Telus International CEO Puritt On Xavient Acquisition Plans, Adding 15,000 Employees In Two Years, And His BPO Competition

M&A On The Brain

Telus International has fortified its business process outsourcing muscle at an astonishing rate over the past two years, growing its team of employees by nearly 15,000 through a blend of organic expansion and acquisitions.

The latest boost in manpower for the Las Vegas-based heavyweight – an independent subsidiary of Telus, No. 29 on the CRN Solution Provider 500 – comes with the planned purchase of next-gen consulting specialist Xavient Information Systems, an 1,800-person enterprise IT outsourcer with an established market presence in India and a broad solutions set that includes cloud, DevOps, big data and Internet of Things services.

Telus intends to acquire a 65 percent stake in Xavient and, as part of the agreement, holds an option to scoop up the company's remaining equity before Jan. 1, 2021, for an estimated $250 million. The deal follows an August acquisition of Ireland-based professional services firm Voxpro – with headcount of 2,700 – for an undisclosed amount.

In the wake of the Xavient announcement, Puritt sat down with CRN to discuss his company's expanding workforce of nearly 30,000 and how Telus International is positioned in the growing BPO market. What follows is an edited excerpt of that conversation.

IT outsourcing has been the Telus forte. Why acquire Xavient?

It shouldn't be hugely surprising, or at least I hope it's not given the transformational changes going on around technology. It seemed obvious that if we're going to continue to be relevant to customers, we need to continue to move up the food chain in terms of these next-generation, leading technology capabilities. While we have an IT capability inside Telus International that's not insignificant, admittedly it's not as big, bold, progressive and expansive as we believed it should be. We spent a great deal of time scanning the marketplace for potential partners that we believed would enable our customers, help us win new customers and help us stay in front of these evolutionary technology changes.

Are you getting into the consulting business, then? Which of Xavient's next-gen capabilities piqued your interest?

We think the Xavient capability is a consultative one, first helping to articulate what that tech transformation pathway could and should look like. And then more importantly, it can build, develop, deliver and support those solutions thereafter, which is something we get quite excited about. Big data, cloud services, IoT, supporting over-the-top content and UI/UX improvements, their DevOps, Agile environment, AI – [customers] are thirsty for partners like us to help them navigate this technology transformation.

Xavient has a pretty diverse solution set and some big vendor partnerships, like SAP, Oracle and IBM. Is there a specific relationship or area of expertise that really stood out to your team?

It's a lot like asking me which one of my kids I love the most. Xavient has some tier-one, marquee communication service provider and BFSI [banking, financial services and insurance] clients. The scope of support they're delivering to those customers is across that entire footprint of next-gen capabilities. It would probably be unfair and inaccurate to single one out. We spent a great deal of time making sure we understood how extensively its delivery capabilities reached and then looked at our incumbent customer footprint to explore just how quickly and broadly we could exploit that delivery capability to serve our customer base. The answer was a pretty resounding 'Yes, sir' across the board. … It really is all of the above.

Given Telus' IT outsourcing strength and Xavient's presence in India, is that where these new capabilities will be applied? Are we going to see outsourced analytics and IoT?

Not exactly. Xavient's footprint is about 70-30, offshore to onshore. Depending on client and program, that mix can differ quite dramatically. Where an individual providing the service needs to be located will ultimately be determined by the customer. We have an appetite, an ability and a capability to support them on-shore, near-shore or off-shore, and progressively, the expectation is that will continue to be the case. … It's not exclusively predicated on hiring more people in India. We will certainly grow the footprint there, just as we've done with our other businesses, but it'll be on-shore, near-shore and off-shore.

How do you plan to implement and integrate those capabilities? Will Xavient's executive team stay intact?

We have a proven formula. It's not like a big company buys a small company and destroys its will to live by crushing its independence, taking over all of its decision-making and insisting things be done our way. To the contrary. Having spent so much time and effort scanning the landscape to find the best possible partner, we want to empower the leadership community at Xavient. They will remain in place, and they'll continue to serve their partners the same way they have historically. The only difference is now they're supported by Telus, so they have access to our balance sheet strength, extended footprint, robust infrastructure and best-in-class practices around recruitment, engagement, retention, reward.

We've seen a lot of consolidation in the channel, particularly among the heavyweights. Do you ever feel competitive pressure to keep pace with the rate of change by growing inorganically?

