Information Technology – Sector Report – BPO to intelligent solutions, the next growth chapter

The global IT industry is entering a structural transition from traditional labor arbitrage-led BPM model toward AI-enabled, domain-centric and outcome-based business process services, which should expand the addressable market over the medium-to-long term. The global BPS market is expected to grow at ~4% CAGR over CY24-29P, vs. 3% CAGR in CY22-24. Despite relatively modest growth, Indian BPM industry has delivered a stronger CAGR of ~9.3% over FY22-26. We believe this outperformance can be sustained as enterprises increasingly seek partners that combine deep domain expertise with AI, automation, analytics and platform-led delivery to transform end-to-end workflows while reducing operating costs. The shift is particularly relevant across healthcare, BFSI and customer experience (CX), where increasing process complexity, regulatory requirements and the need for productivity gains are driving greater outsourcing penetration. Further, the migration toward outcome-based and platform-led models, with outcome-based contracts expected to account for 30-35% and platform-based BPM services for 25-40% of the Indian BPM market, should create opportunities for structurally higher value services. Against this backdrop, we believe Firstsource Solutions (FSOL) and SAGILITY, with their strong domain positioning and exposure to complex and highly outsourced processes, are well placed to capture the next leg of growth as the industry transitions from people-led operations toward AI-enabled intelligent operations. We initiate coverage on FSOL and SAGILITY with ‘BUY’ rating at TP of INR 330 and INR 60, respectively.