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How AI and automation are changing service delivery

The shift is on: Companies are redesigning how work gets done with AI, automation, and modern managed services at the core.

AI and automation are changing every corner of the business world. In many ways, these technologies are ahead of schedule. As the 2026 KPMG Managed Services Outlook survey shows, companies are accelerating implementation and ROI even as they grapple with equally fast-moving new complexities around security, governance, and control.

One of the biggest arenas for all this change is service delivery, where AI and automation are upending long-standing assumptions about how work gets done. Entrenched models focused on optimizing labor costs and absorbing transactional tasks are being replaced by ones built around technology-enabled services and business outcomes.

The implications are significant: 87 percent of companies say managed services are now highly integrated in their digital transformation strategy, per our research. But what they want from those firms is changing by the day. For many companies, a new class of provider is becoming the operational engine that helps them scale AI and automation, manage the related complexity, and accelerate results.

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Old models can’t keep up

Traditional outsourcing—centered on labor arbitrage, static contracts, and transactional delivery—is “Exhibit A” of a service model under stress. Built to optimize costs through scale, outsourcing models were never designed to support the speed, flexibility, and technology-driven intelligence that are now essential for leading organizations.

To close the gap, companies are actively exploring new approaches to the old models. Eighty-two percent of leaders say there is a clear distinction between modern managed services and other kinds of outsourcing, with AI acceleration emerging as a key reason.

The drive is clear: AI implementation is now a critical capability of services providers, according to 98 percent of senior leaders. This demands a fundamentally different approach—service delivery built not to run the business as it was, but to keep up with how fast things are changing. Indeed, technology innovation is where managed services are expected to drive the greatest transformational effects—both today and in the future.

The next generation of service delivery

AI and automation are at the core of this emerging new approach to service delivery. But instead of simply layering new technologies on top of old processes, many companies are rethinking and redesigning critical workflows—from front-line interactions to back-end execution.

That shift is increasingly being supported by a new class of modern managed services providers. These firms are helping organizations operationalize AI and automation across complex environments—integrating tools, updating workflows, and managing execution to help deliver measurable, scalable outcomes.

#1

AI management is the leading area of managed services investment in the next two years

98%

of managed services buyers cite AI implementation as a critical capability.

91%

of leaders view managed services as important for agentic AI delivery.

What’s emerging is a new baseline for enterprise services that is faster and more adaptive, technology-enabled, and anchored by a more resilient service delivery model.

Why modern managed services are now essential

For many companies, the speed of AI adoption has outpaced their internal readiness. The pressure to modernize is real. But so are the risks that come with rapid deployment and workflow changes. In the race to scale AI and automation, critical areas like security, governance, and risk management are often deferred or bolted on too late. Data is another big roadblock, with entrenched issues around data quality, access, and governance blocking meaningful execution on AI.

While companies are moving fast, they’re increasingly aware of what they might be missing. In a recent survey about AI adoption, 69 percent of executives flagged data privacy as their top concern—up sharply from 43 percent just six months earlier. Worries about regulatory risk (55 percent) and data quality (56 percent) are also rising.1

Modern managed services providers are helping organizations bridge this critical gap. They lead with automation and AI to propel business transformation, but they pair that innovation with secure, scalable delivery models aligned to strategic priorities.

Demand for this enhanced level of service is redefining the model, as our research shows. Nearly 80 percent of managed services buyers say AI-powered automation is significantly or fully integrated into their managed services strategy, expecting providers to deliver on everything from data insights to security monitoring.

1 KPMG AI Quarterly Pulse Survey: Q2 2025

Where enhanced services are delivering value

Given the velocity of change, many organizations are leaning on modern managed services providers to help them scale AI and automation with structure, speed, and strategic execution. Here are a few examples of where that’s happening today:

1

Cybersecurity
Providers are embedding AI-powered threat detection and always-on monitoring into managed cyber services, helping clients identify and contain risks before they escalate.

Learn about KPMG Cyber Managed Services, a human-led, AI-enabled approach to strengthen defenses and upgrade operations.

2

Compliance and governance
Automation supports digital audit trails, policy mapping, and training to stay on top of emerging regulations while maintaining operational continuity.

Discover how KPMG KYC Managed Services applies to AI, analytics and automation to help strengthen customer due diligence and financial crime compliance.

3

Data readiness
Clean data is critical for effective AI. Managed services teams are helping companies refine data sets, improve quality, and upgrade infrastructure for scalable AI adoption.

4

Finance functions
AI-enabled managed services in finance are supporting real-time forecasting, anomaly detection, and fraud prevention—bringing more speed and control to finance operations.

Discover how AI-Powered Finance as a Service by KPMG helps finance functions reduce costs and boost productivity.

5

Digital transformation
From modernizing IT operations to reimagining core business processes, providers are helping clients shift from legacy workflows to cloud-native, digitally integrated service models.

Learn how Cloud Platform Management by KPMG leverages skilled teams, AI and automation to maximize the benefits of your cloud applications.

6

Tool integration and deployment
Clients struggling with fragmented AI toolsets are leveraging managed services for integration support and to access licensed technologies through cost-efficient delivery models.

7

Operational continuity and culture change
Managed services offer transitional stability to help clients navigate the impact of expanding AI and automation on their people, processes, and technologies. A big focus here is the human side of change, with training programs, AI literacy efforts, and ongoing support that help internal teams adapt and thrive.

Explore how KPMG Learning as a Service specialists use AI, digitization and enhanced experiences to help optimize learning operations.

8

Strategic collaboration and innovation
Some managed services agreements now include joint innovation funds, in which clients and providers co-invest in AI use cases that advance transformation goals together.

As these examples demonstrate, modern managed services are not just a delivery mechanism, they’re a platform for transformation. And as the pace of change accelerates, they’re becoming indispensable to helping companies get AI and automation to work at scale.

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How KPMG can help

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KPMG combines advanced technology, deep functional and sector expertise, and leading practices to handle knowledge-intensive processes across the business—both non-core and core—while driving your strategic priorities. Our subscription-based services are designed to offer predictable costs, any-shore delivery, and the option to flex up or down to meet fast-changing needs.

Meet the team

Our KPMG Managed Services professionals bring significant functional, industry, and technology experience to every engagement, including the latest AI, automation, and enterprise data capabilities. Please reach out to learn more about how our modern managed services teams can help you transform your company’s operations and position your organization for long-term growth and resilience.

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Bassam Khattab
Partner, Advisory, Managed Services US Leader, KPMG LLP
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Image of Cory Krutis
Cory Krutis
Principal, Advisory, Managed Services, KPMG US
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Image of Sridhar Pattisapu
Sridhar Pattisapu
Managing Director, Advisory, Managed Services Solution & Technology, KPMG LLP
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Image of Bassam Khattab
Bassam Khattab
Partner, Advisory, Managed Services US Leader, KPMG LLP
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Image of Cory Krutis
Cory Krutis
Principal, Advisory, Managed Services, KPMG US
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Image of Sridhar Pattisapu
Sridhar Pattisapu
Managing Director, Advisory, Managed Services Solution & Technology, KPMG LLP
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