There’s a $4 trillion shakeup underway in the services industry, and most companies haven’t caught up.

For decades, business process outsourcing (BPO) has been about cost savings. The infamous "mess for less" model: ship your contact center work overseas, reduce headcount, and move on. But AI is fundamentally changing the math, especially for customer service.

In a recent conversation with automation leader Wayne Butterfield on the Dialed In podcast, he broke it down clearly: there are three types of BPOs today. Two are racing against the clock. Only one is truly built for the future. Listen to the full episode:

1. The labor arbitrage shop

These are the legacy BPOs that built their business on human-first, low-cost delivery. Their margins depend on volume and geography. Their tech? Minimal. Their future? On borrowed time.

As AI automates Tier 1 interactions at scale, from returns, to where is my order, to roadside assistance, these providers will find their value proposition eroding fast. A three-year contract might delay the pain, but the end is coming.

2. The fast-follower

These BPOs see what’s coming and are moving to embrace AI. They’re integrating tech partners, hiring transformation leads, and rethinking delivery models. They’re willing to cannibalize their own revenue to survive.

But they’re not all the way there yet. Their survival hinges on how fast they can evolve, and whether their clients will come along for the ride.

3. The AI-first operator

These are the disruptors: tech-led service providers that treat AI as a core delivery layer, not a bolt-on. Some are born from BPO roots. Others, like IBM, are tech firms eyeing the $2-4T services market and moving in fast.

They don’t sell headcount, they sell outcomes. They partner with clients to deliver high-resolution, high-CSAT experiences powered by AI agents, analytics, and automation. They're agile, insight-driven, and built to scale.

What this means for CX leaders

Whether you're managing your own contact center or working with an outsourcer, the takeaway is the same: don't settle for "cheap." The real value is in speed, insight, and flexibility.

As Wayne put it: "Outsourcing doesn’t mean worse CX, it can actually mean better, if you structure it right."

So ask your BPOs the hard questions:

• Are they building AI into their core delivery model?
• Do they offer outcome-based contracts, not just labor pricing?
• Can they show how they're evolving, not just maintaining?

Because in the next era of customer service, the winners won’t be the cheapest, they’ll be the smartest.

Watch the full episode of Dialed In featuring Wayne Butterfield:

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