IT firms carve out separate units to tap into AI, automation

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Bengaluru: India’s top information technology (IT) services firms led by the likes of Infosys Ltd and Wipro Ltd are carving out separate service lines and business units to tap into newer technologies such as artificial intelligence (AI) and automation, essentially replicating a playbook that was first created a few years ago by International Business Machines (IBM) among others.

Bengaluru-based Infosys, for instance, has just set up a new service line, Artificial Intelligence and Automation Services, and entrusted a former Google executive to oversee the unit as it looks to leverage cognitive platforms to generate more business from a larger set of its customers.

Infosys has pulled together its current offerings in areas such as AI, automation, machine learning, including its own proprietary cognitive platform, Nia, as the company looks to offer these services that can open a new revenue stream, according to three executives familiar with the development, who declined to be named.

The company has tasked senior vice-president and former Google executive Sudhir Jha, who joined the company last year, with heading this new service line, according to an internal communication sent out to executives recently.

The firm’s plan, said the first executive mentioned above, is to sell a “bundled offering of services” to clients, mirroring the approach adopted by some of its rivals.

Mumbai-based Tata Consultancy Services Ltd has set up a business unit called Digitate dedicated to AI platform Ignio and other next-generation products. Infosys’s cross-town rival Wipro, which set up a separate unit called Holmes for Business earlier this year, is banking on it to help generate additional revenue. An email sent to Infosys on Monday evening went unanswered. IBM was the first company to carve out a separate business division called IBM Watson in 2014 to sell its AI product.

India’s $154 billion IT outsourcing sector now faces intense pricing pressure over its commoditized back-office service offerings like maintenance work, thereby prompting the largest companies to build cognitive platforms.

IT giants believe this has two benefits: it helps them have a differentiated offering when vying for outsourcing contracts against global peers and also helps improve productivity.

TCS, Infosys and Wipro first launched their own proprietary cognitive platforms in 2015. During the last two-and-a-half years, these firms have primarily used these platforms internally to save on costs—companies have used these automation and cognitive tools to perform the mundane, repeatable tasks that were done by an army of engineers. In 2016-17, both Infosys and Wipro said these automation tools helped each of the firms record productivity worth 12,000 FTE (full-time equivalent or the work done by 12,000 engineers).

Still, like IBM Watson, all homegrown IT firms have struggled to scale up business by offering these platforms, primarily because most firms are still reluctant, and unsure of the results promised by each of these platforms even as many struggle to select the right automation tools.

“The rise of automation fueled by Robotic Process Automation (RPA) has allowed the world of business operations to think different and to think fresh… Despite the promise, the hype, and the high expectations, the RPA client experience is bi-polar. According to HfS Research, nearly half the RPA clients did not meet or barely met the expectations from their RPA initiatives. The reason is not the technology itself but quite simply the lack of rigour in selecting and implementing the right tool,” Phil Fersht, chief executive and chief analyst, HfS Research and David Brain, chief operating officer, Symphony Ventures, wrote in a report on automation last month.

Homegrown IT giants do not have any fixed price for selling their technology platforms and are pricing it on an outcome-based model under which each client of an IT vendor is promised certain savings when they use the technology platform. Once the client achieves its promised savings, IT vendors get a fee. Still, Indian IT firms remain hopeful of the potential of their own proprietary platforms.

“We have invested in our cognitive platform, Wipro Holmes. And I’m hugely optimistic of what can come out of that. Not only in how we deliver what we do on the IT side better for customer by what we call Holmes for IT but how we can transform and disrupt processes for customers with Holmes for business,” Rishad Premji, Wipro’s chief strategy officer and a director on the company’s board, said in an interview earlier this year.

“There is this huge opportunity leveraging cognition to drive that agenda,” said Premji.