Business process outsourcing (BPO) programs are saving companies an average of 15% over in-house operations, according to a recent survey by Information Services Group (ISG), a global technology research and advisory firm.
Key findings from the ISG Market Lens™ BPO study
The ISG Market Lens™ BPO Study surveyed 368 business leaders worldwide about their BPO practices and plans. Among the companies surveyed, 68% cited reducing operational costs as a top reason for outsourcing to managed service providers.
Other significant reasons included process efficiency (50%) and capacity to support volume needs (33%). Around 20% of the companies mentioned innovation, service quality, or business growth as key motivators for outsourcing.
The study revealed that respondents achieved cost savings of more than 15% on average by outsourcing business processes. They also reported an average improvement in quality performance by 11% compared to running operations in-house.
“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.
Over 30% of outsourced operations have been in place for ten years or more, the study found. Despite this, nearly all enterprises have adjusted their outsourcing activities in the past two years and plan further changes in the next two years, with changes nearly equally divided between expanding and contracting BPO.
The impact of AI and automation on BPOs
The study also highlighted the anticipated impact of AI and automation on BPOs. Approximately 50% of the companies surveyed expect to reduce external staffing through AI and automation efforts.
The impact will be most significant in customer operations outsourcing, with 65% expecting AI to help reduce staffing. In contrast, finance and procurement operations, which are less mature and smaller in scale, will see a weaker impact at 32%. In these areas, managing quality and talent is often a more significant driving factor than cost alone.
New requirements for BPO providers to build efficiency through AI technology solutions are not yet influencing provider decisions significantly, with more than 50% of respondents citing “industry knowledge and understanding of their business” as one of their top decision factors for choosing a provider.
