The Concept Of AI Outsourcing Is Gaining Traction Among Global Clients, Notes Rahul Bhattacharya Of EY GDS
The impact of General Artificial Intelligence (Gen AI) on the global economy is substantial, particularly in its potential to drive productivity and growth. An EY report, titled 'The AIdea of India: Generative AI's impact on India's digital growth,' suggests that by harnessing the technology across different sectors, India could potentially add $359 billion to $438 billion to its economy in the fiscal year 2029–30.
Approximately 69% of the anticipated impact will likely stem from industries like business services, financial services, education, retail, and healthcare, based on the anticipated enhancements in employee productivity, operational efficiency, and strengthened customer engagement.
For top Indian IT companies, the pace of this transformative shift is nuanced and contingent upon several factors. These include the readiness of the companies to invest in cutting-edge AI technologies, the adaptability of existing infrastructure, and the ability to integrate AI into their service offerings seamlessly.
Rahul Bhattacharya, GDS Technology Consulting, Artificial Intelligence Leader at EY GDS, tells Outlook Business that strategic decisions, technological innovations, and the dynamic interplay between industry demands and the capabilities of these organisations will shape this.
Edited excerpts:
Considering that gen AI holds the potential to revolutionize the global economy with increased productivity and growth, how swiftly will this transformation unfold for leading Indian IT firms, particularly those specialising in managed services and BPM solutions?
For top Indian IT companies, exercising due diligence to differentiate authentic capabilities from mere assertions becomes paramount. This discernment plays a pivotal role in shaping the trajectory and speed of the industry's adoption of Gen AI.
Furthermore, it presents a distinctive opportunity to revolutionize IT organizations through efficient software engineering processes. Swift adaptation to these new paradigms holds the potential to significantly expedite the integration of Gen AI into our offerings and service delivery.
This adaptability emerges as a key determinant in the timeline for harnessing its transformative power.
While the technology presents immense promise for transforming our industry, the timeline for its adoption by top Indian IT companies is dynamic. Our ability to navigate the complex landscape of AI expertise, adapt software engineering processes efficiently, and prioritize ethical and secure practices will be instrumental in determining the speed at which we embrace and integrate Gen AI into our operations.
Will global clients use internally created Gen AI modules to reduce their need to outsource backend operations to Indian IT firms?
The concept of 'AI outsourcing' is gaining traction among global clients that seek to leverage Gen AI modules to optimize their backend operations and reduce dependence on external IT firms, including those in India.
The rationale behind this trend lies in the inherent advantages of outsourcing, namely expedited progress, overcoming budget constraints associated with hosting dedicated teams and gaining access to specialized expertise. By incorporating Gen AI into their workflow, global clients aim to maintain a competitive edge, enable timely project delivery, and alleviate the strain on their internal resources.
In essence, AI outsourcing becomes a complementary strategy, where clients harness the benefits of both their in-house capabilities and external AI modules. This symbiotic relationship allows for a seamless integration of cutting-edge technology while preserving the core strengths of their existing operational framework.
The potential for global clients to leverage Gen AI modules in reducing their dependency on outsourcing backend operations to Indian IT firms is a compelling prospect. The tech's capabilities in automating and optimizing various tasks could empower global clients to streamline and enhance their backend processes, reducing the traditional reliance on outsourcing.
What factors are driving this shift?
It could be driven by the desire for increased control, efficiency gains, and the ability to tailor solutions to specific organizational needs. However, the extent of this impact would depend on factors such as the maturity of Gen AI, the complexity of backend operations, and the strategic choices made by global clients in adopting and integrating AI solutions into their workflows.
As the technology continues to evolve, the outsourcing landscape and the role of Gen AI in reshaping global business operations will unfold. As the intersection of technology and outsourcing undergoes continuous evolution, EY is committed to assisting clients in navigating these changes strategically, ensuring they harness the full potential of Gen AI while optimizing their operational models to meet the demands of a rapidly evolving global business landscape.
How will this impact jobs in the IT sector?
The impact on IT jobs is a nuanced scenario. On one hand, the surge in IT outsourcing is a testament to the industry's indispensability and the escalating demand for technology solutions. This creates opportunities for IT professionals to engage in diverse and complex projects, especially as companies upgrade and renew their technological infrastructure.
On the flip side, the shortage of in-house IT professionals, coupled with the necessity for high-quality software solutions, has led to an increased reliance on outsourcing partners. This trend is primarily fuelled by the need for business continuity, which became more pronounced during the pandemic. The outbreak accelerated the adoption of digital solutions across industries, driving companies to outsource digital transformation projects to meet immediate demands.
Since complete digital transformation is a gradual process, these outsourcing projects are expected to be sustained over an extended period. Consequently, the demand for IT outsourcing will likely continue its upward trajectory.
The impact on IT jobs is multifaceted. While the demand for specialized skills in digital transformation and technology solutions remains high, the reliance on outsourcing partners could potentially alter the nature of in-house roles. EY views this as an opportunity to foster collaboration, innovation, and a dynamic workforce that can adapt to the evolving needs of our clients in this digital age.
