The business process outsourcing (BPO) sector—consisting of BPO players that focus on technology-related functions and non-tech BPO providers that focus on administration, finance, and operations—saw revenue and profits grow, thanks to rising demand for digital and AI-led services. Profitability and productivity also improved modestly, driven by automation, tighter cost control, and better workforce utilisation. 

AI is emerging as a future growth runway for the tech BPO sector, and several firms are now disclosing tangible AI-linked revenue. Beyond embedding AI into developer workflows, companies are deploying it in back office functions such as finance and HR. Looking ahead, we believe momentum will remain strongest in AI-enabled transformation services, and in specialised industry verticals where firms can differentiate themselves through domain expertise and technology capabilities.

Non-tech BPO firms have made meaningful progress on productivity but face structural pressures on cash flow. These firms expect stronger demand in specialised areas such as government services, healthcare, financial services, and AI-enabled customer experience.

Your next moves

• Industrialise AI-led delivery. Scale AI from selective deployments into enterprise-wide operating models, while carefully managing rising AI infrastructure costs to ensure that efficiency gains translate into sustainable margin improvement.
• Build defensible domain depth. Focus on regulated, complex sectors where process expertise, compliance capability, data governance, and industry knowledge create stickier client relationships.
• Train an AI-ready workforce. Reskill teams in generative AI (GenAI), agentic AI, data, and automation, while redesigning delivery models to blend domain experts, engineers, and AI-enabled operations teams.

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The digital and education (D&E) services sector—consisting of data providers supplying specialised digital services, and educational technology (edtech) firms offering learning and upskilling services outside institutes and universities—saw revenue and profits grow as a result of greater demand for trusted and proprietary data assets and lifelong training. Profitability and productivity also improved, driven by embedded AI in core workflows, platform scale, and tighter cost control, while cash flow eased slightly as firms funded AI infrastructure and acquisitions.

For the majority of the data provider firms, platform modernisation and cloud migration remained important. Many companies used acquisitions, distribution partnerships, and strategic alliances to accelerate AI capabilities, and to enter adjacent areas. Looking forward, we believe firms will continue to prioritise embedding AI-powered decision assistants, and will expand into newer use cases to increase customer retention and drive upsell opportunities. 

Edtech companies accelerated AI-led product development, while adapting pricing, packaging, and content to match evolving demand for career-linked, skills-based lifelong learning. In the future, AI is likely to improve educator productivity and allow providers to scale delivery. But human elements will remain important, as many edtech engagements are relationship-driven and require continued human interaction.

Your next moves

• Drive contract expansion. Focus on upsells and multiyear contract expansions, embedding training paths and APIs deep into client workflows to maximise lifetime value and prevent churn.
• Monetise AI investments. Offset heavy AI infrastructure outlays by translating technology investments into high-margin premium features and using back-end machine learning automation to reduce operational transaction costs.
• Target regulated verticals. Secure high-margin, predictable revenue by focusing on specialised, highly regulated verticals. These compliance-heavy niches demand hyper-accurate data and official certifications, shielding the business from cheaper substitutes.

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The human capital management (HCM) sector, comprising recruitment providers, which specialise in permanent recruitment solutions, and staffing providers, which focus on temporary and contractual staffing, delivered mixed performance in FY25; persistent softness in staffing services weakened some results. Hiring demand remained uneven as many employers adopted a cautious approach to workforce expansion. Meanwhile, digital talent platforms captured a greater volume of that demand, particularly across blue-collar and small business segments, increasing competition for traditional providers.

In response, recruitment firms accelerated efforts to build more recurring and technology-enabled revenue streams. Many expanded Talent-as-a-Service (TaaS) offerings and embedded proprietary AI-powered matching, screening, and workforce-planning tools directly into client HR workflows to deepen client relationships. As AI capabilities mature, firms are using technology not only to improve recruiter productivity but also to enhance candidate quality, speed-to-hire, and workforce insights.

Staffing providers faced a more challenging environment. Growth moderated as pandemic-era healthcare travel–staffing demand continued to normalise, while weaker industrial activity constrained broader labour demand. Profitability came under pressure from rising wage costs, tighter regulatory requirements, and mounting client use of digital talent platforms. Looking ahead, we expect firms to strengthen client retention through outcome-based contracts; managed workforce solutions; and blended delivery models that combine technology, contingent labour, and advisory capabilities. 

Your next moves

• Secure MSP partnerships. Focus on securing long-term managed service provider (MSP) partnerships with enterprise clients, ensuring highly predictable, recurring revenue streams and deeper integration into corporate hiring infrastructures.
• Provide labour advisory services. Move beyond transactional fulfilment to advise corporate clients on talent mapping, local compliance, and workforce-mix strategies, building indispensable, long-term strategic B2B relationships.
• Deploy and expand AI sourcing. Integrate predictive AI matching and automated screening into workflows, and expand self-service marketplaces to slash corporate time-to-fill, bypassing AI-generated résumé clutter to deliver talent shortlists.

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Legal services (LS) firms delivered strong FY25 growth, driven largely by continued billing rate expansion rather than a significant increase in demand volumes. Activity remained relatively resilient in areas such as M&A, litigation, labour and employment, and real estate, while pricing strength helped sustain profitability despite ongoing pressure from talent costs and technology investment.

