The Information Technology Enabled Services (ITeS) and Business Process Management (BPM) industry is not facing extinction; it is undergoing a radical reinvention.
The narrative that ITeS is “dead” due to automation is misleading. Instead, the sector is experiencing a fundamental leap from relying on human Full-Time Equivalents (FTEs) to delivering value through autonomous, outcome-based models.
While the ITeS segment’s growth rate has recently been modest—projected at 2-3% for the period ending March 2025, according to KS Viswanathan, former vice-president at NASSCOM—this is reflecting a shift from commoditised services to AI-driven business transformation.
The Convergence of IT and ITeS
The traditional separation of IT and ITeS is “becoming moot because, from the client’s perspective, they are becoming one,” said Yugal Joshi, partner at Everest Group, a leading global research firm. As clients pursue AI-led transformation, their focus is shifting to changing core business processes. With a service provider penetration of only around 20%, there is immense room for growth.
The adoption of Agentic AI is injecting a “fresh lease of life” into traditional services. These AI systems can take over processes previously handled in-house, enabling service providers to deliver them more efficiently. Clients will eventually want tech-infused business processes that can run on their own or with optimised human collaboration.
This is leading to integrated spending across processes, data, applications, and technology, a convergence that, along with the rise of “AI-native competitors,” is forcing service providers to innovate. This strategic change is creating a powerful nonlinear growth model that drives superior efficiencies and cost optimisation.
The New Commercial Reality: From FTE to Outcomes
The decades-old practice of billing clients based on headcount (the FTE model) is quickly becoming obsolete. As Joshi pointed out, enterprises are no longer purchasing ‘BPO’ or ‘IT services’; they are spending to “solve complex problems and create market differentiation.”
This is a necessary evolution, especially with sustained pressure from annual price reductions of 5.5-6%. The industry’s consistent growth comes from productivity gains, not headcount expansion, as Viswanathan clarified.
Leading firms are making this strategic pivot mandatory. “We are deliberately moving away from FTE-based models to outcome-based ones,” confirmed Riju Vashisht, chief growth officer at Genpact. At Genpact, approximately 70% of revenue from their Advanced Technology Solutions (ATS) comes from non-FTE models, which “generate more than double the revenue per headcount.” This new model ties compensation directly to outcomes like “accelerated cash flow or increased accuracy,” not to human labour, said Vashisht.
The Technology Imperative: Agentic AI and Process Intelligence
The new service model relies on autonomous systems guided by critical business context. In Customer Interaction Services (CIS), AI is changing the landscape. As Viswanathan noted, support is “no more voice alone. It is also your chat, your mail, et cetera.”
AI analyses call patterns to automate roles, and new speech conversion systems are “augmenting the capacity for the ITeS companies to go beyond English-speaking geography.”
Genpact utilised its Agentic AP Suite for a major client, modernising accounts payable processes to increase straight-through processing. This enabled the client to process over two million invoices annually, freeing up human teams.
However, the industry understands that technology must be grounded in a business context. As Genpact CEO BK Kalra often mentions: “AI without process intelligence is just expensive software.” Process intelligence is the essential domain expertise that provides the competitive edge and manages “last-mile complexity,” ensuring technology translates into tangible client value.
The market is waiting for clients to fully realise the ROI of these transformations, but Viswanathan is optimistic: “market is changing so much, both of them (clients and service providers) will find the ROI and move.”
The urgency to transform is heightened by new rivals. Joshi warned that competition now comes from AI-native service providers who are fundamentally changing the way these business processes can be reinvented.
He concluded with a sharp admonition: “any service provider still thinking in [the] traditional sense of any business process, stands to lose the business very soon.” The future of ITeS is not about finding cheaper labour, but building the most intelligent technology stack.
The Strategic Failure: Diversification Lag
A critical fault line exists among some large, legacy IT services companies: a failure to strategically deploy capital.
Financial analyst Chokkalingam G, founder of Equinomics Research criticised large IT services companies which, upon realising traditional growth was limited, “started returning the money to the shareholder instead of diversifying.”
He argued that they missed opportunities in high-growth ITeS sectors like e-commerce and specialised capital market infrastructure, where the “backbone is IT only.”
This “lethargic” attitude and failure to pursue inorganic growth through acquisitions means they failed to diversify and “risk becoming an ‘underperforming sector’,” he said.
The path forward is innovation and finding “new avenues for such opportunities,” according to Joshi.
The future of ITeS demands a strategic, integrated approach that places process intelligence and Agentic AI at its core. The industry must move forward through reinvention of business operations, services, and commercial models.
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