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Services as software: The disruption is here
A recurring theme in our conversations is the accelerating shift from traditional outsourcing models to software-driven solutions, which HFS termed ‘services as software.’ A notable example is a finance automation tool deployed in back-office operations. In this case, a BPO provider is being replaced by a software platform and a retained in-house team, underscoring the ‘services-as-software’ trend we’ve been discussing.
This transition raises a fundamental question for enterprises and service providers: Is this the tipping point where technology fully displaces traditional labor arbitrage models in certain processes? While the efficiencies are undeniable, the jury is still out on whether enterprises are fully equipped to manage the change.
Service providers should prepare for a future where their biggest competitor isn’t another BPO but a tech platform.
— Analyst observation from Reetika Fleming
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From cost to skills arbitrage: A new GCC mandate
Global capability centers (GCCs) are entering a new phase of relevance, driven by the need for specialized talent rather than cost reduction. A standout example is a global energy company investing in India, primarily to find super-specialized talent at scale—150 PhD holders for hydrogen research—a clear pivot from financial arbitrage to skills arbitrage.
However, this shift poses a challenge for service providers. How do they support clients in transforming GCCs into true innovation hubs rather than glorified shared service centers? Advisory services and talent strategies must evolve to keep pace with these demands.
The GCC of the future must deliver innovation, not just savings. Enterprises and service providers alike need to rethink their playbooks.
— Key takeaway from Saurabh Gupta
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Agentic AI: Misunderstood and misapplied
The concept of agentic AI—technologies designed to act autonomously within a defined scope—continues to dominate industry chatter. Yet, as Elena Christopher put it, “No one knows what the hell it is.” Enterprises struggle to define what agentic AI should do, while service providers grapple with how to price and deliver it effectively.
For example, while some providers pitch agentic AI as revolutionary in customer service, others admit they’re simply repackaging existing technologies. This ‘agent washing’ creates confusion, undermining trust and slowing adoption.
The industry needs to move beyond buzzwords. Enterprises should focus on outcomes, not just capabilities, when evaluating agentic AI.
— Analyst observation from David Cushman
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Deal flows and enterprise appetite: Shifting the vendor dynamic
Our discussion highlighted broader trends beyond vendor consolidation, pointing to a stronger demand appetite as enterprises seek transformational partnerships. While some consolidate vendors to streamline operations, others focus on identifying emerging players that can deliver tech-driven solutions.
One insight revealed that enterprises are placing a greater emphasis on comprehensive deal flows, reflecting a growing need for both strategic outcomes and accountability in execution. As enterprises strive for deeper relationships, they must also navigate the risks of over-reliance on fewer providers, including challenges such as delivery gaps and limited innovation.
Enterprises are balancing consolidation with an openness to new entrants, creating opportunities for agile disruptors to reshape the competitive landscape.
— An open opportunity for the disruptive
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Rethinking processes: Beyond the human mold
Finally, a critical point of reflection for enterprises: Are your processes still defined by outdated constraints? One discussion centered on insurance underwriting, where underwriters insist on manually reviewing every application. However, AI can easily triage low-risk cases, freeing underwriters to focus on complex scenarios. Furthermore, David and Reetika raised concerns about simply replacing ‘bums in seats’ with their agentic equivalents, highlighting the need to rethink processes entirely. HFS’ Josh Matthews brought us back to goal setting, asserting that enterprises must move beyond replicating human workflows and instead define new outcomes—ones that align with the capabilities and efficiencies of modern technology rather than human limitations.
The future isn’t about replicating human workflows with technology—it’s about redefining what good looks like.
— Analyst insight from David and Reetika
The Bottom Line: To thrive in the future of business operations, enterprises and service providers must embrace bold strategies and rethink their foundational processes.
Whether it’s about adopting software over services, redefining talent strategies, or moving beyond buzzwords like agentic AI, the key lies in pursuing transformational outcomes—not just incremental change.
Our challenge to enterprise leaders is simple yet profound: Don’t settle for small improvements. Rethink the foundations of your operations to unlock new value. As always, HFS Research will guide you with fresh perspectives and actionable insights.
