National, 18 February 2025: India’s outsourcing landscape is undergoing a significant transformation, with 81 percent of organisations planning to increase their outsourcing efforts over the next three to five years, according to Deloitte’s latest report, The outsourcing compass: Decoding strategies of today. This shift is driven by the increasing need for technological advancements, access to specialised expertise and cost efficiency. As India is set to become the third-largest economy by 2027, the country is reinforcing its position as a key hub for outsourcing and advanced service functions.
The nature of outsourcing is shifting, with organisations moving beyond traditional transactional and back office services to higher-value, strategic services. AI and automation are playing an increasingly crucial role in outsourcing agreements, with 98 percent of organisations depending on service providers for AI and GenAI capabilities. To optimise these collaborations, companies are embedding AI-specific clauses in outsourcing contracts, ensuring better performance tracking, cost optimisation and risk mitigation. This shift has led to a rise in outcome-based contracts, now preferred by 36 percent of organisations over traditional FTE-based contracts, reflecting the demand for value-driven, innovation-led collaborations.
The report highlights that better alignment with business strategy (28 percent) has overtaken cost savings as the primary driver for outsourcing. This transition is fuelled by advancements in AI, automation and digital transformation, which enable organisations to outsource complex functions such as product development, supplier evaluation and strategic brand management.
Outsourcing models are evolving to include a blend of GBS centres, third-party providers and flexible talent solutions. According to the report, 55 percent of organisations use GBS centres for governance and oversight while relying on third-party providers for execution and efficiency optimisation. Additionally, 35 percent of organisations have adopted the Build-Operate-Transfer (BOT) model, which enables them to scale capabilities while maintaining long-term operational control. These models offer businesses greater agility, cost efficiency and seamless integration between IT and business functions.
Yatin Patil, Partner, Deloitte India, said, “Supported by a thriving start-up ecosystem and continuous upskilling initiatives, India is shaping the future of outsourcing by driving cost efficiency and innovation. Nearly 70 percent of organisations engage with non-traditional service providers to optimise costs while gaining access to new-age technologies and innovative solutions.”
While geopolitical stability remains a key consideration for outsourcing decisions, India continues to be a preferred destination due to its expanding services sector, reliable business environment and strong policy framework. Despite global uncertainties, India’s expertise in digital transformation, cybersecurity and vendor management has positioned it as a scalable and secure outsourcing hub.
The report indicates that strategic supplier collaborations have enabled organisations to achieve an average annual cost savings of 10–25 percent from their outsourced contracts. Organisations balancing strategic service providers and niche providers have achieved even higher savings of 15–35 percent. As outsourcing engagements become more complex, organisations are strengthening their vendor management strategies, with 45 percent of mature outsourcing firms now operating dedicated Vendor Management Offices (VMOs) to enhance governance, supplier risk management and outsourcing effectiveness.
As organisations continue to redefine their outsourcing strategies, India is well-positioned to lead the next phase of global outsourcing expansion. With technological advancements, evolving vendor management practices and a highly skilled workforce, India offers long-term business sustainability, innovation and cost efficiencies. The findings from the report reinforce India’s role as a cornerstone in global business strategies, driving transformation across industries worldwide.
