A sweeping study of artificial intelligence at work across six industries worldwide tips Indian outsourcing giant Tata Consultancy Services for the AI crown ahead of its closest rivals Infosys and Wipro.
TCS’ moonshot has already been fired, says K Anantha Krishnan, VP and CTO of TCS in the 268-page CLSA research report that profiles 10 stocks that are already using AI for a product that's in the market.
CLSA is maintaining a “high conviction” buy on TCS in its tech category and draws five broad investment conclusions. “Technology is highly unlikely to be ex-growth,” says CLSA.
CLSA has analysed 10 focus stocks in the report chosen for the manner in which AI is having a “demonstrable impact on their business now and/or a real product that is in the market”. TCS is one of these.
TCS’s flagship AI offering is Ignio - an automation software launched in 2015. One of Ignio’s most often quoted use cases is how it simplifies batch processing in global banks.
Going into great detail on TCS’ next steps in AI led work, CTO Krishnan stresses that the academic inputs informing AI technology has fairly common set of principles. “The barriers to create a platform are not very high. The crux is not going to be the platform itself but the ability for the platform to understand what problem you are trying to solve. And then what you actually need to solve it. Platforms will become a non-issue in the foreseeable future. If you don't have a platform then it's okay, but what is important is how will you identify and solve the problem. Platforms can be publicly sourced or open sourced,” says Krishnan.
Auto, healthcare, robotics, financial services consumer and technology markets will be the most affected by the rise of artificial intelligence and machine learning, says the CLSA artificial intelligence report written by 20 CLSA experts.
Replying to a question on whether the maintenance business will shrink now, the TCS CTO says no.“I don't think demand for maintenance will go down. The way maintenance workload will be serviced will definitely change. Fundamental laws of arithmetic are at play here. Every piece of code you write requires a certain amount of time. Consumer apps can be written in one week or less that may stay alive for consumers between 12-16 weeks. The ratio of maintenance cycle to development cycle is more or less the same 1:5 or 1:6 as before. Every software system needs maintenance. So that’s not really going away. The timeframe for which they are being serviced is changing due to shorter cycles. Overall, the workload is not changing but the methods are changing,” says Krishnan, as quoted by CLSA.
“AI promises to reduce the manual intensity of projects, making IT firms less linear and shrink legacy spending. TCS aims to cross the chasm and help customers improve both efficiency and the customer experience. This can stretch TCS’s margin lead over peers and open new service areas to compensate for shrinking legacy spend from deeper AI usage,” the report argues.
“While erstwhile industry laggards such as Wipro and Infosys began to push their automation solutions hard to gain market share, stronger positioned firms such as TCS and HCL were forced by clients and investors to come up with a response so as not to lose on vanity metrics,” the CLSA report says.
In the first week of May, Infosys became the first among the Indian IT industry to announce 10,000 AI and big data-led jobs in the US. Cognizant followed that up with a frank assessment during a quarterly earnings call of what they now think is an almost zero cost arbitrage of the outsourcing model pioneered by Indian companies.
The field of artificial intelligence was largely ignored during the “AI winter” of the late 80s and early 90s; the present machine-learning boom began in earnest when Google started doing deals focused on AI.
Tracing the various stages of automation in IT services from routine automation of high repetition tasks to very refined “holy grail of self aware systems” using cognitive software, the CLSA folks say market pressures have forced vendors to tweak existing methods to “appear” smarter. Enterprise clients, the report says, have been winners in the short term.
The report explains how TCS now defines AI to mean algorithms which can do four specific tasks: Sense, think, act and learn.
The fourth one mentioned here - 'learn' is explained as the process of "being able to continuously and automatically refine the knowledge and algorithmic models of an AI system based on its interactions with digital data; increasingly, this is referred to as “machine learning”.
CLSA has listed the following as key risks on their TCS view: Rupee appreciation, which could hurt earnings, given that TCS benefits from a weaker local currency - we estimate every 1% drop in the Rs/US$ helps earnings by 1-1.5%, all else being equal; weak economic activity in the USA, which is TCS’s largest export market (51% of revenue); adverse immigration regulation, which can hurt TCS's ability to staff its projects at client locations in the USA and the UK; sharper cross- currency headwinds; inability to deal with a changing spending environment; and any internal friction caused by its recent CEO succession.
Overall, the CLSA report leader piece says "tech and robotics will see sustained growth while auto and oil will see massive disruption".
Published Date: May 16, 2017 01:15 am | Updated Date: May 16, 2017 04:19 pm