TECHNOLOGY AT WORK

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Citi GPS: Global Perspectives & Solutions February 2015
Software: The Mechanism to Automate
Walter Pritchard
US Software Analyst
Within IT, there is ironically a high degree of manual processes that are being
replaced through automation with software. Estimates we’ve seen suggest labour is
between 25-50% of IT spending, depending on industry, maturity of company and
other factors. As mentioned above, to some degree automation is helping
companies grow incremental capacity in data centres and networks and support for
more devices without adding IT headcount. We see this with the move towards the
“software defined” infrastructure. A decade ago, nearly all devices and infrastructure
elements were manually configured. One way to look at this is the server-tosystems
administrator ratio in data centres. Servers require certain maintenance
and other tasks to be done, with some human intervention required to do these.
While not all servers and environments are created equally and the definition of
what an administrator does is not consistent, the trend on this ratio has continued to
increase. Ten years ago, less than 10:1 was common with x86 (Intel) servers. Today
this number is in the 50:1 ratio with many IT shops, while some push 100:1 with
high degrees of automation. There have been some press reports suggesting that in
web scale environments, with a high degree of server homogeneity and automation,
this ratio can be above 1,000:1. There are analogous comparisons around other
devices (e.g. storage and network devices) and processes (e.g. level 1 IT support)
within IT that can have the impact of pressuring lower skill IT jobs. We note this is
unlikely to have an impact on high-skill IT jobs such as software development,
where automation is in the early stages or non-existent.
Another area where low-skill customer-facing jobs are facing pressure is customer
service automation technologies which drive efficiencies by enabling companies to
scale operations without support personnel or outright cut headcount. Examples of
these include Internet-based chat support, user self-support, diagnostic technology
and modern call centre software.
Digitisation and the Services Industry
Ashwin Shirvaikar, CFA
US Computer Services & IT Consulting
Analyst
Technology has both helped and hurt the
Services industry
We believe low- and mid-level jobs in the
Services sector that involve repetition are at
the highest risk of being lost
People and their talent form the basis of the Services industry (both IT and
Business Process Outsourcing). Traditional industry contract structures have
dictated that most Services work is done and billed for on a per-person, per-unit-oftime
basis. The billing rate generally depends on the complexity of work, the
location of the worker, the expertise of the worker and the supply/demand dynamics
of the specific labour classification.
Against this backdrop, automation has long been a factor that has helped as well as
hurt growth in the Services industry. Services companies, in their role as technology
and process experts, clearly bring productivity benefits to their clients – this is a
crucial selling point for their services and has been an important driver of growth. Of
course, when Services companies use automation, a portion of the productivity gain
is passed onto the client, which creates a headwind of growth to the industry. A
second headwind is the deployment of automation directly by the client, which
reduces the Services industry’s total addressable market. Often, such direct client
deployment is due to the availability of software or online/mobile web/app-based
solutions. In other words, other parts of the technology industry stack impinge on
the Services opportunity.
Given continuing developments in the area of automation, software is increasingly
capable of performing tasks that humans have historically done. When applied to
the workforce, we believe that low- and mid-level jobs in the Services sector that
involve repetition (e.g. data entry, legal discovery work done by paralegals; journal
entries done by accountants) are at the most risk of being lost. This is obviously
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