The Surprising AI-Driven Tailwinds For BPO Growth

The market is understandably focused on the headwinds that artificial intelligence creates for the services industry. If AI can automate work, improve productivity, and reduce the labor required to deliver services, it follows that outsourcing providers should eventually face significant revenue pressure.

However, that is only one side of the story. AI is also creating tailwinds, and one of the clearest examples is in business process outsourcing, or BPO. In fact, the expectation that AI should deliver dramatic cost savings is, somewhat counterintuitively, helping drive more work into traditional BPO models today.

What makes this particularly important is that it challenges the prevailing assumption about how AI disruption will unfold in services. The long-term direction may still be toward greater automation and lower labor intensity, but the path from here to there is not linear. In the near term, AI is creating new pressure on companies to cut costs, expand productivity, and rethink how work gets done. Those pressures are producing some unexpected outcomes, including more demand for established outsourcing and offshore delivery models. To understand why, it helps to look first at where growth in BPO is actually coming from.

Where BPO Growth is Coming From

Growth in services generally comes from three places; transaction volumes inside existing contracts increase; providers sell additional scope to existing customers; or alternatively, they sign up new customers.

All three are occurring in BPO, but much of the above-normal growth we are seeing is coming from additional scope. Companies such as EXL, Genpact, and others have been performing above both broader market growth and, in some cases, their own historic norms. Why is this happening?

AI is Adding Fuel to the Fire

As a result, the transformational path is measured in years. Unfortunately, many corporate cost mandates are measured in quarters.