The Bloor Perspective: a BPO upstart to watch

Business process outsourcing (BPO) has been around for nearly as many years as IT outsourcing. And increasingly we're seeing the two combine. Historically, payroll was the number one business process to be passed on to a service provider but as things have matured human resources, accounts, procurement and customer service have now been added to the BPO portfolio.

Like IT outsourcing, BPO encourages organisations to focus on core competencies. The services outsourced can be extracted relatively easily from the organisation - politics allowing - and can benefit from the application of best practices and economies of scale.

One of the key players in the BPO market is Xchanging. Maybe not a company known to everyone but in the world of BPO they're big and getting bigger. A pure-play BPO vendor, Xchanging currently focuses on human resources, accounts, procurement and customer service.

Established just three years ago by David Andrews, who founded Andersen Consulting's outsourcing business, Xchanging employs 1,200 staff in the UK. Underpinning the company's service delivery is the DNA methodology that integrates environment, service, technology, implementation, process, sourcing and, last but by no means least, people.

Perhaps one of the reasons why no one has heard of Xchanging is the relatively low profile of the BPO marketplace. EDS have a strong presence, as do Capita, but then it is down to niche players.

Xchanging has come a long way in a relatively short period of time and has quickly positioned itself as the number one player in the UK BPO market. The proof is in the numbers. In October this year Xchanging won a 10-year, £800m deal with BAE to create a joint venture called Pro-cur that will manage BAE System's procurement, HR and other administration functions.

November saw the formation of Xchanging Claims Services in a 10-year, £100m deal with Lloyds. With those numbers it is not surprising the company is predicting £1bn revenues by 2005.

Although the BPO market is old, it is still relatively immature. The continuing growth of IT outsourcing will no doubt rub off on BPO and Xchanging is certainly one to watch for the future.