Automation To Reduce IT Labor? JP Morgan Weighs In

In a new report on the IT industry, JP Morgan analyst Tien-tsin Huang discussed the growing reliance on automation and its implications on the labor force. As many companies focus on trimming every last cent of costs, reducing labor expense is a key area of exploration.

Automation Numbers

According to the report, India’s IT employment could shrink by as much as 10 percent in the next three years due to the implementation of self-service IT solutions. Automated services will likely continue to replace low-end, low-skilled employees in upcoming years. In addition, up to 65 percent of business process outsourcing could likely become automated.

IaaS Spending On The Rise

Global cloud information-as-a-service (IaaS) spending is expected to grow by 33 percent in 2015. This robust growth is not expected to change anytime soon, as Gartner forecasts 29 percent compound annual growth per year through 2019. Gartner also expects that consolidation will continue around a handful of major IaaS providers, including Amazon.com, Inc. (NASDAQ: AMZN), Microsoft Corporation (NASDAQ: MSFT) and Google Inc (NASDAQ: GOOG)(NASDAQ: GOOGL).

IT Initiatives

According to the report, International Business Machines Corp (NYSE: IBM) is continuing to push for adoption of Watson, while Wipro Ltd (NYSE: WIT) recently launched its own artificial intelligence platform, named “Holmes.” In addition, CAI International Inc (NYSE: CAP) recently introduced a cloud-based banking system, and Genpact Limited (NYSE: G) launched a cloud-based order management platform.

Stock Picks

JP Morgan sees plenty of opportunity for investors in IT stocks. The firm has Overweight ratings on CDW Corp (NASDAQ: CDW), Cognizant Technology Solutions Corp (NASDAQ: CTSH), Globant SA (NYSE: GLOB), Infosys Ltd (NYSE: INFY), Luxoft Holding Inc (NYSE: LXFT) and Virtusa Corporation (NASDAQ: VRTU).

Disclosure: the author holds a short position in Amazon.