{"id":1654,"date":"2010-07-01T11:13:00","date_gmt":"2010-07-01T11:13:00","guid":{"rendered":"http:\/\/localhost\/projects\/horsesforsources\/davidandrews-parti-070110\/"},"modified":"2010-07-01T11:13:00","modified_gmt":"2010-07-01T11:13:00","slug":"davidandrews-parti-070110","status":"publish","type":"post","link":"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/","title":{"rendered":"BPO’s billion dollar best-kept secret: Part I"},"content":{"rendered":"
\"\"<\/p>\n

David Andrews, CEO Xchanging plc<\/p>\n<\/div>\n

There are a lot of secrets in the BPO business (oh, if only you knew), however, one best-kept secret that is worth revealing, is the Xchanging story.\u00a0 The UK-headquartered firm is the largest pureplay BPO today, with revenues over $1.1bn.<\/strong>\u00a0<\/p>\n

BPO purists will recall some significant developments, back in the late ’90s, when private equity investor General Atlantic\u00a0pump-primed two BPO providers to enter enterprise markets:\u00a0 Exult and Xchanging.\u00a0 While the former went after the big “lift and shift” enterprise engagements, the latter quietly went about developing BPO services focused on partnering with enterprises, co-developing technology and processes, and developing industry-specific process skills that could be blended with horizontal administrative processes.\u00a0<\/p>\n

Wall Street investors, industry analysts and business\u00a0media loved the Exult model – it was focused on big-bang deals, exposed the shortcomings of enterprise HR operations, and brought the BPO business to the attention of the media and the industry.\u00a0 Meanwhile, Xchanging, led by the pragmatic David Andrews, quietly went under the radar building a business that focused on servicing\u00a0industry vertical processes,\u00a0namely insurance and banking, and two fulcrum bridging processes:\u00a0 payroll and accounts payable processing, in addition to other\u00a0administrative functions.<\/p>\n

In today’s market, the message couldn’t be clearer:\u00a0 the old “lift and shift” model only works when there is tremendous discipline applied to process standardization tied to common technology workflows, while the partner-orientated approach, where buyer and provider work together towards common outcomes, is proving to be the model where both parties are vested in making the engagement successful – and within budget.<\/p>\n

As part of our CEO series of interviews, we thought it about time to drag David away from one of his hazardous Dartmoor runs (the invisible cliff edges keep his shareholders constantly on edge) to share his story with us.<\/p>\n

Phil Fersht:<\/strong>\u00a0Good afternoon, David.\u00a0\u00a0When you look back at Xchanging over the\u00a0its first\u00a0decade, how would you say it\u2019s developed from when you started out.\u00a0\u00a0How different is\u00a0the vision from when you began, to\u00a0where the company is today?<\/span><\/p>\n

David Andrews:<\/strong>\u00a0Phil, if you look at the original business case, we\u2019re pretty much bang on track. We set up in 10 years of operation, 10000 people and a billion turn over dollars. And 100 million dollar profit. And that\u2019s where we are now. Got our first contract in 2001. Financially, it\u2019s gratifying, we\u2019re on target. We\u2019ve weathered the financial crisis pretty well, despite having a pretty heavy reliance on financial services. I\u2019m delighted that the enterprise partnership model has become accepted in the business community. When you start a business you\u2019re never quite sure whether it\u2019s your own stupid idea that no one else will think is any good, or whether it has legs, so it\u2019s really been proven that it has legs. Certainly as we now globalized, which is crucial. I don\u2019t see how you can do national BPO for corporations. As we\u2019re globalizing, we\u2019re finding it has a lot of support in Asia as well as the states.<\/p>\n

Phil Fersht:\u00a0 <\/strong>For those of our readers who are not all that familiar with Xchanging, tell us about your\u00a0 enterprise partnership model and how it works.<\/span><\/p>\n

David Andrews:\u00a0 <\/strong>In my view there are three generic third-party delivery models in the marketplace today. One is an M&A-type model where you buy a piece of processing and then seek to develop it. The second, sitting at the other end of the spectrum, is outsourcing, so lift and shift either on a time and materials or on an output price basis. What we\u2019vedone is put something in the middle which has some characteristics of M&A \u2013 which is your seeking to do a capital upside \u2013 and some characteristics of outsourcing \u2013 which is your seeking to create a discontinuity and a mindset by moving the process. The enterprise partnership is actually a jointly-owned business which not only serves the client customer, but can also serve other customers. Some of our enterprise partners are Deutsche Bank, BAE Systems and Lloyd’s.<\/p>\n

