talent cannot compete in the high-end of the technology market needs to be understood better. In a shocking 2017 study by Aspiring Minds, 95% of engineers in India are unfit for software development jobs. Only 4.77% candidates can write the correct logic during programming tasks, the minimum requirement for any programming job. This, of course, is because of the mushrooming of private engineering colleges in every city. These schools lack credible faculty and even the most basic infrastructure. The faculty members whose names private colleges use to gain accreditation from national bodies are often teaching elsewhere and 23 universities and 279 technical institutes are themselves fake. It is not uncommon for Indian computer science graduates to get a bachelor's or a master's degree without writing a single line of code.

The impact of automation and artificial intelligence on India’s $160 billion IT services industry is already being felt. Job growth is slowing. According to the executive search firm Head Hunters India, 175,000 to 200,000 technology jobs will be lost in the country each year through 2020.  There are newspapers and media are full of reports of mass layoffs in the Indian IT sector, as the video above demonstrates.

Stagnant job growth is most evident among India’s top 5 IT services companies—Wipro, TCS, Infosys, HCL Technologies and Cognizant who have been the quickest to jump on the bandwagon to embrace new technologies. They have witnessed declines in job growth of as much as 40%. In particular, Wipro has launched an artificial intelligence platform known as Holmes that uses “bots”—tools that carry out repetitive and mundane tasks—to replace 12,000 employees. TCS has its own AI platform known as Ignio and Infosys has one known as Mano. These AI platforms are addressing the pressures on profit margins that these firms have been experiencing by increasing revenue per employee and profitability. Unfortunately, the success of these platforms remains to be seen and based on my encounter with these firms, it is unlikely that they have the necessary skills to build game-changing AI platforms.

Indians must upskill in the IT sector to survive and this is increasingly acknowledged. But there are constraints that go beyond an over-emphasis on low-end technical services. While the country is not an entrepreneurial epicenter for artificial intelligence, many of the executives who are a part of the ecosystem of over 170 AI startups point out that they face enormous staffing challenges. There simply is not enough AI talent in the country as only 4% of AI professionals in India have worked on emerging technologies such as deep learning and neural networks and many companies require candidates to have a PhD in the field, which is even scarcer in India. According to AI startup founders Subrat Parida and Navneet Gupta, they spend 40% of their time just looking for talented engineers and it is immensely difficult to find people with the right training and experience in AI. India must address its shortage of engineers with training in machine learning, analytics, and robotics. However, the problems go beyond training. There is a particular mindset that is required as AI is a discovery-oriented and novel field that requires professionals with an appetite for research and experimentation. Indians typically go into IT services because it offers good job prospects but AI requires more of an entrepreneurial and risk-taking approach to your career along with the analytical and problem-solving skills of top engineers. Thus, the challenges experienced by Indian startups in AI are related to a deeper problem. Ironically, given their success in IT services and off-shoring, Indians and their educational infrastructure have not been focused on research and development, and entrepreneurship which are both uncertain in terms of returns and requires an appetite for risk that most would prefer to avoid. But the threat posed by automation and artificial intelligence means that the greatest risk of all is not acting, not investing and not innovating in the technologies of the future.

Aside from the human capital bottlenecks and cultural issues, India faces significant physical infrastructure constraints in competing in artificial intelligence and automation. These technologies typically rely upon a robust cloud computing infrastructure that is capable of storing vast quantities of data and harnessing the massive computational power required to analyze it. Most of this cloud infrastructure exists outside of India’s borders. For example, as of 2016, the entire data center market in India was valued at only $2 billion versus the $17 billion in global revenue garnered by Amazon’s AWS in a single quarter. These data centers require not only AI expertise but reliable energy that is not consistently available in India. As a consequence of the lack of indigenous cloud computing infrastructure, many promising Indian AI startups are forced to incorporate themselves outside the country to gain access to the technological capabilities that they need to do their work. Also, the lack of a large indigenous base of on-demand cloud computing infrastructure places many of the most recent advances in AI outside of the reach of Indian researchers in government labs. It also raises the cost and complexity of adopting AI technology since many industries cannot risk storing their data outside of India where it can be accessed by algorithms over which they have little control. The lack of indigenous cloud computing infrastructure is a profound issue of corporate security that is inhibiting the development of the AI industry in India and driving promising firms out of the country. Coping with these challenges requires national investment by the Indian government on both the electricity and the computational infrastructure sides of the equation.

While there is a definitive need for a new, cross-cutting and strategic emphasis on the humanities, arts, entrepreneurship and the specific skill sets intrinsic to artificial intelligence and machine learning, there are a number of initiatives already under way that simply need to be refocused to have a salient impact on preparing Indians for the future. The country has already launched a Make in India initiative to emphasize manufacturing in India. This program is likely to be stillborn unless it is adapted to facilitate investment in automation research in India by emphasizing the constructing of research labs and design studios; and special incentives should be crafted in consultation with manufacturers so that a regulatory regime is created that will help them to develop global hubs for machine learning. Skill India, another stillborn initiative, can also be rescued by giving incentives to bring non-Indian training providers to deliver training virtually (Out of full disclosure, my company Experfy, is one such provider of AI training and consulting in emerging technologies). As was the case with the various Indian Institutes of Technology, India must adopt a regional training institutes approach to support innovation across the country but bolster it with German-style manufacturing apprentice linkages between companies and educational institutions so that students have an incentive to embrace this new field since they will be assured of employment and continuous training to prevent skills from becoming obsolete in a rapidly changing field. India’s Digital India program could be a powerful tool in prioritizing and addressing the cloud computing bottleneck in the country. The country needs incentives to build large scale data centers within India and given the general trend of data centers that use renewable energy, this initiative could serve as a catalyst for energy independence within the country. Finally, just as in the United States, China and Russia, the Indian governmental establishment can facilitate the development of AI by giving out grants for innovation. India faces enormous challenges posed by ongoing technological disruption but it can harness its talents and advantages to address the pending revolution in AI and automation if it acts urgently. If nothing is done and 69% of the jobs are lost to automation, India will witness a crisis like the one it has never seen before.

Experfy's Enterprise Training Platform for AI and IoT is helping companies upskill their workforce in the technologies of the future. A number of Fortune 500s are using Experfy's Data Science Certification program and also co-creating courses for specific verticals leveraging Experfy's 30,000 data scientists. Experfy is backed by Peter Diamandis and based in Harvard Innovation Launch Lab.

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