Spend Matters 50/50: Xchanging/MarketMaker 4 – A Provider to Know in 2015

Spend Matters Almanac

So events have rather overtaken our 50 to Know review of Xchanging/MarketMaker 4, with Xchanging at parent firm level receiving two takeover bids last week, as we reported here and here. As those bids were pitched at some 70% above the prevailing share price, it seems likely one of them — or indeed a further new bidder — will succeed.

While the larger divisions within the firm are focused chiefly on business process outsourcing (BPO) and software in the financial services industry, particularly insurance, Xchanging has also been a force in procurement outsourcing, although the firm has not grown in recent years to the extent of some competitors, particularly Accenture/Procurian. Its willingness to enter into risk-reward deals where it puts its revenues and profit at risk based on achieving savings sets the company apart. But this may also have contributed to the recent issues in the procurement division, which made a loss according to the recent half-year figures.

Direction changed a couple of years ago with the acquisition of MarketMaker4 (MM4), a sourcing software business founded by the charismatic Chirag Shah. The acquisition of spend analytics firm Spikes Cavell followed, bringing its strength in the UK and US public sector market, and the procurement division has been re-orientating itself more as a software business, pushing more of an "as a service" proposition rather than full-scale outsourcing.

Indeed, MM4 and Spikes, both reasonably strong products in their sectors, seemed to be thriving as products within their new home. But the recent profitability issues, Shah's sidelining within the firm and now the takeover bids all mean that the future is somewhat uncertain.

Xchanging still has good software assets, and indeed some good outsourcing clients, such as L'Oreal. We hope that the new owners can develop these further; or indeed, as Jason Busch suggested, find an alternative owner for those assets.

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