The enterprise partnership model is highly attractive when you are dealing with complex things you can\u2019t absolutely define on Day One. If you are doing an M&A or an outsourcing transaction you\u2019ve got to put very tight boundaries around what you\u2019re dealing with because you are either offering a price or a discount on Day One. If you\u2019re dealing with very large, complex back offices, it can be very difficult to put the boundaries with sufficient accuracy. There will be lots of interconnections with other systems. There won\u2019t necessarily be ready-made SLAs and measures as you would find in ITO. So you need different mechanisms for handling complexity and uncertainty. To do so, the enterprise partnership model says let\u2019s go open book, let\u2019s define some outcomes and let\u2019s create a commercial arrangement around the outcomes rather than the inputs. So it seeks to put some commercial certainty around the uncertainty of the complex back office. It enables you to do stuff you couldn\u2019t otherwise M&A or outsource.<\/p>\n

Philip Fersht:<\/strong>\u00a0\u00a0 So what you are talking about, is really what a lot of the leaders and your competitors are now talking about. We\u2019ve gotten to the point, particularly with many of the big horizontal BPO deals and things like F&A, where the price points are pretty similar and the presented differentiator now, is one vendor offering better gain-sharing than another. Do you think this is a reality or a lot of smoke-blowing to try and close the business? We\u2019veseen a couple of recent deals with some pretty innovative gain-share approaches, but you guys have been doing this for a very long time, and it\u00a0seems only now that your larger competitors have begun trying it as well.<\/span><\/p>\n

David Andrews:\u00a0\u00a0<\/strong>Hopefully, a few more will. I welcome the competition as I think it creates a bigger market. The only thing I would say is that it is quite difficult to do gain share as just an add-on to what you already do. I think there is quite a fundamental mind shift you have to bring about. Without talking ill of my previous company Accenture, I found it very challenging to get them into a gain share mindset. They understood time and materials really well, and we all understand that an input cost-based time and materials model has been brilliantly exploited by the Indian companies. But what we\u2019re talking about here is\u2026\u201dI\u2019m not going to make any money at all unless I create a gain. So I am at risk. I\u2019m not just creating a company but creating an outsourced arrangement where unless I do really well, unless I get the costs down, unless I get the productivity gains up and unless I attract third-party revenues, I am not doing anything.\u201d And that\u2019s a really different and very important mindset because it does take you beyond what you otherwise do. You\u2019ve got to have that absolute determination to bring about the benefits otherwise you don\u2019t make any money. So I am a bit worried about gain-share being a “sweetener”.<\/p>\n

Philip Fersht:<\/strong>\u00a0\u00a0 I completely agree with you here. I think we\u2019ve seen some deals recently where the vendor has done it because they felt they needed to in order to win the business, and now they\u2019re going to be forced to actually try and deliver what they promised or they\u2019ll be punished for it. And I\u2019ve seen some rather cleverly worded gain-share initiatives where the\u00a0provider might be able to get away with not delivering on some of what they\u2019ve promised,\u00a0however, I do think some of them are almost deliberately sticking their neck out so they can try and prove they can do this.\u00a0 But as you\u2019ve said, it is very difficult when it is more positioned as a “sweetener” than as something they genuinely feel they can deliver.<\/span>\u00a0<\/p>\n

David Andrews:<\/strong>\u00a0 Yes, people often rationalize this in their own way and I\u2019ve seen this in large corporations. You are seeking to create a different set of motivations for both the provider and the customer, so you move away from an adversarial relationship by putting in some sweeteners to win this and then hope it will go back to normal. And the provider who is going to squeeze the maximum out of the supplier by way of promises upfront \u2013 that\u2019s a misalignment. I think in the future we\u2019re going to see a different set of motivations where the provider and customer agree that if they cooperate and align as partners they\u2019ll get more out of it. Now that\u2019s a very different mindset than what has historically existed in outsourcing. And it isn\u2019t a soft mindset\u2026actually cooperating as partners is tough stuff because you have to be very transparent. There is a lot more relationship to it, and there are breakdowns to get breakthroughs if you stick together. The tremendous advantage I\u2019ve seen with your big partnerships is that you can actually be braver to accomplish some big stuff because you know your partners are aligned with you.<\/p>\n

Philip Fersht:<\/strong>\u00a0\u00a0 What do you see as the main opportunities for Xchanging, and where you are going to make your future investments?<\/span><\/p>\n

