Xchanging announced a $544m deal with Allianz Global Investors to provide back office services to its fund managers in Germany. The 8-year agreement follows Xchanging's model, with Allianz's back office and HR operations spun off in a separate entity (Fondsdepot Bank) in which Xchanging will take a 51% stake and Allianz retains a 49% stake.
This is a major deal for Xchanging, and an addition to its $201m+ relationships with Aon, BAE Systems, Boots and United Biscuits. It also comes 12 months after it signed the deal with Aon, which means that management is beginning to deliver on its promise to reduce the time between mega-deals to below 18-24 months as it was previously. This deal adds further weight to the gain-sharing BPO partnership model which Xchanging favors, where the supplier and the client share equity stakes in the spun off operations, and share the gains of any improvements. As in the Aon deal, there are plans to open the processing platform to the rest of the market.
There was some talk of a slight 'pause' in the BPO market earlier this year after a selection of BPO deals ran into execution challenges, and clients become more wary of the risks. Every client is different in some way, and no single BPO model suits every client and vendor. But Xchanging's approach, where ownership, risk and gains are more evenly shared between both sides (particularly at the early stages of the relationship) when it is offered by a provider with a sound track record, does go a long way to address a considerable number of client concerns.
Source(s): Ovum, Xchanging