Service Bureau Industry at a Crossroads as HR Leaders Demand Unified Tech, AI Innovation and Strategic Partnerships
isolved’s 2025 Service Bureau Insights Report reveals nearly half of HR leaders plan to switch providers in the next year
AUSTIN, Texas, Oct. 07, 2025 (GLOBE NEWSWIRE) -- NAPEO -- A new report from isolved®, 2025 Service Bureau Insights : How PEOs, ASOs and Payroll Providers Are Evolving in the AI Era, reveals that the service bureau industry, spanning professional employer organizations (PEOs), administrative service organizations (ASOs) and payroll service providers (PSPs), is undergoing a significant transformation. Data shows that two-thirds of HR leaders (67%) plan to switch their human capital management (HCM) platform and nearly half (49%) are considering a new service bureau partner in the next 12 months. As a result, providers must evolve quickly to meet rising expectations for integrated technology, AI-driven insights and strategic partnership.
Drawing on feedback from over 2,000 HR decision-makers, the report shows a service bureau market at an inflection point where disconnected tech stacks, rising demand for AI-enabled solutions and evolving partnership expectations are redefining how providers must deliver value. Key findings include:
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Fragmented tech stacks are driving change. Over half (58%) of organizations rely on four or more HR systems, with 17% juggling 10 or more tools. This fragmentation is fueling demand for unified, easy-to-use platforms.
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Integration is now table stakes. Nearly one in five ASO clients cite poor integration as their primary reason for switching, while PEO clients seek broader technology capabilities and payroll clients continue to focus on cost.
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AI adoption is accelerating but so are concerns. Sixty-nine percent of HR teams are already using AI, yet one in five HR leaders say they worry about AI’s impact on their roles. Providers that pair innovation with transparency and guidance will gain an edge.
- Outsourcing intent is high, but execution lags. Seventy-one percent of HR leaders see value in outsourcing HR tasks, but only 41% plan to do so this year, signaling an opportunity for service bureaus to position outsourcing as a strategic advantage rather than a replacement for in-house teams.
“HR leaders are redefining what they expect from their partners,” said Pragya Gupta, Chief Product and Technology Officer at isolved. “It’s no longer enough to process payroll or offer basic compliance support. ASOs, PEOs and payroll providers must pair their services with modern, integrated platforms that eliminate system silos. Providers that deliver connected technology, AI-driven insights, responsive service and measurable business outcomes will not only retain clients but also expand their value in the years ahead.”
The report also explores how evolving expectations are reshaping the service bureau business model itself. Initiatives like isolved Venture, a recently launched program designed to help top-performing sales professionals build and scale their own payroll businesses, reflect a growing demand for flexibility, ownership and entrepreneurial opportunity within the industry.
Looking ahead, the research shows that HR leaders’ top priorities include enhancing employee engagement, improving talent acquisition, consolidating HR systems and investing in analytics and AI capabilities. For service bureaus, this presents a clear roadmap for strengthening client relationships and sustaining growth amid rapid industry change.
About isolved®
isolved is a provider of human capital management (HCM) solutions that help organizations recruit, retain and elevate their workforce. More than 195,000 employers and 8 million employees rely on isolved's software and services to streamline human resource (HR) operations and deliver employee experiences that matter. isolved People Cloud™ is a unified yet modular HCM platform with built-in artificial intelligence (AI) and analytics that connects HR, payroll, benefits, and workforce and talent management into a single solution that drives better business outcomes. Through the Sidekick Advantage™, isolved also provides expert guidance, embedded services and an engaged community that empowers People Heroes™ to grow their companies and careers. Learn more at www.isolvedhcm.com.
Media Contact:
Christine Allen, Director of Communications
CAllen@isolvedhcm.com
603-743-4534
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