Conduent

Conduent Incorporated, spun off from Xerox in January 2017, inherited a $6.4 billion portfolio of business process services contracts spanning government services, transportation, and commercial industries. However, many of these contracts were legacy Xerox arrangements structured as fixed-price, transaction-volume deals with limited escalation provisions. By 2019, revenue had declined to $4.5 billion as clients renegotiated terms at renewal or shifted to competitors. The company faced a structural problem: its government contracts (roughly 45% of revenue) had been priced aggressively to win volume, and commercial contracts lacked minimum commitment floors, meaning client volume reductions flowed directly to Conduent's top line. New business signings were not offsetting attrition, and the contract backlog was declining. Operating margins had compressed to approximately 4-5%, well below the 10-12% typical of well-run BPO operations.

Starting in 2020 under new CEO Cliff Skelton, Conduent undertook a systematic contract restructuring program focused on improving contract economics rather than chasing top-line growth:

• Minimum volume commitments: Renegotiated existing commercial contracts to include minimum monthly volume floors, ensuring a predictable revenue baseline even when client transaction volumes fluctuated. Contracts below $5 million annual value without minimum commitments were either restructured or allowed to attrite.
• Outcome-based pricing conversion: Shifted select government and commercial contracts from pure transaction-based pricing to outcome-based models tied to measurable results (e.g., claims processed accurately, citizen inquiries resolved on first contact). These contracts carried higher per-unit pricing in exchange for Conduent assuming performance risk.
• Contract term extensions: Negotiated 2-3 year extensions on key government contracts by offering technology modernization investments (cloud migration, automation) in exchange for longer commitment periods and built-in annual price adjustments of 2-3%.
• Portfolio rationalization: Deliberately exited approximately $300 million in low-margin, short-term contracts between 2020 and 2022, accepting revenue decline in exchange for improved contract quality. Management described this as clearing out unprofitable work to build a healthier base.
• New business selectivity: Shifted new business pursuit criteria to require minimum contract values of $3 million ACV and minimum 3-year terms, reducing the volume of small, short-cycle deals that consumed sales resources disproportionately.