Generative artificial intelligence (GenAI) has taken the world by storm, but its adoption in the IT outsourcing industry is lagging behind the hype. Industry experts and executives point to several factors hindering widespread implementation, including high error rates, the significant cost of deployment, and the technology’s relative newness.
Rohit Kapoor, CEO of ExlService Holdings Inc., a Nasdaq-listed BPO company, highlighted the crucial need for accuracy in GenAI solutions. He explained that the technology’s accuracy levels are initially low, often between 65% and 70%, but require significant improvement to reach 90% to 95% for meaningful competitive advantage. This improvement requires a deep understanding of data and domain expertise to fine-tune algorithms and integrate GenAI seamlessly into workflows.
While GenAI has generated much excitement since the launch of ChatGPT in 2022, its practical applications have been slower to materialize. K. Krithivasan, CEO of Tata Consultancy Services Ltd (TCS), emphasized the importance of delivering value to clients rather than simply following the hype cycle. However, the path to widespread adoption remains unclear.
Industry experts have noted that a significant proportion of GenAI proof-of-concept projects have failed to transition into production. Keith Bachman, an analyst at BMO Capital Markets, observed that over 85% of these projects have stalled, highlighting a disparity between investment in GenAI hardware and training versus actual revenue generation. Gartner, an IT research firm, anticipates that 30% of GenAI projects will be abandoned by 2025 due to challenges such as poor data quality, insufficient risk controls, escalating costs, and unclear business value.
Beyond accuracy concerns, stakeholders are apprehensive about the novelty of GenAI. Enterprises are hesitant to embrace the technology due to its relative youth. Phil Fersht, CEO of outsourcing research firm HFS Research, acknowledged that only 5% of GenAI has been integrated into major enterprises but anticipates significant growth as practical business cases emerge. He emphasized that the technology is still in its early stages, and companies are still exploring its potential.
The high cost of deployment also presents a hurdle to immediate adoption. To commercialize GenAI, proof-of-concept projects must be integrated into the IT infrastructure of outsourcing firms, requiring substantial investment in data layering and implementation. This significant financial commitment necessitates careful planning and resource allocation, potentially delaying widespread adoption.
Despite the current slow pace of adoption, experts believe GenAI will eventually replace basic human functions in areas like customer experience, marketing, and IT development. Fersht predicts a 20-50% reduction in existing workforces, with those remaining needing to be trained on the technology. An industry expert at a BPO company suggested that GenAI will be integrated into human-centric processes, combining human expertise with AI capabilities to enhance efficiency. This integration approach acknowledges that humans will remain essential in addressing complex queries, while AI handles routine customer interactions.
While GenAI presents a potential paradigm shift in the outsourcing industry, its adoption will require careful planning, significant investment, and a focus on addressing the inherent challenges. As the technology matures and its potential becomes clearer, its impact on the workforce and the landscape of IT outsourcing will become more pronounced.
