Outsourcing Reimagined: Top Strategies for Future-Proof Partnerships

The days of business process outsourcing (BPO) driven by labor arbitrage for back-office transactional activities are over. BPO now delivers value on a broader scale. Underpinning this evolution are two primary trends:

1. Companies want service providers to deliver full business outcomes, not just task outputs, by outsourcing more activities across an integrated set of front, middle, and back office activities.

2. Companies are looking to outsourcers as a source of talent and innovation for the adoption of digital solutions.

SSON Research & Analytics’s State of Shared Services and Outsourcing Industry Global Market Report 2025  echoes these trends. Forty-eight percent (48%) of report respondents note they are shifting from traditional back-office activities toward core business support.  The top benefit cited for outsourcing is access to talent and skills.  The subtitle of the report, From Back Office to Business Enabler:  Elevating Impact in a Digital World, conveys the shift in the GBS value proposition and by extension outsourcing’s role.

While the value proposition of this evolution is enticing, it also comes with increased complexity and risks for both buyers and providers of services. As a result, the relationship model for outsourcing is also shifting from performance-based managed services to vested partnerships as depicted below:

The challenge has been that the way outsourcing is evaluated, contracted for, and managed has been slower to adapt to this evolution. Many outsourcing contracts and relationships are highly structured, with relatively long durations, strict service levels, and predefined economics over the contract life. Buyers and providers need a new, more adaptable way to establish and manage outsourcing relationships.

Here is what re-imagined outsourcing the future of outsourcing looks like:

1. Build agile mechanisms for relationship and agreement renewal. The standard length of a BPO contract has evolved from 7- to 10 years in the early days of outsourcing to 5 years today. It is unlikely to expect that the contract term itself will shorten significantly as both buyers and providers of services are still looking for some level of predictability and stability. However, outside of generic change control procedures, there is little mention of mechanisms for contract re-adjustment for the latter part of a contract term or contract renewal to allow for longer-term strategic partnerships. Contracts and governance practices need to allow for more explicit in-term reviews adopting agile processes and sprints, especially for innovation, transformation, and renewal.

2. Add outcome-based service levels. Traditional outsourcing service levels are more narrowly focused on timeliness, quality, compliance, and accuracy directly attributable to the service being performed. As more digital transformation and front and middle office scope are added, the impact on the business extends well beyond the direct services being provided. Service levels need to be more outcome-based reflecting strategic objectives. Examples of business outcomes include higher customer experience and loyalty, improved cash flow, and increased market share. This requires a shift in perspective from service levels that need to be tied directly to what a service provider can control to one in which a service provider can have an impact, but not necessarily direct control.

3. Incent service performance using both a carrot and a stick. Traditional service level agreements (SLAs) put service provider fees at risk for not achieving defined targets. There is little upside potential for a service provider who outperforms targets. As business outcomes are added to the list of service levels, contracts should allow for gains for providers, not just risks. This may require changes in how outsourcing services are fundedfunded, including performance and innovation or related pools by buyers and providers.

4.  Adopt new postures toward operational risks.  As middle and front office processes are outsourced, greater scrutiny is needed around operational risks such as lost sales, or regulatory or data privacy breaches.  At one level, buyers and providers can work to mitigate these risks in the service delivery model itself applying artificial intelligence and related technologies to flag potential errors or carefully orchestrating the handoffs between outsourced and retained staff. Contract terms must also change in areas such as limits of liability for breaches and service level impact.

5. Adapt the commercial model to different types of services. The relatively homogeneous nature of back-office process outsourcing lent itself to a standard commercial model of managed service where the provider takes on service commitments at a predictable price.  As companies outsource processes requiring higher levels of complexity along with greater levels of transformation, different commercial models may be better suited to particular services even within the same agreement. For example, less routine capability services may be better provided through a staff augmentation or subscription-based pay-as-you-go model. Other high-risk or impact services may be suited for a co-manage or build-operate-transfer model where the buyer excerpts greater managerial control over service delivery at different phases of the relationship.  Structure future agreements in modules by class of service.

6. Evaluate service providers against a new set of criteria. Relative to back-office processes, middle and front-office processes have more industry-specific characteristics.  Therefore, service providers should be evaluated for their experience and capabilities in similar industries. Similarly, as providers are engaged as digital partners, they should be assessed for their digital capabilities. This should extend beyond generic digital capabilities to include capabilities in specific applications as increasingly digital features such as artificial intelligence are embedded in these software packages.

7. Invest in service governance as a capability. The complexity and reach of new outsourcing relationships demand stronger service governance. A robust service management framework that includes organization structures and roles, committees, practices and procedures, performance metrics and other information exchanges, and supporting tools is needed.  Increasingly complex service governance is becoming a core capability and competency, not just a role assumed by someone in the function or process being outsourced.

We are entering a new frontier for outsourcing with the potential for significantly increased value. To reap the benefits from the changing outsourcing landscape, providers, buyers, and advisors must all work collectively together to adapt to new ways of working. To hear more insights from our SSO Network please join us for our AP Automation Digital Summit.