Managed Services Evolve Beyond Cost Reduction Goals

• A KPMG-HFS study finds companies now expect strategic transformation from managed service providers, not just operational efficiency.

Strategic Partnerships Replace Traditional Outsourcing

A growing number of companies are rethinking their approach to outsourcing, shifting focus from transactional cost-cutting to long-term strategic collaboration. According to a joint study by KPMG and HFS Research, nearly 75% of surveyed executives expect managed service providers to deliver transformative impact—not only in operations and technology, but also in business outcomes. Managed services now encompass more complex functions across multiple domains, reflecting a broader role in enterprise strategy. This shift highlights the need for providers with deep expertise and the ability to drive innovation, flexibility, and measurable results.

Unlike conventional outsourcing, managed services involve a partner assuming responsibility for a business function or process with performance-based accountability. The model emphasizes continuous improvement and responsiveness to market changes. As competition intensifies in technology-driven sectors, organizations increasingly rely on these partnerships to stay agile. The study, based on responses from 1,250 senior decision-makers across industries, reveals a clear trend toward integrated, outcome-focused service models.

Transformation and Efficiency Go Hand in Hand

The research shows that managed services already account for more than half of service delivery in many functional areas, with an average 10% growth expected over the next two years. Respondents overwhelmingly agree—89%—that effectiveness depends on moving beyond legacy outsourcing frameworks. Furthermore, 73% seek providers capable of enabling business model shifts, supporting strategic goals, and introducing new technologies. These expectations are reshaping procurement processes, with companies prioritizing partners who can rapidly adopt and apply emerging solutions.

Strategic value is now a core driver, with 81% of executives viewing managed services as a long-term advantage, especially in fast-moving markets. Cost efficiency remains important, but is no longer the sole objective; 88% still recognize the model’s potential for sustained savings. A new priority has emerged: accelerating the launch of new products and services. Notably, 70% of respondents report that managed services have exceeded expectations in this area.

Industry-Specific Expertise Gains Importance

The study finds that 71% of companies already use managed services in at least one business function, and one-third apply the model across three-quarters of their operations. Key areas include cybersecurity, regulatory compliance, taxation, and application management, with 60% relying on external providers for the latter. Expansion is expected to continue, as half of the surveyed organizations plan to increase usage, while another 40% aim to maintain current levels. This growth reflects a shift toward deeper integration and broader coverage.

Industry-specific knowledge is increasingly valued, with 87% of respondents citing it as essential for delivering tangible business outcomes. Providers are expected to offer tailored solutions aligned with sector needs, supported by domain expertise and strategic alignment. Long-term, subscription-based models are becoming standard, offering predictable pricing and supporting forward-looking planning. Decision-makers prioritize access to cutting-edge technologies, global talent pools, and stable cost structures—ideally within multi-year agreements.

Full-Service Adoption on the Rise

Two out of five companies surveyed already rely entirely on managed services in areas such as IT infrastructure, AI development hubs, R&D, and specialized operational units. This indicates that the model is no longer limited to isolated tasks, but is capable of supporting comprehensive enterprise functions. As managed services mature, their role in enabling scalable, resilient, and adaptive business models continues to expand. The findings suggest that strategic service partnerships will play a central role in shaping future enterprise operations.