Here’s the statement that changes everything. “We will no longer rely on the generation of Enterprise Partnerships to sustain growth in the future”. Thus ‘new’ CEO, Ken Lever, completely reset the course that founding CEO, David Andrews, charted over a decade ago for UK-based and internationally operating BPO firm, Xchanging. Enterprise Partnerships (EPs) – the erstwhile cornerstone of Xchanging’s operating model – are innovative joint venture outsourcing arrangements Xchanging created with marquee clients, and which gave Xchanging the option to take entire control of after a given period. It was different, it was bold, and I would say it mostly – but it seems not always – worked.
Lever has also instituted many other major changes as part of his cupboard-clearing and floor-sweeping exercise. This includes: the exit of some 40 senior managers and at least 90 middle managers (that did sound a bit top-heavy for a company of Xchanging’s size); the commencement of direct marketing of Xchanging’s India-based offshore services into the UK, US and Germany; and the closure of its data centre hosting reseller programme. Each of these is worthy of analysis in its own right – and at some point we will come back to explain why.
All this acted as dressing for Xchanging’s H1 results (to 30th June) which, it has to be said, could have been a lot, lot worse. In the event, headline revenues for continuing operations declined by just 1% yoy to £330m, or a 7% decline like-for-like at constant exchange rates. Of course, profits were hit badly, taking operating margins down from 6.5% to 1.0%, leaving a small net loss, more than offset by the profit from the sale of its India-based, US-focused BPO business (see Xchanging exchanges US business for cash).
Xchanging also announced a €25m 3+ year procurement services contract with L’Oreal and new credit facilities.
Lever is projecting that Xchanging will meet FY expectations. This is a pretty bold statement given the fundamental and structural changes he is making to the company. One assumes, then, that there is still a goodly chunk of the business underpinned by EPs and other long-term contracts which are keeping the engine room running. But for now, Xchanging remains a game of multiple parts which mostly don’t fit together very well. This is Lever’s real challenge.