WNS (Holdings) (NYSE: WNS) stock is down 19% on the announcement of the quarterly results. On the surface they look pretty good. Revenue up, profit up, but a slightly deeper look shows something a little different. For we’ve always got to remember that corporate accounts are not adjusted for inflation. That’s something that we’ve got to do ourselves. There’s that to deal with first - then we’ve got to consider the effects of AI on the ongoing business. Which we think will not be positive.
The business line at WNS: “WNS (Holdings) Limited, a business process management (BPM) company, provides data, voice, analytical, and business transformation services worldwide. The company operates through two segments, WNS Global BPM and WNS Auto Claims BPM. It offers industry-specific services to clients primarily in insurance; diversified businesses, including manufacturing, retail, consumer packaged goods,” etc. Effectively, one of the big Indian business services houses.
The revenue problem is here: “Revenue in the second quarter was $333.9 million, representing an 8.7% increase versus Q2 of last year” and, well, OK. Now adjust for inflation. What was that in the USD this past year? 6%? 7%? So how much of this is an increase and just keeping up with inflation?
WNS (Holdings) stock price from Google Finance
That isn’t, to us, the real worry though. We think this is horribly complacent: “In addition, we are making steady progress on our AI and Generative AI initiatives and continue to believe that these technologies represent more opportunity than risk to our business.” For here’s our problem.
To its customers WNS is automation. Instead of having to do something for themselves they simply ship the task off to WNS. How WNS then does that task doesn’t matter - it’s a black box that gets the job done. So, it’s true, how WNS does the job can be automated and AI’d and so on and margins at WNS will increase by their having automated.
But as we say, to the customer WNS is automation. So, the rise of AI is going to mean many more competitors who can be that automation black box for all those customers. Further, teh one really big thing that drives the WNS business is the arbitrage between US and European wages and Indian wages. But if everything’s being automated then that arbitrage opportunity disappears. As an analogy we think WNS is like the coachman regarding the new Model-T Ford. Ah, yes, but my horses are better than other horses! Which is to entirely miss the point of what’s about to happen.