Since most top Indian IT companies provide service-based solutions that an AI model can easily replicate, will this result in job losses?
The proliferation of AI models capable of replicating service-based solutions raises concerns about potential job losses in the Indian IT sector. As AI becomes adept at automating routine tasks and handling service-oriented functions, the need for manual intervention in these roles may diminish.
While AI adoption promises efficiency gains, it could lead to workforce restructuring and job displacement. Indian IT is racing and will not stop growing in the coming decades.
Along with growth comes the concerns surrounding potential job losses due to AI replication of service-based solutions are valid. Pinpointing an exact timeline for these changes is a nuanced task, contingent on factors like the speed of AI adoption and the regulatory framework.
What does this mean for IT companies?
Understanding the inherent fallibility of AI, from biased algorithms to occasional glitches, we emphasize the need for a culture of openness. This empowers employees to question AI outputs, ensuring that technology aligns with human needs.
Our focus must be on preserving human-centred jobs, highlighting skills like problem-solving. Collaboration among our tech executives, HR, and Line of Business leaders is imperative to redefine roles and create a seamless synergy between humans and machines.
Drawing a parallel with historical shifts, like the transition from steam to electric power, the integration of AI is a gradual process. Our organization must reorganize, providing our workforce with the time to adapt. Rather than viewing it as job elimination, we anticipate the transformation of roles, paving the way for new opportunities and industries.
This impact of AI on job dynamics is contingent on our ability to adapt effectively. Prioritizing human-centered approaches, fostering collaboration, and managing employee expectations are key strategies to navigate this transition successfully.
How could ChatGPT play a more substantial role in deflating legacy services than application services, considering the potential short-term deflationary impact predicted by JP Morgan analysts?
When we consider the potential for ChatGPT to contribute more significantly to deflating legacy services as compared to application services, it's crucial to examine the nature of interactions and information retrieval. It can potentially contribute more significantly to deflating legacy services than application services due to its ability to handle conversational tasks, customer support, and information retrieval.
ChatGPT excels in natural language understanding and generation, enabling it to handle a diverse array of tasks in a conversational manner. This versatility positions ChatGPT to revolutionize customer service, support, and communication, thereby disrupting legacy services that rely heavily on traditional modes of interaction.
What factors contribute to this trend, including implications for staff retraining, competitiveness, and job displacement?
The underlying reasons for this impact lie in ChatGPT's ability to automate and streamline communication-intensive tasks, leading to increased efficiency and cost-effectiveness. Legacy services often involve repetitive and rule-based interactions that are well-suited for automation using conversational AI. As a result, the competitive pricing pressures mentioned by JP Morgan analysts are likely to emerge, compelling companies to reassess and optimize their service delivery models.
Moreover, the potential need for staff retraining is an inevitable aspect of this transition. While some roles may undergo transformation, it is essential to view this as an opportunity for upskilling and redeployment rather than a loss of competitiveness. Embracing the integration of generative AI like ChatGPT can empower the workforce to focus on higher-value tasks, creativity, and problem-solving, contributing to overall organizational growth.
Google, OpenAI and Microsoft have cautioned employees to exercise caution about information shared with gen AI-powered chatbots. Considering this, will multinationals feel comfortable establishing a presence on Indian tech companies' platforms where their data could be compromised and even used for training models for their competition?
The caution exercised by Google, OpenAI, and Microsoft regarding the information shared with AI-powered chatbots is a critical consideration for multinationals. The apprehension about potential data compromise and its use for training models by competitors is a valid concern.
While India's tech prowess is undeniable, multinational corporations must prioritize data security and privacy. Establishing shared ethical frameworks with Indian tech partners is crucial. This involves mutual agreement on responsible AI practices, ensuring that data is used ethically and in a manner consistent with global ethical standards.
At EY GDS, we emphasize a robust infrastructure that adheres to international standards, ensuring data integrity and confidentiality. For instance, just as a bank enables the security of financial transactions, we prioritize protecting our clients' data.
Additionally, regular training programs for employees and partners on cybersecurity best practices foster a culture of awareness. This helps mitigate human-related risks, such as social engineering attacks or accidental data exposure.
Will this ensure transparency, though?
Transparency in data usage is paramount. Multinationals need assurances that their data won't be used for unintended purposes, such as training models for potential competitors.
Our commitment is to provide clarity and control over data, comparable to how customers have control over their preferences in a well-designed user interface. Leveraging blockchain technology for data transactions provides an additional layer of security and transparency. This decentralized approach enhances trust by creating an immutable ledger of data interactions.
Collaboration with Indian tech companies can be mutually beneficial when founded on trust and shared values. Drawing parallels with international collaborations in scientific research, where stringent ethical guidelines govern data sharing, our partnerships prioritize ethical considerations in handling sensitive information.
By implementing robust safeguards and ethical practices, we envision a future where collaboration with Indian tech firms becomes a strategic advantage without compromising the integrity of multinational corporations' sensitive data.
