How modern outsourcing can help solve 5 enterprise challenges

For years, outsourcing has been a reliable back-office fix: a way to reduce costs, offload transactional tasks, and manage work that didn’t require close strategic oversight.

But today’s business challenges are leaving traditional outsourcing in the rearview mirror. Companies must navigate a volatile mix of margin pressure, skills gaps, moving-target risks, and nonstop technology change. And, these days, every business function demands strategic attention.

As complexity rises, so do expectations. Which is why business leaders are asking more of their service delivery partners—not just execution, but insight, flexibility, and innovation. In fact, a recent KPMG survey found that 9 in 10 executives believe the services their organizations need going forward must come from a new generation of providers—not legacy firms defined by transactional outsourcing.¹

These enhanced new providers are stepping up. They’re more agile, embedded in the business, and focused on driving outcomes. Beyond efficiency, they’re helping organizations modernize operations by filling capability gaps and accelerating transformation efforts.

The Challenge: “We need to cut costs—without cutting capabilities.”
Cost pressure is constant. But many business leaders now face a sharper mandate: Reduce spending without undermining performance, essential skills, and customer experiences... at a time when even just pausing investments can put the organization behind. Traditional outsourcing locked in savings, but it wasn’t designed to deliver the strategic solutions that companies now need.

The New Model: Leading companies are prioritizing outsourcing providers who can offer more predictable costs while expanding capabilities. These firms embed automation into their services, redesign processes to eliminate waste, and structure contracts around performance and continuous improvement. Fixed costs become variable, and pricing models evolve to reflect value and outcomes, not simply volume and cost-cutting.

The Trend: Buyers ranked speed to market for new products and services as their top requirement for engaging a provider—while cost savings came in just fifth.¹

The Challenge: “We can’t find the right skills.”
Talent shortage isn’t new. But it’s getting harder to manage as companies struggle to source the specialized skills needed to modernize operations and scale up new capabilities. Traditional outsourcing focused on filling seats, not capability gaps—and it rarely flexed with the business.

The New Model: Beyond covering headcount, modern outsourcing providers deliver embedded expertise via multidisciplinary teams with AI fluency, automation, domain experience, and industry-specific knowledge. These teams plug directly into critical functions like cybersecurity, tax, compliance, and finance, often with prebuilt tools and accelerators that create new efficiencies. This helps organizations close skills gaps quickly while maintaining flexibility through modular contracts and scalable delivery.

The Trend: Just 19 percent of companies plan to use low-cost talent as part of their service delivery models going forward, compared with 42 percent today.¹

The Challenge: “We need to accelerate AI and automation.”
Everyone’s chasing the AI advantage, but few companies are ready to build it from scratch. Standing up new AI and automation tools takes capital. Integrating and scaling those tools takes time. And even when you get it right, the technology landscape keeps shifting. That leaves many companies stuck with legacy systems, manual workarounds, and systemic data bottlenecks that stall innovation.

The New Model: Modern providers are embedding AI and automation directly into service delivery from Day 1, reducing the need for large upfront investments. Top-heavy software licenses or hit-or-miss innovation pilots give way to production-ready solutions that drive rapid impact. Whether it’s intelligent document processing, agent-based service models, or embedded analytics, the goal is speed to value. No proof-of-concepts, no delays, just outcomes.

The Trend: 83 percent of companies plan to accelerate AI and automation in the next two years,² but many still face major hurdles like limited in-house expertise, restricted funding, legacy data, and tech complexity.

The Challenge: “Our business is too complex for a one-size-fits-all model.”
Standardized outsourced services are out of step with the modern enterprise. Business units often operate on different systems, with different goals, in different geographies. Trying to shoehorn them into a single outsourced model leads to friction, confusion, and service breakdowns. And internal teams can’t support custom builds for every function.

The New Model: Modern outsourcing embraces complexity with modular models that flex by function, geography, and maturity. Providers support hybrid environments that combine global capability centers, shared services, and external partners—while evolving over time. Structured governance helps clarify roles and scale delivery, without locking the business into a rigid mold. Instead of one-for-all, it’s fit-for-purpose.

The Trend: Traditional outsourcing is forecast to fall from 55 percent to 37 percent over the next two years, while software-based service delivery doubles, from 14 percent to 30 percent.²

The Challenge: “We need to move faster and be able to pivot when things change.”
Business doesn’t move in five-year cycles anymore. New products, markets, and risks emerge overnight. Traditional outsourcing models are too rigid, constrained by fixed headcount, front-loaded onboarding, and inflexible contracts. When priorities shift, the old model struggles to keep up.

The New Model: Modern outsourcing is designed for speed. Contracts are modular. Teams are agile. Onboarding is faster and more integrated. Providers deliver with flexibility in mind—ready to scale, shift, or evolve as the business does. This embedded adaptability turns outsourcing from a cost center into a source of resilience.

The Trend: 41 percent of enterprises are breaking up large contracts into smaller modules, while 52 percent are adding renegotiation clauses tied to economic triggers²—turning contracts into instruments of agility.

Key Notes

¹“Accelerating business transformation,” KPMG LLP, fall 2024.
²“Tariffs lit the fuse for bold enterprises to automate,” HFS Research and KPMG LLP, July 2025

Today’s outsourcing model looks nothing like the past. Our new report explores how AI, flexible delivery models, outcome-based engagements, and more are upending long-standing ideas and expectations around outsourced services.

KPMG LLP (KPMG) helps organizations navigate the new era of outsourcing—from strategy and decision frameworks to deal execution, governance, and value realization. Our teams bring deep experience across the sourcing lifecycle and understand what it takes to turn outsourcing into a transformative business capability. We support clients by:

Developing sourcing strategies aligned to transformation goals, talent needs, and delivery models
Designing and executing competitive deal processes, including provider evaluation, contract support, and negotiation
Standing up governance frameworks and operating models for multivendor environments
Embedding innovation, AI, and performance tracking into delivery oversight
Enabling long-term value through business case design, change management, and continuous improvement

Whether you’re optimizing an existing model or designing one from the ground up, KPMG can help you build a more strategic, resilient, and future-ready approach to outsourcing.