TLDR: A recent report by Kotak Institutional Equities indicates that India’s Business Process Outsourcing (BPO) sector has consistently outperformed IT services in export growth and is expected to maintain this lead into fiscal year 2026. This growth is fueled by global clients’ focus on cost optimization, increased outsourcing, and a shift towards offshore delivery models. The report also highlights the dual impact of generative AI, presenting both revenue deflation risks and new opportunities for agile BPO firms in data services.
Indian Business Process Outsourcing (BPO) services have demonstrated a robust export growth, consistently surpassing that of IT services over several consecutive years. This trend is projected to continue, with the BPO sector maintaining its momentum into the Financial Year 2026, according to a comprehensive report by Kotak Institutional Equities. The findings, released around August 27, 2025, underscore a significant shift in global outsourcing dynamics.
The primary driver behind this accelerated growth is a heightened focus on cost optimization among international clients. This has led to an increased propensity for outsourcing various business processes and a notable shift towards offshore delivery models, with India at the forefront of this expansion. Indian BPO services exports currently stand at an impressive USD 45 billion, constituting 20% of the total global outsourced spends. Over the period of FY2015-25, these exports have grown at a Compound Annual Growth Rate (CAGR) of 7.8%, which is 250-300 basis points higher than the global outsourced spends during the same timeframe. Service providers contribute approximately two-thirds of India’s BPO exports, with pure-play Indian BPO firms being particularly well-positioned as challengers to established global incumbents, owing to their leaner cost structures and a move towards outcome-based engagement models.
The global BPO services market is anticipated to grow at a CAGR of 3.9% over Calendar Year 2024-29E, reaching an estimated USD 268 billion by CY2029E. While the evolving technology landscape, particularly the adoption of generative AI (Gen AI), presents potential revenue deflation risks for larger, traditional incumbents, it simultaneously unlocks substantial new opportunities for more agile BPO firms. Enterprises are increasingly automating routine tasks, and Gen AI is expected to further enhance productivity gains. This technological shift creates incremental prospects for BPO providers in specialized areas such as data annotation, collection, and curation services, which are crucial for the development and refinement of large language models (LLMs).
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However, the report also cautions that the widespread adoption of Gen AI may lead to disruptions in existing business models within the sector. Initial implementation of AI is expected to concentrate on industry-agnostic support functions. Conversely, industry-specific BPO services, which demand a deeper contextual understanding, are considered more resilient due to their inherent complexity and stringent regulatory requirements, especially in scenarios involving legacy technology systems that pose integration challenges. This contrasts with the Indian Information Technology (IT) sector, which is expected to experience flat revenue growth due to ongoing macroeconomic uncertainties and cost pressures impacting client spending.
