GenAI challenges Indian BPO industry
NEW DELHI, INDIA — The rise of Generative AI (GenAI) is casting uncertainty over the future of business process outsourcing (BPO) firms, with analysts warning that undiversified players face existential risks.
Mumbai-based JM Financial recently flagged AI as a key threat to Indian BPO companies Sagility and Inventurus Knowledge Solutions (IKS Health), citing emerging automation in healthcare workflows and policy volatility in the US as compounding challenges.
The AI threat to pure-play BPO’s
Since stock markets debuted last year, Sagility and IKS have seen shares plummet by 21% and 12%, respectively, reflecting investor skepticism about their long-term viability. Unlike diversified giants like Accenture and Teleperformance which combine BPO with information technology (IT), and Artificial Intelligence services, pure-play firms lack the technological flexibility to adapt.
“Low costs are no longer a primary selling point. Companies now demand efficiency solutions that allow them to scale smarter and faster,” said Pranav Dalal, CEO of Office Beacon, noting that clients now prioritize AI-driven efficiency over cost-effective labor outsourcing.
Analysts suggest that without rapid reinvention, traditional BPOs risk losing market share to AI-powered solutions.
As healthcare payers and providers increasingly favor vendors offering AI-integrated services, the pressure on undiversified BPOs will only continue.
Stock slumps and policy risks compound BPO sector woes
Investor confidence in India’s BPO sector is waning, as Sagility and IKS grapple with double-digit stock declines amid rising AI disruption. JM Financial’s report underscores concerns over the firms’ lack of diversification and reliance on U.S. healthcare clients, where policy shifts such as potential regulatory changes under a Trump administration, that raises more uncertainty.
The challenges extend beyond AI, with integration hurdles in electronic health record (EHR) systems and AI model inaccuracies risking client dissatisfaction. While global BPS leaders like Accenture and Genpact thrive by blending outsourcing with AI-driven services, pure-play Indian BPOs struggle to compete.
With Everest Group’s 2024 report highlighting IT-integrated firms as industry leaders, the writing is on the wall for undiversified BPOs. Sagility and IKS must either invest in AI capabilities or risk further devaluation, as clients increasingly prioritize vendors offering end-to-end automation. The sector’s future may hinge on how quickly traditional players can pivot.