David Andrews:<\/strong>\u00a0\u00a0We put a certain level of investment in to make the transformation in all our enterprise partnerships. Part of our model is that we put money upfront. We are at risk with that money and that further focuses our minds on getting the return we share with our partner. So that won\u2019t stop as it\u2019s an underlying cultural underpinning of the company. What has happened in the last two or three years, and is accelerating, is us taking development risk on renewing technology\u2026reinventing it really. I didn\u2019t foresee that. I thought it would be more of a partitioning of the industry, where you\u2019d still have the systems integrators and the outsourcers and we\u2019d subcontract to them, but we\u2019re finding that we\u2019re investing for our own account in large-scale technology. So, for example, in the U.K., I thought we\u2019d be able to subcontract data center processing but we found we couldn\u2019t get the quality to financial services standards of delivery. We\u2019d get it to maybe a telco standard billing reliability, but not to something beyond Six Sigma that you need for payment systems in financial services. So we have found ourselves investing in things we thought we could buy in, which is causing us to be a much more integrated technology and BPO company. And that is half the reason we did the deal with Cambridge<\/a>. We knew we had to have strength and depth in advanced systems development, web-based development, and fast transaction-based, real-time systems development for payment systems\/exchange systems for us to move into a world where we could genuinely offer that standard of service. I think that would mark out what has changed over the last ten years in BPO. You\u2019ve seen technology companies dabble a bit in BPO. You\u2019ve seen BPO companies dabble a bit in technology. But I think that dabbling at each end of this is out. You\u2019ve got to be really seriously into both of those.\u00a0<\/p>\n

In Part II,\u00a0 we’ll focus in on the market dynamics,\u00a0where\u00a0buyers are achieving some innovation and the convergence of IT and BPO within industry processes…<\/span><\/p>\n

David Andrews (pictured above) is CEO Xchanging plc, founding the company in 1999.\u00a0 Previously, David built up Accenture\u2019s outsourcing business and had responsibility for managing major technology replacement programmes in Europe.\u00a0 Before joining Accenture, he managed a major programme of hospital refurbishment and health care infrastructure renewal in Congo.<\/span><\/em><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

