Xchanging procurement’s new leader, Chirag Shah, and some hints about their future

Just over a year ago, Chirag Shah was a true entrepreneur, running MarketMaker4, a fairly small eSourcing firm, and having previously been a founder of e-auction pioneers Trading Partners back in 2000. Scrolling forward 12 months, he is now on the Executive Board of Xchanging, one of the world’s largest publically quoted, pure-play outsourcing firms. Having joined Xchanging when the firm acquired MarketMaker4, he runs the procurement business unit, handling some major outsourcing clients whilst looking to move the business more into the software world (without losing the outsourcing heritage or client base).

When I met him recently, he acknowledged himself that the Xchanging CEO and Board are “taking a bit of a risk” putting an entrepreneur into this job. I suggested that it seems unlikely that this will end up in a sort of “not bad” outcome – it’s either going to be a major success or a big flop, given his change of role. He just smiled at that. Personally, I wouldn’t bet again him – he’s an entrepreneur, but with a Cambridge Engineering degree and an MBA, he’s not exactly a market trader type!

After his appointment, we commented here on the apparent change in strategy in the firm and the move towards software. Whilst broadly I think we were accurate, Shah was careful here with his words. “Yes, we think there are opportunities in software. But we want to be in the outsourcing business too”. Indeed, he says that here are two “substantial” contract wins in that field which the firm will be announcing soon, one which will take them into largely new geographic areas for the business.

He is positioning Xchanging to have three offerings. The conventional outsourcing approach is an obvious one, as is subscription based software products, such as his MarketMaker4 platform. But the “new” intermediate offering he describes as “procurement as a service” – which would include an element of software plus people to run it, available when you require it.

Basically, that gives the firm the opportunity to give the customer whatever the customer wants. Now this is not a totally new concept, and we might argue that others such as GEP are offering a somewhat similar proposition. But Shah seems to be aiming at really systemising and structuring this in a clear and attractive manner for the market.

Another area of focus for Shah is in the management of “tail spend”. This is the “last” ten or twenty percent of an organisation’s spend that is accounted for often by thousands of small suppliers, even more and even smaller transactions, and (usually) little professional procurement attention. As a topic, we have noticed it moving up the priority list for many CPOs over the last year or so, perhaps because the procurement “low hanging fruit” has been plucked already. So if Xchanging can come up with effective offerings here, almost certainly combining software tools with people-based outsourced service provision, they could really be onto a winner.

In terms of expansion plans, Shah pointed out that whilst Xchanging is usually ranked at number 3 in the procurement outsourcing league table, in fact this is more accurately made up of a number two ranking in Europe, nothing in many parts of the world and something in between in the US (where Market Maker4 is strong in the software sector) . So he wants to equalise this somewhat if he can, and grow where there are big gaps currently. We’re assuming this could mean either aggressive marketing efforts, or acquisitions – or indeed both.

However, he suggests that acquisitions might be relatively small initially – “MarketMaker4 has been a big success, but we need to prove we can make further good decisions like that before the Board will give us a lot of money to spend!”

We’ll be keeping a look out anyway for both possible acquisition activity and the large contract wins that he promises – but many thanks to Chirag Shah for a most interesting and enjoyable discussion.

 

Declaration – I own a few £000 of Xchanging shares in my personal pension, bought in pre Spend Matters days when they floated in 2007. They were bought because David Rich-Jones who initially built the procurement outsourcing business was a friend and fellow CIPS President. The shares are currently creeping back up towards their issue price!

Voices (4)

  1. Peter Smith:

    Yes, I still have my Xchanging shares, and yes, certainly any shares I bought because my friends worked for the firm (Mr Rich-Jones in this case) have not turned out well!

  2. Someone at Xchanging:

    Peter, it’s probably time to run this interview again.

    You were right, acquiring MM4 and nominating Chirag Shah as executive director of Xchanging procurement could only lead to a dramatic outcome. Unfortunately, that was a major flop !

    One year later, MM4 sales are still stagnating, The procurement business (what is left of it) is disintegrated and incorporated into the two other sectors (technology and business processing services), the CEO Ken Lever is forced to resign by the end of the year, and Chirag Shah has been nominated as “advisor”? Advisor to whom and on what, I wonder …

    Did you keep your Xchanging shares ?

  3. Secret Squirrel:

    Peter,

    Can you please disclose all your stock holdings. I’m thinking of going short on everything you have!

    Secret Squirrel

    1. Xchanging employee:

      Time to run this interview again, Peter !

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