Firms continued to invest in AI and process automation, but many are still working to demonstrate measurable returns and articulate the value of these investments to clients. As AI-driven efficiencies become more tangible, legal providers will face increasing pressure to evolve traditional pricing models, shifting the conversation from billable hours to outcomes, value delivered, and business impact.

Looking ahead, we believe rising regulatory complexity, geopolitical uncertainty, and growing demand for cross-border advice should continue to support current activity levels. At the same time, corporate clients are scrutinising legal spending more closely and consolidating work among firms that can combine deep legal expertise with commercial judgment, operational efficiency, and demonstrable value creation.

Your next moves

• Evaluate alternative pricing models. Rethink pricing as AI-driven efficiency gains materialise, potentially shifting from hourly billing to fixed fees tied to outcomes.
• Drive strategic value for the client. Strengthen commercial relevance by linking legal advice more clearly to business priorities, risk, and decision-making, helping to defend pricing and retain share of wallet.
• Deploy AI strategically. Focus AI investment on practical use cases that improve efficiency, support service delivery, and create measurable value, rather than relying on adoption alone.

Learn more about LS performance

The logistics and distribution (L&D) sector navigated a mixed operating environment, as firms balanced stabilising trade volumes with continued pressure on margins and returns. Logistics providers saw recovering shipment volumes, but continued to face cost inflation and network disruption. Distributors and wholesalers benefited from selective volume recovery and pricing actions. Supply chain solutions and freight-arrangement providers gained from cross-border trade, strategic acquisitions, and more extensive technology-enabled offerings, although profitability remained constrained by pricing pressure and restructuring costs.

Across the sector, firms remained focused on protecting margins and improving resilience amid continued volatility. Many operators increased investment in automation, AI, and digital planning tools to improve efficiency and workforce productivity. Providers also expanded into higher-value segments and adjacent services to strengthen customer relationships and improve differentiation.

Looking ahead, we expect that ongoing geopolitical volatility and trade disruption will continue to create opportunities for logistics and supply chain solutions providers, as organisations reconfigure supply chains and navigate increasingly complex global networks. Meanwhile, value chains involving healthcare, infrastructure, and electrification are poised to create attractive growth opportunities for distributors and wholesalers.

Your next moves

• Build resilience and network flexibility. Strengthen routing agility, partner redundancy, facility flexibility, and control tower coordination to help operators manage disruption while supporting service levels and pricing.
• Build integrated supply chain solutions. Expand into adjacent services and capabilities to create more opportunities for integrated end-to-end solutions across the supply chain—thereby capturing a greater share of customer spend and deepening client relationships.
• Utilise assets and capacity smartly. Maintain focus on network density, procurement discipline, warehouse productivity, selective automation, and targeted AI deployment in support roles and workflow-heavy functions to build margin resilience.

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For providers of management and technology consulting services and auditing and risk services, performance remained resilient, even as clients were more selective in committing to work. Mandatory audit, compliance, and regulatory assignments remained stable, while discretionary spending shifted towards projects with clearer economic value, including digital transformation, restructuring, and operational efficiency. AI usage expanded across the sector as firms incorporated AI into client delivery, research, and compliance activities.

Growth is expected in offerings related to AI transformation and digital modernisation, alongside demand from sectors undergoing significant regulatory change and capital investment. Meanwhile, firms are placing greater emphasis on linking AI-enabled services to measurable client outcomes, including productivity improvements, efficiency gains, and service quality enhancements.

Your next moves

• Support specialist expertise with AI tools. Embed AI into core services, while strengthening technical and sector expertise to improve quality and execution in complex client work.
• Focus on recurring service delivery. Expand recurring, managed, and repeatable delivery approaches to improve consistency and support growth across client engagements.
• Build workforce readiness and capability depth. Invest in training and capability development so teams can deliver more effectively as both AI adoption and client complexity continue to increase.

Learn more about PS performance

The testing, inspection, and certification (TICC) sector improved solidly over the course of FY25, led by strong growth momentum across the two sub-sectors: inspection and certification, and healthcare diagnostics and testing. 

Within the inspection and certification sub-sector, stricter regulations and evolving risk landscapes are expanding demand for independent assurance and certification services in areas such as environmental issues, energy, and electronics. As the energy transition continues and regulation tightens, testing and inspection firms are growing from traditional product testing into higher-value areas such as sustainability, digital and AI assurance, and advisory-led offerings. Meanwhile, geopolitical rerouting due to the disruptions in the Middle East is expected to further support demand for testing, inspection, and certification services.

In healthcare diagnostics, new pockets of demand are emerging as the sub-sector moves beyond routine testing and towards earlier detection and personalised care, with growth in areas such as oncology, genomics, and veterinary pathology. Lab automation, digital platforms, and AI workflows are helping boost productivity and are contributing to margin resilience. Pressure from tighter reimbursements is pushing firms to find new ways to grow profitably, as are rising costs of labour, materials, supplies, and logistics.

Your next moves

• Shift towards higher-growth specialist areas. Venture into adjacent verticals like cybersecurity, governance certifications, and specialised diagnostic testing services that are seeing increased demand and that offer higher margins.
• Use M&A to expand capabilities and scale. Acquire or partner to add specialist capabilities, enter attractive niches, and strengthen local market access, while using consolidation to drive synergies and improve profitability.
• Expand AI investment to boost efficiency. Improve productivity, automate workflows, and enhance service delivery through targeted AI and automation investments.

Learn more about TICC performance