L’Oreal think Xchanging are worth it with procurement outsource deal

At last, some very good news for beleaguered outsourcing specialist Xchanging. And after a difficult few months, with profit warnings, problems with their Indian acquisition (Cambridge Solutions) and their founder and CEO, David Andrews, stepping down in February, they needed it!

They've just announced a significant contract with L'Oreal for management of indirect procurement spend. While the value isn't given, it is the "largest procurement contract by spend for Xchanging" so is presumably bigger even than their BAE Systems deal, their first and until now biggest client in this space. Here's the press release:

L'Oreal have awarded a three-and-a-half year procurement co-sourcing contract to Xchanging, the business process and technology services provider and integrator. As part of the contract, Xchanging will manage a significant amount of indirect procurement on behalf of L'Oréal across five countries - France, the UK, Germany, Italy and Spain. The contract runs to 31st December 2014.

Two general points. This seems to confirm our view that there is some momentum in the procurement outsourcing market, as we discussed here in the light of recent BuyingTeam and Efficio wins. And the positioning of this as "co-sourcing" again seems to support the trend we've seen for new business models rather than a simple "lift and shift" approach. We saw that with the Efficio / Thames Water and the Accenture / City of London deals, where there is more emphasis on a co-operative and integrated business model rather than a simple hand over of responsibility to the outsourcer.

Here's the press release comment on that topic:

Xchanging will operate on a co-sourcing basis working alongside L'Oréal's purchasing team to streamline purchasing processes and improve overall quality and cost. The contract spans various categories of indirect spend including: Information Technology and Telecommunications, Facilities Management, Human Resources, Light Transport and Logistics Supplies, Travel, Industrial Supplies & Services, Utilities and Laboratory Supplies. Xchanging will also provide procurement management activities including reporting, supplier and contract management.

We'll watch progress here and in the market generally with interest.

Declaration of interest: Peter Smith has owned since their flotation (through his self-invested pension plan) a few thousand £ worth of Xchanging shares.  A better investment than Southern Cross, worse than vintage claret  (see post later this week...)!

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