India’s Information Technology sector is something of a holy grail. It contributes 7.5% to the gross domestic product, employs more than 2.5 million people directly and earns much needed foreign exchange through its software exports. Even Prime Minister Narendra Modi has made it a point to laud the sector multiple times, while highlighting the need of constructing more i-ways – information highways.

Even as the government goes about connecting India in its bid to generate five crore jobs – the much famed IT sector is going through a massive shapeshift that, while increasing profitability of firms, might just end up affecting the job security of workers.

Last week, the Tamil Nadu government said that the employees of Information Technology firms in the state are free to form labour unions under the Industrial Disputes Act, 1947. The move comes on the heels of IT employees in tech giants like TCS raising their voice against dismissal of workforce at a time when more companies are adopting automated systems to replace human interface.

Automation simply means using control systems to do jobs which were earlier performed by either partial or full use of human labour. Last year, an extensive study carried out by Oxford University and Deloitte said that about 35% of jobs in the UK are highly likely to be replaced by computers in the next two decades – in the case of IT engineers, this figure is as high as 58%.

Replacing humans

An easy way to understand how automation helps business in reducing the work force would be to think of bottling plants. While the bottling process would earlier be done by a large number of factory workers, companies like Coca Cola are adopting automated systems to put empty bottles on assembly lines where these are filled and packaged by machines under minimal human supervision.

What automation has done to the IT sector, however, is a bit different in that it is not just assisting workers but actually replacing actual humans, as robots and computers are increasingly writing code and building software. Many IT vendors are using bots which are computer programmes and algorithms but are able to do tasks such as extracting, filtering and placing data in different places just like a data entry operator would do.

The companies as a result are managing to reduce their costs, free up their workforce and also observe much more efficiency – bots do not get tired like humans do.

Even Reserve Bank of India Governor Raghuram Rajan recently spoke about the anxiety among the middle class because computers and bots are taking human jobs globally.

“The emerging threat is it’s not the guy in Bengaluru but the robot next door who’s going to take your job,” Rajan said.

A report put out by brokerage firm Centrum in February said that the top IT companies in India are hiring much fewer employees than before and a part of it is because of aggressive adoption of automated technologies by the companies in these competitive times.

In the year 2015, the top five IT companies hired 77,625 employees which is 24% lesser than the previous year. And the trend is going to continue.

Meanwhile, Infosys, the second largest IT company in India, has been vocally advocating “freeing up of resources” by implementing automation in many more business processes. This is giving rise to nonlinearity of revenues – rise in company’s revenues doesn’t necessarily coincide with a rise in work force. In other words, IT companies like Infosys are able to raise revenues while keeping their workforce the same or even lowering it.

“For doing similar kind of repetitive work, automation will definitely be used in a big way,” Infosys COO UB Pravin Rao told the Economic Times in an interview on June 9. “From that perspective, you will definitely see more and more non-linearity in our revenues. Earlier, the industry was more linear – more revenues meant more people. But that will change.”

While the trend of automation being utilised by companies is not new, it’s catching up fast among technology giants. The Centrum report pointed out that the rate of growth in headcount at these companies has been moderating and over the past year or two, it has fallen sharply.

The Centrum report, for instance, makes references to a company which saved time by using automated systems to check the health of its products being used at a client’s site. By shifting to machines, the company was able to cut time on one of its process from 11 minutes to just 35 seconds.

“Bots will enable humans to focus on the higher end of the pyramid and substantially cut flab at the bottom of the pyramid,” the report said.

The “flab at the bottom” applies to fresh graduates who are employed at the lowest level of the organisation. With more automation in place, these workers are likely to lose some of their bargaining power if the industry continues to cut jobs or reduces their hiring targets.

Moreover, such a situation where a workers are worried about their job security could lead them to be more muted about grievances on account of remuneration or work-life balance – something that only something like the workers' unions potentially could address in the long term.

“In the past, there was high labour demand, so employees could quit rather than raise their voice,” KR Shyam Sundar, professor of human resources management at XLRI Jamshedpur told the Economic Times. “But now, with automation, demand for labour will fall and that could spur creation of unions.”