Outsourcing Market Trends
A decade after automation rewrote the rules of outsourcing, AI is flipping the game. Enterprises are moving away from labor-based contracts and static scopes in favor of dynamic partnerships built on shared intelligence, compounding returns, and value creation. It’s not about doing the same work faster. It's about redefining what work gets done, why it's done, and who captures the upside.
Market perspectives
The old outsourcing playbook is burning. As Gen AI slashes costs and redefines “value,” clients are ditching bloated contracts, demanding smarter delivery, and reshuffling the power dynamics.
Uncertainty and Disruption
Ongoing tariff uncertainty and growing negative sentiment toward offshoring are creating pressure on the outsourcing market.
AI-Driven Efficiency
Gen AI is increasingly embedded in service delivery, driving greater efficiency—and often, lower pricing. Agentic AI will cannibalize business.
Talent & Operating Model Shifts
Expectations for AI fluency are accelerating, with many providers (and clients) shifting to product-based operating models.
Insourcing via GCCs
Global capability centers (GCCs), an insourcing strategy, are growing, pulling business away from traditional outsourcing providers.
Rising Competition
The big consulting firms will be investing more effort (and $$) into commercial sectors as federal opportunities decline.
Our thoughts
Stop waiting for transformation. Bake AI into your contracts now, tie payment to real outcomes, and hold your partners accountable from day one. Shift from service creep to strategic clarity: define the roadmap, spotlight new growth zones, and build a deal structure that rewards bold execution, not busywork.
Turn the AI switch on today
Drive smart automation into the services and rates being charged; start shrinking the cost base from day one. Keep focus on current/base services, but provider must show/commit to immediate AI impact.
Draw the Three-Year AI Plan
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Identify the Next Hunting Grounds
Flag the high-value areas that sit outside of provider’s remit, so they can see what’s possible long term. Leverage growth opportunities to drive adjustment of base services terms.
Peformance-Based Agreements
Shift to outcome-based commercials so provider is paid for performance, with no more endless change orders or bolt-on SoWs. Drive contract terms creation from business perspective, with legal supporting business requirements.