It’s been just over a year since Xerox officially acquired business process outsourcer ACS for $6.4 billion. But as students of successful mergers understand, the real work of integration–combining the technology, processes and cultures of the two organizations–has only just begun.
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The question that looms largest is whether or not the conjoined companies can deliver on the premise–and promise–of their union. In the case of Xerox-ACS, according to its own recent marketing campaigns, that means changing “the way you see our company–and possibly your own.” By combining Xerox’s strengths in document technology with ACS’s expertise in managing and automating work processes, the company says it has created a new class of business services provider.
CIO.com spoke to Xerox CIO John McDermott and the head of ACS’s IT outsourcing unit Kevin Kyser about the challenges of integrating a products company with a service provider, the role of IT services in the merged company, and ACS’s newest–and least profitable–outsourcing customer, Xerox.
CIO.com: Industry watchers tend to view the Xerox-ACS partnership as the odd couple of technology mergers. It’s harder to see how the two companies might complement each other than it is with a Dell-Perot or HP-EDS match-up. How do you explain the value of the partnership?
John E. McDermott, Xerox CIO: We get reports from CIOs and other customers that Xerox has fundamentally changed the impression of its brand from a brand associated with great printing and some document management services to company that can manage document intensive processes across a wide spectrum. And that’s what pointed us toward ACS. ACS had found an important and profitable segment of the outsourcing marketplace that is document intensive. We see that in traditional BPO areas like HR. We see it in legal and mortgage and health records.
How do you explain the value of the partnership in terms of IT outsourcing?
Kevin Kyser, COO of ACS’s Information Technology Outsourcing group: There’s great synergy between the two companies in IT outsourcing. That’s where the ACS business started, and that’s where we’ve continued to grow in tough economic times. But now we can help companies run their entire business more efficiently–not just IT. That’s going to be a great differentiator in the marketplace–thinking through the big issues with our customers that we didn’t have the bandwidth or processes for before.
In the world of IT services, Xerox is famous for inking one of the first single-source outsourcing mega-deals. Recently, you shifted to a multi-vendor approach. Now that you’ve acquired ACS, will the pendulum swing back in the single-source direction?
McDermott: I now have the opportunity to insource [some IT services] and become [ACS’s] largest and best customer. Years ago, Xerox made the largest EDS deal of that time. It was a monolithic arrangement, and only a thin veneer of IT talent remained within Xerox. Over time, we rebalanced that and moved key knowledge back into Xerox. As we began to manage more discretely by tower or application area, that led to the notion that we could get partners with more specific expertise at a lower cost by multi-sourcing. Four years ago, we started down that path with considerable success in reducing costs and improving service levels. That required us to put in place vendor management capabilities to make sure problems that needed to be coordinated could be effectively done. That provided a good backdrop to bring in the ACS services and get rid of some of the others.