How AI and automation are changing service delivery

AI and automation are changing every corner of the business world. In many ways, these technologies are ahead of schedule. As several recent KPMG surveys have shown, 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: 8 in 10 enterprises rely on third-party providers for key business services, 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.

Modern managed services from KPMG combine advanced technology, specialized teams and outcome-focused approach to drive transformational value.

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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. Nine in 10 executives say transactional service delivery models no longer meet their needs. And labor-led outsourcing is forecast to fall from 55 percent to 37 percent over the next two years—while software-based service delivery is projected to jump from 14 percent to 30 percent. Those are dramatic swings that are already impacting traditional models in contracting, scope, and budget allocation.

The drivers are clear: Flexibility and technology enablement have overtaken cost and labor efficiency as the top priorities for service delivery. It’s a fundamentally different approach—built not to run the business as it was, but to keep up with how fast things are changing.

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.

95%

of enterprises plan to increase AI spending.

83%

say they are accelerating automation initiatives

72%

plan an automation implementation within two years.

Virtually everyone is reporting ROI from AI and automation implementations, including productivity gains (98 percent), improved profitability (97 percent), and higher work quality (94 percent).

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.

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.

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. Ninety-three percent of executives say they want service providers who can combine technology and process expertise, and more than 8 in 10 now expect providers to bring AI, strategy, and consulting capabilities.

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:

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.

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.

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.

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.

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.

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.

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.

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.

Dig deeper into the research

This article draws on three recent surveys and research reports:

KPMG AI Quarterly Pulse Survey: Q2 2025

Accelerating Business Transformation, KPMG and HFS Research.

Tariffs lit the fuse for bold enterprises to automate, HFS Research, in collaboration with KPMG US, July 2025.

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Bassam Khattab

Partner, Advisory, Managed Services US Leader, KPMG LLP

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Cory Krutis

Principal, Advisory, Managed Services, KPMG US

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Sridhar Pattisapu

Managing Director, Advisory, Managed Services Solution & Technology, KPMG LLP

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Bassam Khattab

Partner, Advisory, Managed Services US Leader, KPMG LLP

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Cory Krutis

Principal, Advisory, Managed Services, KPMG US

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Sridhar Pattisapu

Managing Director, Advisory, Managed Services Solution & Technology, KPMG LLP

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Relevant Results

Ready to transform?

Old models can’t keep up

The next generation of service delivery

Why modern managed services are now essential

Where enhanced services are delivering value

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.

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.

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.

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.

View all of our managed services insights

Related insights

How KPMG can help

Meet the team

Contact KPMG

Headline

How AI and automation are changing service delivery

Ready to transform?

Old models can’t keep up

The next generation of service delivery

Why modern managed services are now essential

Where enhanced services are delivering value

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.

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.

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.

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.

View all of our managed services insights

Related insights

How KPMG can help

Meet the team

Headline

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.

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.

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.

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.