QX’s acquisition of Chazey Partners —a credible threat to large F&A BPOs

The Situation: Increasingly depth of business and functional-domain knowledge, combined with the ability to pilot and scale-up use cases deploying digital capabilities, are becoming critical selection criteria for enterprise buyers who are looking for transformational partners for their F&A function. QX F&A outsourcing combined with Chazey’s consulting, AI, and RPA tools for F&A mean enterprises can sole source a compelling in-demand solution to power their transformation journey.

QX’s acquisition of Chazey Partners creates a synergy between two business models – business process outsourcing and practitioner-led consulting with significant overlap in the industries they operate. This alchemy of finance and accounting (F&A) sourcing and practitioner-led consulting for IT and business operations presents serious competition to large-scale service providers like Accenture, IBM, Infosys, and others with similar capabilities.

QX and Chazey Partners: a blueprint for a strong partnership that bridges the gap between technology and business

The marriage of two distinct business models is a success when it delivers tremendous value to clients, which is the case here. QX is an outsourcing service provider for F&A functions, and Chazey Partners is a business transformation consultant and artificial intelligence (AI) and robotic process automation (RPA) provider. With this partnership, QX can expand from supporting its clients across the F&A value chain through people, sourcing, and technology platforms to delivering deep insights into their finance and business processes through Chazey Partners’ transformation capabilities. It can carve out an “as-a-service” delivery model, pairing skilled F&A talent with process and transformation consulting and an additional overlay of enabling technology platforms, all as part of an end-to-end offering.

They have the right formula for cross-selling synergies: nimble resource allocation, complementary product portfolios, combined delivery centers, and access to a diverse customer network

QX pursued the acquisition with Chazey Partners to streamline delivery centers, establish and extend digital capabilities, and strengthen its competitive position, mainly driven by customer demands. Each has its strengths: QX brings offshore delivery centers and a strong presence in the UK and Europe, while Chazey Partners is well established in the Americas and will help set up near-shore business process outsourcing (BPO) operations. The combined business will pursue opportunities with similar target clients and footprint aspirations. With a clear integration strategy which includes front-line teams committed to cross-selling the new service bundles and access to a new customer base, the partnership will lead to the combined organization realizing more value.

Digital-first service providers as a core value proposition are now challenging the F&A outsourcing marketplace

Today, enterprises are looking at delivery models focused on more than “core capabilities,” seeking those that also support integrated services, including domain-service experience with digital and design thinking. As the pace and complexities of today’s businesses evolve, enterprises are moving from the traditional pure-play F&A outsourcing model to modern service providers like QX that can offer a domain-rich talent pool, consulting, and niche-technology platforms together as a one-stop-shop solution. As enterprises increasingly face large and complex challenges, bringing disparate capabilities to solve problems becomes critical.

The Bottom Line: Although QX addresses the disruption in the traditional F&A model due to innovation and digital advancement by forging the right partnerships, it still needs to beat the odds of large service provider biases that undermine the F&A BPO landscape

QX must face the goliaths of F&A BPO providers like Accenture, IBM, Infosys, and others. Exhibit 1 shows the deal-size distribution for large service providers’ F&A BPO contracts in 2020. Today, these large service providers are looking for smaller deals between $10 million and $20 million; they have realized that it is rare for the mega-deals of $100 million-plus to appear in these markets. While they wait for these large deals, they do not mind putting in the work to win smaller deals. A solid brand name and significant client base of established service providers put them in a stronger position to win deals. Additionally, their sheer scale and size give them access to talent, the ability to quickly mobilize resources, and investment in innovation. These factors have made QX go the extra mile to position itself strategically against the competition by adding new end-to-end capabilities and value to its existing and potential new customer base while retaining the advantages of flexibility and speed.

Exhibit 1:Deal-size distribution for large service providers’ F&A BPO contracts in 2020

Sample: 2020 HFS Top 10 Finance and Accounting Outsourcing (FAO) Service Providers; survey from 16 leading global service providers
Source: HFS Research, 2022