As AI waits in the wings, IT sector must prepare for changing labour needs

News that Microsoft will lay off about 6,000 of its employees has focused attention on how labour requirements in the software and information technology-enabled services (ITeS) sectors are shifting due to explosive growth in generative artificial intelligence (Gen AI). Microsoft is well known for easing its movement towards new growth and research areas by pruning its workforce and transferring resources to novel technologies. This appears to be occurring in this case, with a planned investment of $80 billion this financial year creating a need to constantly reduce the company’s salary bill. Its competitors have already taken similar action. They include Alphabet, the parent company of Google, though they mostly do it a few hundred at a time, focusing on specific divisions. Microsoft, by comparison, is reportedly planning to axe 3 per cent of its workforce at one go this time. However, whether done in dribs and drabs or in larger instalments, the direction of travel is clear: To survive, large tech organisations will need to focus on AI developments, and they may have to do so at the cost of reducing their headcount.

 

There are important implications for the sector in India. As this newspaper has reported, the effects of AI are being felt in the information technology (IT) business, which has long been a major employer and export earner. The age of old-style call centres and human-run support is passing, if it has not already passed. Generative AI allows for each employee to do more and Agentic AI — which is sometimes empowered to take action previously done by humans — will reduce each employee’s required tasks. In January, AI entrepreneur Sam Altman said that this year would see the first AI agents “join the workforce and materially change the output of companies”. Corporations in multiple consumer-facing sectors have seen the proportion of customer queries that AI can deal with increasing rapidly. This newspaper has reported that one ITeS firm that provides customer service for leading domestic conglomerates now has AI agents handling between 30 and 40 per cent of interaction across voice and digital domains. This might bring the support cost down by an equivalent proportion. It has also reduced resolution time in many cases, again by 30-40 per cent. For many customers, this is an important gain in efficiency; for many shareholders, it is a useful increase in value.

 

However, the broader impact of this growth in AI must also be prepared for. Estimates suggest there are 1.5 million call-centre agents in India. Contrary to popular belief, this number has in fact grown rapidly in recent years, and is almost double of what it was when the pandemic hit. Many of these are focused on serving domestic demand as Indian consumers become more conscious of their rights and expectations regarding support. The question is what will happen to these jobs. There is a possibility that they will evolve and get more productive, with some call-centre employees coming to a position where they can train AI agents. If local software behemoths play it right, then new jobs will also be created in AI development. But there will be less call for entry-level tasks, and it may become harder to be employed in the ITeS sector without specific skills. Both the corporate world and the government need to carefully examine what will be needed to prepare the Indian workforce for the transition in requirements and human capital that will follow in the train of generative and agentic AI.