Powerlan leaps into BPO with $12m deal

Software vendor and services provider Powerlan has made its first big leap into business process outsourcing (BPO), forming a wholly-owned subsidiary to win a $12 million tender with OFM Investment Group.

Tomislav Matic, managing director and CEO of Powerlan, said the ASX-listed company's new subsidiary, FinancialBPO, had won a competitive tender to supply investment administration and client registry services -- using Powerlan's Garradin Portfolio software -- for three years to OFM, a property and mortgage fund company.

The deal was worth about $4 million a year, he said.

“Many clients or prospective clients have asked us to do [BPO] in the past, but we didn't [then] have the BPO management skills,” he said. “We learnt some painful lessons and so tread carefully.”

Matic said that FinancialBPO had been specifically spun off to target the OFM tender, but a Powerlan move to BPO had been planned for some time. “It was strategic,” he said.

Matic said the appointment of Byram Johnston -- who had “extensive experience” in commercialisation and large-scale BPO operations -- to the helm of FinancialBPO had provided that expertise, and Powerlan now felt confident to tackle the growing BPO market.

He said Johnston had worked in various senior BPO management roles such as at Accenture and EDS. “All sorts of interesting articles have been written about his background and he wanted to get into the financial BPO space,” Matic said.

Powerlan has hit headlines in recent times as it whittled its divisions down to six -- telecommunications operation support systems provider Clarity, FinancialBPO, Garradin, foreign exchange systems vendor IMX, Microsoft application update software provider Office Converter and managed security services provider (MSSP) Zento.

Matic said Powerlan had thought hard and decided that BPO was where it wanted to focus. Its executives had done a lot of negotiating to “tread carefully” in some new directions.

“This will succeed,” he said. “For the next 12 months [FinancialBPO] is going to be somewhere in the order of seven to 10 percent of our revenues.”

He conceded that Powerlan was a much smaller business than it had been but added that all six remaining divisions were profitable, especially with the big lift in BPO predicted this year by Gartner and other analysts.

Zento's MSSP expertise would also play a critical role in the OFM deal, helping to securely host the Garradin applications, he said.

OFM had been using Garradin software previously, but it was delivered by a third party that had decided to withdraw from the contract to focus on its core trustee-based activities.

Powerlan chairman Theo Baker said in his address to the company's AGM in November that Powerlan had improved its balance sheet “significantly” and was overcoming the “challenges” suffered in the 2001-02 financial year.

“Our revenue for the year was $71 million down from the previous year of $211 million, as a result of Powerlan exiting its low margin IT commodity businesses,” Baker said then.

“The profit after tax for the [2002-03] year was $2.5 million, compared to a loss of $142.4 million for the previous year.”