David Andrews, CEO Xchanging plc There are a lot of secrets in the BPO business (oh, if only you knew),…<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48,50,835,61,79,88,836,91],"tags":[825],"ppma_author":[19],"yoast_head":"\nBPO's billion dollar best-kept secret: Part I - Horses for Sources | No Boundaries<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"BPO's billion dollar best-kept secret: Part I - Horses for Sources | No Boundaries\" \/>\n<meta property=\"og:description\" content=\"David Andrews, CEO Xchanging plc There are a lot of secrets in the BPO business (oh, if only you knew),...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/\" \/>\n<meta property=\"og:site_name\" content=\"Horses for Sources | No Boundaries\" \/>\n<meta property=\"article:published_time\" content=\"2010-07-01T11:13:00+00:00\" \/>\n<meta property=\"og:image\" content=\"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/07\/David-Andrews.jpg\" \/>\n<meta name=\"author\" content=\"Phil Fersht\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@pfersht\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Phil Fersht\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"10 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/\",\"url\":\"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/\",\"name\":\"BPO's billion dollar best-kept secret: Part I - Horses for Sources | No Boundaries\",\"isPartOf\":{\"@id\":\"https:\/\/www.horsesforsources.com\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/#primaryimage\"},\"thumbnailUrl\":\"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/07\/David-Andrews.jpg\",\"datePublished\":\"2010-07-01T11:13:00+00:00\",\"dateModified\":\"2010-07-01T11:13:00+00:00\",\"author\":{\"@id\":\"https:\/\/www.horsesforsources.com\/#\/schema\/person\/c4f084ff7ad43632f537b3b30918e69f\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/#primaryimage\",\"url\":\"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/07\/David-Andrews.jpg\",\"contentUrl\":\"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/07\/David-Andrews.jpg\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.horsesforsources.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"BPO’s billion dollar best-kept secret: Part I\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.horsesforsources.com\/#website\",\"url\":\"https:\/\/www.horsesforsources.com\/\",\"name\":\"Horses for Sources | No Boundaries\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.horsesforsources.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.horsesforsources.com\/#\/schema\/person\/c4f084ff7ad43632f537b3b30918e69f\",\"name\":\"Phil Fersht\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.horsesforsources.com\/#\/schema\/person\/image\/86ee0c0ac2d033eed87f327162eb27f7\",\"url\":\"https:\/\/www.horsesforsources.com\/wp-content\/uploads\/2020\/11\/phill-150x150.png\",\"contentUrl\":\"https:\/\/www.horsesforsources.com\/wp-content\/uploads\/2020\/11\/phill-150x150.png\",\"caption\":\"Phil Fersht\"},\"description\":\"Phil Fersht is\u00a0a world-renowned analyst, writer and visionary in\u00a0emerging technologies, automation, digital business models, and the alignment of\u00a0enterprise operations to\u00a0drive customer impact and competitive advantage\",\"sameAs\":[\"http:\/\/hfsresearch.com\/team\/phil-fersht\",\"https:\/\/www.linkedin.com\/in\/pfersht\/\",\"https:\/\/x.com\/pfersht\"],\"url\":\"https:\/\/www.horsesforsources.com\/author\/phil-fherst\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"BPO's billion dollar best-kept secret: Part I - Horses for Sources | No Boundaries","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/","og_locale":"en_US","og_type":"article","og_title":"BPO's billion dollar best-kept secret: Part I - Horses for Sources | No Boundaries","og_description":"David Andrews, CEO Xchanging plc There are a lot of secrets in the BPO business (oh, if only you knew),...","og_url":"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/","og_site_name":"Horses for Sources | No Boundaries","article_published_time":"2010-07-01T11:13:00+00:00","og_image":[{"url":"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/07\/David-Andrews.jpg"}],"author":"Phil Fersht","twitter_card":"summary_large_image","twitter_creator":"@pfersht","twitter_misc":{"Written by":"Phil Fersht","Est. reading time":"10 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/","url":"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/","name":"BPO's billion dollar best-kept secret: Part I - Horses for Sources | No Boundaries","isPartOf":{"@id":"https:\/\/www.horsesforsources.com\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/#primaryimage"},"image":{"@id":"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/#primaryimage"},"thumbnailUrl":"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/07\/David-Andrews.jpg","datePublished":"2010-07-01T11:13:00+00:00","dateModified":"2010-07-01T11:13:00+00:00","author":{"@id":"https:\/\/www.horsesforsources.com\/#\/schema\/person\/c4f084ff7ad43632f537b3b30918e69f"},"breadcrumb":{"@id":"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/#primaryimage","url":"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/07\/David-Andrews.jpg","contentUrl":"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/07\/David-Andrews.jpg"},{"@type":"BreadcrumbList","@id":"https:\/\/www.horsesforsources.com\/davidandrews-parti-070110\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.horsesforsources.com\/"},{"@type":"ListItem","position":2,"name":"BPO’s billion dollar best-kept secret: Part I"}]},{"@type":"WebSite","@id":"https:\/\/www.horsesforsources.com\/#website","url":"https:\/\/www.horsesforsources.com\/","name":"Horses for Sources | No Boundaries","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.horsesforsources.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.horsesforsources.com\/#\/schema\/person\/c4f084ff7ad43632f537b3b30918e69f","name":"Phil Fersht","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.horsesforsources.com\/#\/schema\/person\/image\/86ee0c0ac2d033eed87f327162eb27f7","url":"https:\/\/www.horsesforsources.com\/wp-content\/uploads\/2020\/11\/phill-150x150.png","contentUrl":"https:\/\/www.horsesforsources.com\/wp-content\/uploads\/2020\/11\/phill-150x150.png","caption":"Phil Fersht"},"description":"Phil Fersht is\u00a0a world-renowned analyst, writer and visionary in\u00a0emerging technologies, automation, digital business models, and the alignment of\u00a0enterprise operations to\u00a0drive customer impact and competitive advantage","sameAs":["http:\/\/hfsresearch.com\/team\/phil-fersht","https:\/\/www.linkedin.com\/in\/pfersht\/","https:\/\/x.com\/pfersht"],"url":"https:\/\/www.horsesforsources.com\/author\/phil-fherst\/"}]}},"authors":[{"term_id":19,"user_id":3,"is_guest":0,"slug":"phil-fherst","display_name":"Phil Fersht","avatar_url":{"url":"https:\/\/www.horsesforsources.com\/wp-content\/uploads\/2024\/02\/Phil-Fersht-HFS-Updated.jpg","url2x":"https:\/\/www.horsesforsources.com\/wp-content\/uploads\/2024\/02\/Phil-Fersht-HFS-Updated.jpg"},"first_name":"Phil","last_name":"Fersht","user_url":"http:\/\/hfsresearch.com\/team\/phil-fersht","description":"Phil Fersht is\u00a0a world-renowned analyst, writer and visionary in\u00a0emerging technologies, automation, digital business models, and the alignment of\u00a0enterprise operations to\u00a0drive customer impact and competitive advantage"}],"_links":{"self":[{"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/posts\/1654"}],"collection":[{"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/comments?post=1654"}],"version-history":[{"count":0,"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/posts\/1654\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/media?parent=1654"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/categories?post=1654"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/tags?post=1654"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/ppma_author?post=1654"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}