10 Ways Xerox Is Playing To Win

Checking In

Russell Peacock became Xerox North America president in February 2010, and right now he sees Xerox embracing new opportunity at every turn. Channel business is expanding on the back of managed print services -- an opportunity, he says, that Xerox was in front of before its competitors -- and the acquisition of ACS, completed two months ago, is opening doors for both Xerox as a BPO-centric services powerhouse and, for Xerox partners, for sales on the back of ACS deals both local, and global.

CRN editors met with Peacock at Xerox's midtown Manhattan showroom this week to hear about why Xerox is in a great position coming out of the recession. Here are 10 highlights from the conversation.

Alternatives Are Wanted

According to Peacock, printing and imaging solution providers have craved an alternative to HP's dominance for some time, and Xerox has the opportunity to emerge as a clear leader in managed print services thanks to a better program and fatter margins.

"In building this spectacular array of value-added resellers around the globe, HP resellers have become highly dependent on HP and their business model is very mature. You know that adage about no one ever being fired for buying IBM? In the printer area it has also been true for a long time for HP. That's great for HP, but it also means, if I'm interpreting the messages I get from resellers, resellers are saying: 'Give us an alternative to HP.'"

Better Margins Than HP

Better margins with Xerox than HP? "I'd very surprised if that is not the case," Peacock said.

HP may have gotten a little too comfortable in the No. 1 spot, he reasoned.

"If we're talking about the printer environment, they've been the lords and masters for a long, long time. We've won skirmishes and battles on the laser front, maybe, but on a tech-by-tech basis we're probably about the same. We're proud of our array of products and I'm sure HP is proud of theirs. But we've suddenly got this opportunity to differentiate ourselves from all of our competitors without asking the customer to spend more money, and any incremental round we win, we're winning at our competitors' expense. If you do the math -- if you're promising 15, 20, 25 percent savings -- it's impacting your revenue stream."

No Shortage Of R&D

Xerox's R&D engine is humming along, and according to Peacock, is evolving to serve the needs of each of Xerox's product lines and channel models.

"We've got a full-time team developing the technology road map and the software tools specifically for managed print services. There's a whole bunch of stuff being done in the background as we speak, and as the [managed print] market goes from $20 billion to $60 billion, we will start pulling the grapes off the vine while ensuring the base platform is modular and capable of improvements."

Four Channels, One Message

You don't want too much harmony in your channels, Peacock said -- that stifles competition -- but Xerox is in a position where its many channels, including its agents, resellers and Xerox Global Services, can operate as distinct routes to market while serving a common goal.

"Each channel is in varying degrees of maturity but all are recognizing that managed print services is the key to the pots of gold at the end of the rainbow. All of our channels have kind of been operating in silos. There are overlaps and adjacencies, but I think there is opportunity for us to take a more holistic view and recognize that each is slightly different, but we're playing in the same kind of document management space."

Addition Without 'Additional'

Xerox's $6.4 billion acquisition of Affiliated Computer Services (ACS), completed in February, triples Xerox's services revenue and almost automatically makes the vendor a BPO powerhouse. For the moment, said Peacock, it's important to let business as usual continue at ACS and not upset its pipeline by integrating too fast.

"In the first instance, we're going to let ACS be ACS," he said. "Their core competency is in business process outsourcing. We flirted in that arena with (Xerox) Global Services, but the lion's share of that business is in document management services rather than in classic BPO or ITO. Obviously, there are overlaps and adjacencies but not a huge amount."

Build, Partner And Buy

It became clear to Xerox, Peacock explained, that it couldn't compete as a global BPO force by scaling Xerox Global Services alone.

"We're very pleased with the progress of Xerox Global Services, but it became increasingly clear that to convince the client base around the world we could scale as a BPO player with the capabilities of an IBM, we'd need to acquire," he said. "That's why ACS felt like a good fit."

Leverage ACS

The ways in which existing Xerox channel partners will be able to leverage the ACS pipeline are only starting to emerge.

"We got lots of volume traffic from existing clients of both organizations and a lot of new clients saying, well, this is interesting, what can you do for us?" Peacock said. "It's opened up a lot of new conversations, and those are the works in progress."

As a BPO specialist, ACS had historically been vendor-agnostic, Peacock said, when it came to choosing hardware and software to provide its customers. Those opportunities will now open to Xerox VARs and the Xerox brand, he explained, because going to the well for Xerox solutions on the hardware and software side will be "logical."

"On the back of penetration into various of their clients, there'll be a requirement to drag hardware and software, and the logical place to go is to work with our channel partners," he said. "It feels like a win-win-win: for our customers, for ACS and and for our channel partners."

Xerox Managed Print Is Exploding

According to Peacock, Xerox's North American reseller base collectively grew its managed print services revenue by 50 percent in 2009. Xerox would like to see at least that for 2010 and there's no indication it won't hit that mark.

"We're giving the channel a new story to tell in an area I think everyone would recognize the train has left the station," he said. "Feeds and speeds and prices of printers are tedious, and it's increasingly difficult to get onto the CIO's calendar on hardware alone. We're at last scratching that itch of our channel partners: 'please, please, please' give us new streams of profitable revenue."

Peacock said the "classic" document imaging marketplace is expected to post 1 percent growth -- or stay flat -- over the next three years. Managed print services, on the other hand, are by most industry analysts a $20 billion opportunity expected to triple by 2013.

"We're very excited. Why are we excited? Because we're ahead of the game and we've been ahead of the game for quite some time," Peacock said.

The Numbers Don't Lie

For those who doubt Xerox has survived the recession intact and is in position to grow, the company's first quarter numbers, announced April 23, should provide succor. Yes, the company swung to a first quarter loss of $42 million, but still handily beat most Wall Street estimates, and also saw an earnings surge of $224 million on 18 cents per share. Revenue, too, rose 33 percent, and Xerox is forecasting adjusted earnings per share between 20 and 22 cents for Q2, a solid 4-cents-per-share higher than analyst forecasts.

"There are encouraging signs," Peacock said.

The Game Face Is On

Expect Xerox to take and maintain market share, Peacock said. It's in the best position to do that now than at any time in the past 10 years.

"This is a tough market full of very, very competent competitors, but the door is ajar for Xerox to barge through, given the foundations we've laid."