Companies expect more value from outsourcing rather than just savings

Companies now expect their outsourcing partners to better align with their business strategies and help them adopt new-age technologies such as artificial intelligence (AI) and generative artificial intelligence (GenAI) rather than only provide cost benefits, according to a survey of 170 organisations by tax and consulting firm Deloitte.

 

While enterprises across verticals will continue to outsource more in the future—with almost half of those surveyed expecting an increase in annual savings—the nature of contracts and engagements is expected to change from headcount benefits to value-driven propositions.

 

About 28 per cent of participants, ranging from energy and life sciences to financial services and automotive, said they expect greater alignment with business strategy from their outsourcing partners, while 25 per cent preferred better performance quality. Only 19 per cent prioritised cost savings. This marks a shift from 2020 and 2022, when the need to lower costs dominated outsourcing decisions.

 

"Clients now demand outsourcing partners to harness AI and machine learning, enhance cybersecurity, and deliver innovation-driven value—all while reducing costs. This marks a shift from traditional headcount-based commercial models to value-driven, innovation-centric approaches. This transition necessitates a fresh perspective on talent, operations, and contracting mechanisms for service providers," the report titled The Outsourcing Compass: Decoding Strategies of Today stated.

 

As outsourcing tenure and maturity increase, organisations become more comfortable outsourcing one or more core areas within each function to service providers.

 

Close to 82 per cent of the 170 surveyed firms are outsourcing some portions of their core functions to third-party service providers. In the IT sector, for example, this includes outsourcing enterprise architecture design and cybersecurity, apart from the traditional areas of application development, maintenance, and infrastructure management. In the engineering research and development (ER&D) sector, companies are also outsourcing parts of product design and development, as well as quality management and research.

 

The report added that all surveyed firms rely on their current service providers for their AI and next-generation technology needs. This creates opportunities for service providers to capitalise on the growing demand in these areas.

 

"Developing in-house AI and next-gen technology capabilities demands substantial infrastructure investment and specialised skills. Current service providers possess a deep understanding of the organisation’s landscape, allowing them to implement these advanced solutions quickly and on a large scale," according to the report.

 

Companies are also including AI and GenAI-specific terms and conditions in agreements, ensuring compliance and clear expectations around technological use and performance returns. Others are using productivity-based pricing to focus on efficiencies. These approaches highlight the diverse strategies companies are adopting to balance innovation with accountability in AI-driven engagements.