Enterprises want more BPO innovation not more headcount: ISG
CONNECTICUT, UNITED STATES — ISG’s State of BPO Report — surveying 250 senior decision-makers — finds 70% of enterprises expect their business process outsourcing (BPO) providers to deliver more innovation, but only 40% expect outsourced staff to increase and 29% expect internal staff to grow.
According to a press release, BPO bookings remain below 2019 pre-pandemic levels, and only 14% of enterprises are currently receiving AI-first outcomes from their providers — a gap between what the market demands and what operators are delivering.
70% demand provider innovation; only 14% are receiving AI-first outcomes
43% of enterprises are using AI primarily for efficiency gains — the traditional cost-reduction application — while 14% are achieving AI-first outcomes that reconfigure what BPO delivers rather than just how cheaply it delivers it; in customer experience BPO specifically, 29% still operate on traditional models and only 22% have reached AI-first status.
The gap between the 70% demanding more innovation and the 14% currently receiving AI-first outcomes is the commercial opportunity: enterprise expectations are running five-to-one ahead of what most providers are delivering — and the operators who close that gap fastest are best positioned for the next contract cycle.
66% of respondents expect providers to lead AI adoption — not wait for enterprise direction — while only 21% of enterprises have the internal skills to govern AI-enabled BPO services once deployed, a combination that places the adoption burden squarely on providers.
“AI is transforming the way organizations approach efficiency and expertise, and traditional labor-plus-automation services [are being measured against a new standard],” said Stanton Jones, Distinguished Analyst, ISG.
90% plan GCC expansion as AI-enabled insourcing accelerates in regulated sectors
90% of respondents plan to increase their GCC scope within 12 months — the insourcing trend accelerating as AI enables enterprises to replicate traditional BPO benefits of cost savings, efficiency, capacity, and expertise internally without external providers.
Healthcare, life sciences, banking, and financial services are leading the insourcing-with-AI trend, as heavily regulated sectors find that AI governance requirements make internal control of automated workflows more tractable than managing compliance accountability through third-party contracts.
BPO bookings remain below 2019 pre-pandemic levels despite rising innovation demand — an uneven recovery that suggests enterprises are selectively concentrating spend on capability-driven providers rather than expanding total outsourcing volume.
The ISG data reframes the competitive threat to BPO operators: the most significant displacement risk is not AI automating tasks but enterprises using AI to insource the capabilities they currently buy from BPO providers — particularly in regulated sectors already leading this shift.
“Providers that manage exceptions, measure automation impact, and remain accountable to industry-specific KPIs will succeed,” said Michael Dornan, Principal Analyst, ISG.
For BPO and operators, ISG’s 250-respondent survey documents a market where enterprise clients have not cut demand — they have raised expectations while simultaneously developing the AI capability to meet those expectations internally if providers cannot.
The operators who close the 70%-to-14% innovation gap are best positioned to capture expanding GCC budgets before enterprises redirect them entirely.
