Home / Companies / For IT firms, artificial intelligence a new route for revenue growth

Bengaluru: Tata Consultancy Services Ltd (TCS), India’s largest software services exporter, is looking to increase by 20% the revenue per employee in its information technology (IT) infrastructure division by automating tasks previously done by engineers.

The plan is part of a larger trend of automation in Indian IT services—a move prompted by the desire of companies such as TCS, Wipro Ltd and Infosys Ltd —to make their revenue growth non-linear.

That refers to revenue growing at a much faster rate than the number of employees, increasing both revenue per employee and profitability.

“Internally, we are looking at at least a 20% increase in revenues without any incremental increase in headcount," said an executive familiar with the matter.

TCS’s aggressive approach may have helped it steal a march over smaller Indian rivals, say analysts.

At the core of TCS’s ambitious internal strategy lies the success of its newly introduced artificial intelligence (AI) platform, Ignio.

Billed as one of the most significant technological innovations to come out of TCS, Ignio is now being used for “paid pilot" projects for 18 clients, according to one executive, compared to three clients using Ignio in the April-June period.

A TCS spokesperson declined to comment for this story.

A second TCS executive who, like the first, wished not to be identified, confirmed that Ignio is central to TCS’s plans to automate processes in its IT infrastructure division.

“Data is the essence of any AI platform. And why use them (intelligent platforms) in infrastructure? Because we have been doing this work, managing infrastructure for decades, and now, we are training or modelling our platform with millions of data sets so that the Ignio platform can learn by looking at the existing data sets and doing the work without any engineers," the second executive said.

Managing computer networks and maintaining applications for the world’s largest banks and retail giants has been the mainstay of the $146 billion Indian IT outsourcing industry. With companies globally looking to save on IT costs, IT vendors have seen this business come under pricing pressure. Over the last few years, the poster boys of the country’s software industry have launched patented intelligent platforms that not only help in managing IT network of clients, thereby saving them from deploying an army of software engineers, but also in warning when a problem may arise in a client’s IT infrastructure.

These intelligent platforms are branded artificial intelligence platforms by Indian IT vendors.

IT giants believe this serves two benefits: it helps them have a differentiated offering when they vie for outsourcing contracts against their global peers; and it also helps improve their productivity.

Infrastructure management accounts for 14%, or $2 billion, of TCS’s revenue of about $15.5 billion and is the second largest practice behind the technology services division.

For Infosys Ltd, infrastructure management brings around $1 billion in revenue while for the country’s third largest IT firm, Wipro, global infrastructure services bring 27.2%, or $2 billion, of the company’s $7.1 billion revenue.

Earlier this year, Wipro surprised industry experts when it became the first Indian IT services firm to launch an AI platform HOLMES, or “heuristics and ontology-based learning machines and experiential systems".

Currently, Wipro has about 70 projects running on HOLMES, and the firm expects to offer it to up to one-third of its 1,000+ clients in the next 24 months.

Infosys, which, under its first non-founder CEO Vishal Sikka, has been vocal in quantifying the benefits brought in by automating a lot of work, conceded that only a tiny number of projects have seen tasks being automated.

“In infrastructure management, our team under Ravi (Ravi Kumar S., executive vice-president and global head of delivery), did an estimation that as much as 70% of the work that is done in infrastructure could be automated," said Sikka in an analyst conference organized by JPMorgan Chase & Co. in New York on 1 September.

“Ravi’s team last quarter did this with 11 clients where we rolled this out to projects affecting 1,080 people. We were able to remove 187 people out of this 1,080, or 17% reduction, in the number of people. This quarter, now we have already three times as many projects, about 32 projects, that are already underway. In one of them, the team was telling me that they have seen more than 40% reduction in the effort because of automation... (However) this is
still about 45 projects out of 8,000 (master) projects that are going on in the company," said Sikka.

For this reason, some experts said that it is “too early to judge" the success of intelligent platforms, such as Ignio, as the market is still in early days in embracing these platforms.

“Productivity is rather an internal metric. Here the mantra is all about safeguarding margins," said Thomas Reuner, managing director at IT outsourcing firm HfS Research.

“TCS’s autonomics Ignio platform has already a strong cognitive engine as part of its offering. However, the traction with customers comes down to their maturity and specific use cases. The traction of autonomics in more business process-centric use cases is still rare. It is too early to judge whether those productivity gains will lead to re-deployment, re-skilling or to redundancies. In a nascent market more than ever, there are no simple answers," Reuner added.

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