Pure-play business process management (BPM) companies recorded their best quarter by way of annual contract values in the first three months of 2026, industry data showed, upending established market opinion that AI would immediately obliterate revenue streams for such firms that earn their daily bread from tasks seemingly repetitive in structure.
These firms showed contract values climbed 62% year-on-year, as per data from technology research and advisory firm Information Services Group (ISG).
In comparison, engineering services (ER&D) and IT services ACV were flat and down 7.7%, respectively.
This was the BPM segment’s best quarter since Q1 of 2022 (ISG reports according to the calendar year).
Industry-specific BPM companies' underlying data on domain-specific business processes are particularly advantageous, experts said, with ISG’s data showing that about half of signed deals involved data and analytics services.
“For the use cases or activities in which AI infusion has to happen, a deep understanding of how the business process is and what part of it one could start relying on AI, people who have domain knowledge or who are at the forefront of it clearly will have an advantage,” said Siddhartha Tipnis, technology lead at Deloitte India.
For instance, healthcare focus among EXL Services, Firstsource Solutions or banking and financial services focus in Genpact are expected to be advantages, owing to the deeper domain knowledge in the respective verticals.
“What has changed is what clients are now asking us to do with that foundation. Today, they come to us to bring together processes, technology, data, and organisations to deliver outcomes that simply were not possible before. Because of that, we are winning new kinds of work, engaging in new kinds of conversations, and expanding the addressable market in front of us,” said Balkrishan Kalra, chief executive officer of Genpact, in the post-earnings call earlier this month.
Big deals
Genpact posted a 5.6% YoY growth (in constant currency) in its topline for Q1, EXL Services posted a 13.4% growth, while Firstsource Solutions reported a 13.6% growth YoY, all aided by large deal wins.
On net profit, Genpact reported $148 million, up 13.1% YoY, while EXL Services posted a profit of $67 million, gaining 0.8% YoY, for the quarter ended March 31st. Firstsource reported a net profit of Rs. 205.2 crore ($24 million approx) for the period, up 27.7% year on year.
“The BPO space touches a large number of industries from an operational process point of view. And each industry's last mile (services) is extremely different. It is not a homogeneous, one-size-fits-all thing,” CP Duggal, chief business officer, WNS, part of Capgemini, told ET.
With clients looking to optimise cost amid macroeconomic uncertainty and undertake core business transformation, apart from discretionary tech spending, Duggal highlighted that this leads to less revenue compression among BPMs, since not all parts of the enterprise process can be immediately automated.
“How you help companies in recovering revenue becomes very important for an insurance company. Similarly, the revenue recognition cycle for a telecom company, for example, has a lot of cash transactions, whereas for banking, it is different. So being industry-specific in your service becomes very important,” said Namratha Dharshan, chief business leader at ISG.
The growth is despite BPM companies signing smaller contracts, with just about 20% of the contracts exceeding $5 million annually, according to ISG’s BPO study, with providers largely using “land and expand” strategies, starting with small deals and growing them over time.
“As we shift from labour-price delivery to outcomes-linked delivery. The unit of value stops being the seat and starts being the result. It's also why we are increasingly comfortable underwriting outcomes in our commercial constructs and why our pipeline of transformative wins continues to grow,” noted Ritesh Idnani, Firstsource’s CEO, in the post-earnings call in May.
However, this doesn’t necessarily mean that BPOs are immune to AI-led revenue deflation as pricing pressures continue to weigh, industry watchers said, with the recent macroeconomic uncertainty due to the West Asia conflict also adding to the grim demand outlook.
In its preview of the fourth quarter of FY26 results, Kotak Institutional Equities also noted that early signs of disruption are emerging in pure-play BPOs, as AI adoption picks up. “Deal conversion timelines remain longer than expected for large deals, indicating greater scrutiny of spends and exploring avenues to improve efficiencies,” analysts said in a note in April.
“While deals may not have gone down, the pricing pressures persist. But what has happened is the quantum of work is not going down. As enterprises bring in more AI capabilities, providers bring these AI capabilities to these operations, increasing the scope of work,” said Ashutosh Sharma, vice president and research director at Forrester.