My philosophy with respect to growth and acquisition is perhaps a bit contrarian. It never occurred to me to manage my business based on how my competitors are managing theirs. Having said that, I'm obviously not oblivious to the competitive landscape and what's going on out there. It certainly drives things like customer appetite around a single point of contact and a desire for a more consolidated support approach. Your stakeholders will quickly grow weary of you and take their investment capital elsewhere if you're not delivering ever-heightening returns. Without growth, you can't. And if your more talented employees have no place to grow their careers, they will take their talents to the competition or elsewhere. It's a consequence of the obligation we have to fulfill employee and stakeholder expectations.

But you'd prefer to grow organically?

Organic [growth] would obviously be preferable. The good news is when you have the track record of success we do around acquisition and integration, and you have shareholders with a willingness to provide incremental growth capital to support our expansionary ambitions, it creates further opportunity for accelerated growth through M&A. It puts us in good company in terms of the other consolidation activities going on in our sector. But rather than simply growing to have the most pervasive global footprint, where we've grown has been on the back of strategic, thoughtful, well-planned efforts to meet existing customer demand. Rather than a build-and-they-will-come strategy, we've been focused on a well-heeled approach to acquisition that starts with strategic rationale.

What sort of components typically drive your M&A strategy?

Expanding into a particular geography, into a new solution set, a comprehensive evaluation of the commercial efficacy that underlines why we'd choose this particular business … and to be clear we have an achievable, robust post-deal integration plan. Effectively integrating new business capabilities with our own. That's where most acquisitions seem to fall down. Because we spend so much time up front, that gives us an opportunity to ensure we're delivering incremental shareholder value as a result.

Both of your most recent purchases have involved fairly big companies; Xavient has 1,800 employees, and Voxpro, acquired in August, is 2,700 strong. Is this a time to really focus on integration, or will the M&A charge continue?

Our road map anticipates further M&A activity, but timing is everything. We want to ensure that we give these two transactions our full time and attention so we are successful on the integration front. Having said that, our business organically added almost 10,000 team members over the last two years. Adding 5,000 team members is something we've managed to support quite effectively. Our business, post-closing of the Xavient deal, will be north of 30,000 team members. We also are beneficiaries of a broader bench of talent that can support our ambitions. I'm not sure we need to be quite as measured as we have historically in terms of the pace of acquisition growth. For now, we'll for sure be focused on making sure we can derive anticipated benefits from these transactions near term.

You mentioned hiring some 10,000 employees. Is there a particular solution set or vertical where you've seen the most growth and investment?

Most of our growth have been in what we call traditional BPO, or back-office support. We're doing a fair bit of technical support and care across a range of services from an industry segment perspective, really for the fast-growing technology, travel, hospitality and health-care sectors. That's really where see the most upside in our business. Our IT platforms have grown more slowly – not insignificantly – but that was part of the reason for the Xavient deal. It was a booster shot to get us where I'd like us to be a little bit sooner.

Telus indicated it would use performance metrics to determine whether the company would purchase the remaining 35 percent stake in Xavient. Are those typical financial measures like revenue and profit, or are there other areas you'll be evaluating?

In addition to the obvious aspects that you identified, we'd include operational and delivery metrics. We'll evaluate not just to the financial success of the business, which we'd consider a lagging indicator, but perhaps more importantly those leading indicators of performance that are more likely to give rise to sustained, long-term financial success. We'll be evaluating our partnership across that lens even more so than the traditional financial metrics to ensure that, together, they and we are still delighting our collective customers.

Once the company has fully integrated Xavient and its advanced solutions into the business, how much could a prospective client expect to save by working with Telus International?

It varies markedly depending on what the use case looks like, whether the customer is already exploiting next-gen technology solutions and whether they're using the scale efficiencies of an outsource partner or not. Our experience over the 12 years we've been in business suggests that the gain our partners enjoy can comfortably be double digits, starting with a three or a four. It's a pretty compelling business model and that's why you've seen continued success of this industry across the globe. It's a compelling value prop provided you choose the right partner.

Is there anything else we should know about Telus' capabilities, expertise or past performance?

We seem to get some notoriety around our people practices. You can have the best technology tools, but if your team members are disengaged or looking for their next gig, that great tool set gets squandered. We start with a focus on our employees, providing them with the right career path rather than just a job, an inspiring workplace rather than just a basement and an internet connection, and give them the opportunity to be part of something bigger than themselves in terms of our corporate social responsibility platform – philanthropy and giving back to communities. Driving our best-in-class engagement levels allows us to ensure we have the most tenured, well-trained and qualified team to deliver the best levels of service, no matter how complex the technology becomes.

So your competition should be worried, then?

I will leave them to worry or not as they see fit. We're focused on trying to deliver better services to our customers, and the bigger our business gets, the more generous we can be toward those who are less fortunate in the communities where we operate.