AI giving a big boost to Cognizant BPO business, says CFO Jatin Dalal

Segment expanding faster than the core business and delivering better margins as generative AI spurs productivity: Jatin Dalal

IT services major Cognizant’s business process outsourcing (BPO) segment is growing faster than the company’s overall business and delivering higher margins, its Chief Financial Officer Jatin Dalal said, countering concerns that artificial intelligence (AI) could disrupt the industry.

 

“BPO is a great adopter of generative AI (GenAI). The initial perception was that the throughput it offers will shrink but effectively it has been otherwise. BPO is faster growing and giving better profitability for us, and it is a good portfolio contribution if they grow so fast,” Dalal said at Morgan Stanley’s Technology, Media & Telecom Conference on Wednesday.

 

He said the company has been able to generate higher throughput with humans and agents, which customers have adopted widely. In addition, firms are tapping into a larger addressable market that was previously beyond the scope of third-party service providers.

 

 

“So let us say there is a 100-people customer service work. Normally it would not have gone to a BPO as it is too small but now multiple such work are spread across the organisation and amenable for agentic deployment. You do not have to worry about offshoring, can put in an agentic solution wherever the work is and have about 50–60 per cent productivity benefit through that. So not only has the industry overcome the compression that was perceived as a risk, but is actually growing healthier,” Dalal added.

 

Nasdaq-listed Cognizant’s BPO revenue grew 9 per cent in the fourth quarter ended December 31 compared with a year earlier. In comparison, its constant currency growth stood at 3.8 per cent.

 

India’s business process management (BPM) industry, valued at $54.6 billion in the financial year ended 2024–25, continues to rely heavily on overseas markets. According to Nasscom, the United States remains the largest geography, contributing about half of the industry’s revenue, while Europe accounts for another 30 per cent.

 

Banking, financial services and insurance (BFSI) contributes about 30 per cent of the sector’s revenue, while hospitality and telecom each account for around 20 per cent.

 

While the industry expanded 4.7 per cent last year, its future growth will depend on how quickly companies adapt to new technologies. Many BPM firms have moved towards process optimisation and now deliver end-to-end process transformation solutions instead of traditional process management services.

 

They are also shifting from conventional pricing structures to outcome-based pricing, often adopting hybrid models depending on the specifics of each engagement.

 

Chief Executive Officer Ravi Kumar said last month that the opportunity for service providers in the BPO sector is significant as the total addressable spend is 10–20 times larger than technology spending.

 

“You’re embedding technology data into process and in recent times, machine learning and AI. The BPO business growing because we are able… to deliver to outcomes, own the value chain, and share the benefits,” he said.

 

On discretionary spending and the macroeconomic environment, Dalal said the broader outlook remains unchanged with no major acceleration, though discretionary spending has improved in BFSI and healthcare.

 

In BFSI — traditionally an early adopter of technology — spending is now focused on compliance, deploying AI tools in workflows and customer service, and accelerating digitisation.