My dear friend, and former colleague at AMR Research, Dana Stiffler(pictured), recently sent us in some of her views on the merger. Dana actually got promoted today to VP and Head of Research for AMR's services research, where she will be offering clients "cashable benefits, or your money back" with her group's output.
Anyhow, thought this a good time to showcase her talent… Over to you, Dana:
Xerox-ACS: Cloud Services Potential, or Dinosaurs Huddling Together for Warmth?
Xerox is the latest in a long line of technology manufacturers to realize that its future lies in services, not products, particularly in the B2B value chain. Once manufacturing and supply chain efficiencies have been wrung out, it’s time to turn to top-line opportunities: services that use product heritage as a foundation. The fastest way to acquire these capabilities is by acquisition. Xerox’s predecessors in this journey include IBM, Fujitsu, Hitachi, HP, and, just recently, Dell, with its acquisition of Perot Systems.
In this case, Xerox’s target is Affiliated Computer Systems (ACS), a $6.5B, Dallas-based outfit best known for its broad set of business process outsourcing (BPO) services. The acquisition makes sense when Xerox and ACS executives talk about synergies in document management and transaction processing, though there’s some distance to travel to put together a viable offering and go-to-market strategy, even for this supposed sweet spot. The two companies’ traditional target prospects appear to reside in different universes: ACS’s in the finance function and strategic sourcing, and Xerox’s in administrative operations and procurement.
Important areas within ACS likely to languish post-transaction include the company’s burgeoning technology outsourcing business, as well as broader, full-scope, back-office offerings like finance and accounting services (the jewel in ACS’s crown) and human resources outsourcing. ACS businesses most likely to retain executive attention and investment are the more targeted processing products in healthcare, government, and financial services. Xerox had already made investments in mortgage processing as well as litigation support.
The combined entity will need to move quickly to prove to Wall Street that the transaction is about delivering industry-focused, asset-based business services (hint: use the word “cloud” a lot—they love that), rather than two dinosaurs huddling together for warmth.
Dana Stiffler (pictured), is Vice President and Head of Research for AMR Research's Global Business & Outsourcing Services Practice