CX BPO at a crossroads: further pain, pivot, or possibility?

Two recent headlines have intensified the ongoing discussion within the Customer Experience (CX) industry regarding whether current conditions represent a temporary downturn or a structural reset.

Capita agreed to sell its private sector contact center business to investment firm Inspirit Capital. The business being sold generated GBP398.1 million of 2025 adjusted revenue, but also an adjusted operating loss of GBP34.9 million, and Capita agreed to sell it for GBP1 with £6.5 million of cash left in the business for working capital.

Meanwhile, Concentrix reported declining operating margins even as revenue grew only slightly. Q1 FY2026 revenue rose 5.4% year on year, but operating income fell 29.8%, and adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) fell 6.9%.

The blog explores why such headlines such as these can be alarming but for those willing to look past the short-term turbulence, they point toward something more interesting than a simple story of decline.

Reach out to discuss this topic in depth.

The industry is under structural strain

The temptation is to treat these as isolated stories: a UK Business Process Outsourcing (BPO) rationalizing a bloated portfolio; a global Business Process Outsourcing (BPO) addressing the challenges associated with post-acquisition integration. However, these are symptoms of a deeper structural challenge that is reshaping the entire CX BPO industry.

The traditional CX outsourcing model was built on a simple premise of labor and cost arbitrage. Organizations relocated staff offshore to lower the cost per contact, allocated a portion of the savings to clients, and retained the remainder as margin. For two decades, that model worked. Now the traditional model is being squeezed from both ends. Enterprises still want lower cost, but they also expect digital-first experiences, measurable business outcomes, better security, and Artificial Intelligence (AI) enabled transformation.

There are further challenges ahead

AI agents are absorbing high-volume work that once anchored large contracts, while wage inflation is eroding the offshore cost advantage. Enterprises have evolved into sophisticated buyers demanding measurable outcomes over simple cost reduction. Consumer dissatisfaction is attracting regulatory scrutiny that could shift significant liability onto BPOs, and geopolitical instability is tightening budgets, disrupting delivery locations, and raising business continuity expectations. Together, these forces are compressing margins and challenging the traditional operating model from every angle.

The industry itself is not shrinking

The demand for CX is not going away. It is still a ~US$118 billion industry and continues to grow, with most growth coming from embedded digital services. The opportunities are there for the taking:

AI-augmented high-value CX: As AI absorbs routine tasks, human agents handle complex, emotionally charged, and high-stakes interactions commanding premium rates. This is where BPOs can command premium rates and build defensible relationships
AI implementation and orchestration: BPOs with deployment capability, training data, and change management expertise can become strategic AI partners for enterprises
Knowledge-centric customer journeys: Blending telemetry, customer data, and next-best-action insights drives measurable revenue lift and higher margins
Industry vertical specializations: Healthcare, financial services, and public sector demand domain expertise over generic execution due to regulation and compliance complexities
Outcome-based engagements: Contracts tied to Net Promoter Score (NPS), churn, or revenue metrics unlock new revenue models and deeper client alignment
Nearshore and onshore delivery: Compliance needs and sensitivity concerns are driving repatriation and nearshoring, creating opportunities across Portugal, Eastern Europe, Africa, and Latin America

Enterprises want CX partners with skin in the game

Enterprises are looking for optimum provider portfolios, with deeper capability, and more accountability. They now ask:

How does the partner deploy AI and what outcomes can they prove?
Is an the partner link CX performance to revenue and retention, not just operational Key Performance Indicators (KPIs)?
Does the partner have genuine vertical expertise and compliance know-how?
How flexible is the commercial model?
Can the commercial model transition from input pricing to outcome- or consumption-based contracts?
Is the provider a strategic innovator or only an Service Level Agreement (SLA) fulfiller?

Answering these questions requires providers to move beyond execution and become outcome-oriented strategic partners.

CX providers must reinvent themselves

The path forward requires genuine commitment and meaningful investment. Thriving rather than simply surviving needs practical priorities, such as:

Building proprietary AI capability: Own data assets, training pipelines, and orchestration layers. Rebranding a third-party Large Language Model (LLM) is not strategy
Shifting commercial models toward outcomes: Move toward gainshare, consumption, and per-outcome contracts. Productize CX components and embed automation investment clauses into renegotiated deals
Verticalizing and moving up the value chain: Sector depth in training, tooling, and compliance commands premium pricing and reduces churn
Developing the governance muscle: Make AI governance, privacy, and audit trails standard capabilities; add advisory skills to advise regulated clients
Treating workforce transformation as a competitive advantage: Reskill agents to manage complex interactions, supervise AI, and deliver higher-value services

Final word

Capita’s exit from private-sector CX and Concentrix’s margin challenges do not indicate an industry in decline. They signal transformation. Providers that persist with the volume and arbitrage model will continue to experience margin compression, contract attrition, and ultimately, similar consolidation or divestiture measures as are currently receiving attention.

Conversely, providers that proactively invest in AI native capabilities, sector-specific expertise, outcome-based commercial models, and comprehensive advisory services will position themselves within a market that is larger, more valuable, and structurally more resilient than the previous environment. The CX BPO industry’s best chapter may well be the one it hasn’t yet written.

If you enjoyed this blog, check out, What the latest earnings signal about the future of CX, which argues that CX is headed for recalibration, not disruption or resurgence.  

For a deeper discussion about the future of CX outsourcing, contact Abhijnan Dasgupta ([email protected]).  