Artificial intelligence is going to bring forth a paradigm shift in how IT firms operate, according to Nigel Vaz, CEO of Publicis Sapient, a global digital transformation firm.
In an interview with businessline, Vaz spoke on how the company is bracing for the AI wave, and where they are positioned against their competitors.
Do you think we will see a paradigm shift in how IT firms operate as AI becomes pervasive, and as they face tough macroeconomic conditions?
The orientation for IT firms was a cost arbitrage model. If it can be done in a certain country at a much cheaper cost, let’s move it all to that region. Then, what you see is that the model becomes established, and after a while, there’s no more efficiency to be gained in that model.
The reason I’m excited about this is because I think if you have built an IT company on a hugely people-intensive model, essentially driving cost arbitrage between your people and the people of your clients, geographically, I think that model will come under huge amounts of pressure.
For instance, we recently started moving into operations. Historically, we’ve stayed away from that space, because it was extraordinarily commoditised and the cheapest player won – now we can use AI to compete with these players
For example, very recently, we built a tool using AI that replaced 500 people from one of our competitors, whose sole job was to monitor 50 different screens to look for indicators and patterns. With this AI tool, you only need 10 people to do this job.
What happens to jobs if firms (IT) start downsizing because of AI?
If you are somebody that thinks you’re going to basically build a career out of “I studied for the first third of my life in school and university, or however I learned then, for the next third of my life I work and I apply what I learned, and depending on how well I do the first two things, I retire for the last third of my life.” Those times are over.
Every single person is going to go through the equivalent learning of a four-year degree, every four years. It might even be shorter than that, which means, four years of learning of the kind that you would be like if you were a bachelors in journalism, and now you have to be a bachelors in law, or an undergraduate in law, or an undergraduate in medicine.
Which means for organisations there are two things. Fundamentally, if you believe that people are your greatest assets, you have to lay emphasis on how they will be trained and developed. And our belief is also that traditional learning systems aren’t up to the task. This needs the approach of a player coach.
Even at a macroeconomic level, as most countries, including India, hit replacement rates for population growth – the only choice you have to do that, is going to come through how you embrace technology (to control inflation) and bring technology to be core to the financial ecosystem of the country or the company. Because without that, you’re just not going to see the kind of growth that you’ve seen in historical years, which was largely driven by population.
How do IT companies keep up with the pace of rapidly changing technologies? From blockchain, to metaverse, to AI, by the time you set up a digital infrastructure for a business, a new thing comes along.
Fundamentally, the first shift that you have to make is that this idea of transformation is not transformed, it is a journey. So, you’re constantly transforming.
Let’s look at the biggest digital companies and compare them to traditional companies. Look at Netflix, for example. They started off by posting DVDs in the mail. It was a mail-order company, and it went from mail order to streaming, and from streaming to basically producing and creating its own content, and now it’s going from producing and creating its own content, to basically being the largest producer and syndicator of content.
The constant among these digital companies (Netflix, Amazon) is this idea that they understand that you have to continually transform.
Indian IT firms are recognising the need to diversify from their existing outsourcing model, and are re-training their employees for strategy consulting, a space that Publicis occupies. How successful do you think they are going to be in competing with you?
Without talking specifically about a competitor, lots of competitors are trying to move around the value chain - like you have a bunch of the strategy firms that are trying to move towards implementation, and you have a bunch of the lower-end implementation firms trying to move towards strategy... But the trick is, how do you establish balance?
Allow me to use another analogy. If you go to the gym and all you do is work out on your upper body, you get gigantic arms and chest and super skinny legs, there is no balance. The idea is if you are a gigantic company of 800,000 people, and you hire 50 strategy people, it doesn’t matter where they’re from, because the balance is off.
The bigger question, I think, for a lot of these firms is whether you’re a strategy firm moving through implementation, or an implementation firm trying to move to strategy, and how do you get that balance? And the reason we grew up helping create that balance for ourselves is because we had 30 years to do it. We hired designers and strategy people in India much before our competitors.
You hire around 20,000 people, 50 per cent of your employees are in India. However, you still do not do much business with Indian enterprises. Do you see this context changing? That is, will you hire more people in India and likely do more deals with Indian companies?
We are continuing to hire on a constant basis to support the growth that we see in the business. The orientation that we’ve always had, though, is our value didn’t come from adding people. It was about the kind of capability that we were building in order to have more impact with our clients, and that continues to be our primary focus because, clearly, we aren’t as successful because we’re big.
On the enterprise side, we made a strategic decision a while back, that India would be a talent market for us, and unless we identified very specific projects that were very transformational, we wouldn’t treat India more broadly as a market. In India, we were only doing projects that have strategic value to us, wherein we are paid equivalent to US or Europe terms for the same. The simple reason for that is – the firms serving the India market are tier-3 players even in their own companies. And with the result, the price points that India as a market was buying the kind of services we did, was just not really a competitive area we wanted to play in.
Most firms engaged in digital transformation have made an open commitment that a certain portion of their deals will be in generative AI, in the coming years. Does Publicis also have a number of such sort?
In our case, I would say in three years’ time, 100 per cent of everything we l do will be based on the platforms that we are building today, which already the majority of our people are using. And what I’m saying is actually for me, if you use a three-year time horizon, 100 per cent of every single thing we do will be based on this way of working, because we’re already doing it now.