Enterprises save 15% with business process outsourcing, ISG study finds

CONNECTICUT, UNITED STATES — A recent study by Information Services Group (ISG) revealed that enterprises are saving an average of 15% by adopting business process outsourcing (BPO) programs.
The ISG Market Lens Business Process Outsourcing (BPO) Study surveyed nearly 400 business leaders worldwide, highlighting that cost optimization is the primary motivator for BPO adoption.
BPO helps companies reduce operational costs
The study found that 68% of respondents cited reducing operational costs as their top reason for outsourcing to managed services providers.
Efficiency of processes (50%) and the capacity to support their volume of needs (33%) were also significant motivators. However, only about 20% of enterprises listed service quality, business growth, or innovation as key reasons for outsourcing.
“Business process outsourcing has been largely driven by the need for cost reduction and efficiency—even for customer-facing operations—and on the face of it, BPO has delivered very successfully,” said Michael Dornan, principal analyst and co-author of the study.
Dornan added that BPO also improved respondents’ quality performance by an average of 11% over running operations in-house.
Demand for greater savings and innovation
Despite the cost savings achieved, the study indicated that enterprises are demanding further cost and efficiency improvements.
While at least half of the respondents rated BPO’s ability to deliver capacity, expertise, and performance as very good or excellent, only 38% rated the cost savings achieved this highly.
“BPO outsourcing has proven to be successful in meeting enterprise capacity needs and providing access to expertise, quality, and efficiency, but enterprises rate BPO performance lower for driving direct business outcomes such as innovation, improved customer experience, growth, or direct cost savings,” said Alex Bakker, ISG Distinguished Analyst and co-author of the study.
AI and automation to transform BPO
The study also emphasized the growing impact of artificial intelligence (AI) and automation on BPO.
Around half of the respondents expect to reduce external staffing through AI and automation efforts, particularly in customer operations outsourcing, where 65% anticipate reductions.
In contrast, finance and procurement operations are less likely to see significant changes due to their smaller scale and focus on quality and talent management.
New requirements for BPO providers to build efficiency through AI technology solutions are not yet significantly influencing provider decisions.
More than 50% of respondents cited “industry knowledge and understanding of their business” as a top decision factor, while fewer than a third mentioned talent availability, and only 12% considered AI and automation capabilities as a main factor.
The ISG Market Lens BPO Study, conducted globally in March 2024, surveyed 368 executives responsible for business process outsourcing across various sectors, including finance, accounting, procurement, and customer operations.