Xerox-ACS: Cloud Services Potential, or Dinosaurs Huddling Together for Warmth?

Dana_StifflerOur recent discussion on Xerox's acquisition of ACS certainly served up some meaty discussion, and even got picked up by CIO.com, among other media.

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

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7 Comments

  1. Larry
    Posted November 19, 2009 at 7:20 am | Permalink

    The latter

  2. Eric
    Posted November 19, 2009 at 7:34 am | Permalink

    Most definitely dinosaurs huddling. Not sure if they’re finding much warmth either,

    Eric

  3. Posted November 19, 2009 at 1:50 pm | Permalink

    Near term (first 18 months) synergies will be purely administrative. Medium term (18-36 months) synergies depends on whether Xerox’s print salespeople have the executive connections and ethos to sell ACS’ BPO capabilities and ACS’ BPO salespeople can sell printers. Long term synergies depend on the capabilities of the offspring of these two dinosaurs. Frankly, the question is whether, after ACS’s executives leave following change of control and other retention issues, if ACS’s leadership can change Xerox’s fate. After all, Xerox must change more than ACS…

    Sounds like a classic Digital and Compaq culture clash.

    Wish them both the best of luck because, independent of each other, both are better than the average dinosaur for some clients.

  4. Posted November 20, 2009 at 11:13 pm | Permalink

    Congrats to Dana! Good to see her on Horses and especially good to see that the quality discussion on Horses continues!

    While I agree somewhat with the skpetics, I personally give this one a decent chance of success.

  5. Posted November 21, 2009 at 6:38 pm | Permalink

    “Tony” nailed it above – the transformation from a product to services company is incredibly difficult for sales people. The execution of a conjoined sales strategy will likely be difficult.

  6. Glenn
    Posted December 7, 2009 at 9:45 am | Permalink

    Great perspectives. This particular combination perplexes me….Xerox product sales folks don’t have CxO relationships and transitioning from moving print/copy to selling BPO to the CFO is a huge chasm.

  7. Robert Rutherford
    Posted December 16, 2009 at 3:02 pm | Permalink

    The dinosaur is the perspective that Xerox is just a print machine factory. Xerox has been developing their services perspective for 15 years, but as with any extremely large and diverse organization, many egos are required to become aligned for substantive change.
    I thnk the major acquisition of ACS underscores just such a growing alignment within the Xerox management ranks.

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