It has something of a ‘consolation prize’ feel to it, but Xchanging has won a three-year renewal with anchor client BAE Systems for procurement services in the UK, starting at the end of 2012. As Hot Views readers will know, Xchanging lost out on the bigger prize, the renewal of its HR BPO contract with BAE to rival Logica earlier this month (see Logica scores BAE Systems HR BPO deal). That deal was worth £18m per year to Xchanging, and made a modest 5% margin. This procurement renewal however doesn’t have a revenue figure attached – although ominously Xchanging said it will be ‘lower margin than the existing contract’.
Xchanging’s existing UK procurement BPO deal with BAE was signed in October 2011 for ten years. This saw Xchanging take on responsibility for indirect spend in the UK worth c£80m per year. It also formed a 50:50 joint venture company with BAE at the time to provide procurement services into other markets. No doubt this relationship helped Xchanging secure this latest renewal. The long-term relationship will also have gone a long way to bringing in a new procurement contract with BAE in the US last August, andanother renewal with the company in Australia last April (see here). But as we can see with this latest deal the renewals can come at a high price.