Xerox closes ACS purchase: A look at the grand plan
Xerox has closed the purchase of ACS and the deal transforms the company from a document management outfit into one that extends into business process outsourcing. The big question is what comes next.
Xerox announced the acquisition of ACS in September and initially the deal raised a few eyebrows. However, the two companies argue that together they will have the technology and know-how to become a leading business process outsourcing (BPO) company with unique capabilities.
I spoke to Jim Firestone, president of corporate operations at Xerox, and Lynn Blodgett, CEO of ACS, on the closing of the deal, the short-term and long-term plans and what the customer will see. On the 100-day plan:
Firestone said Xerox and ACS have put together an integration team that has been working for a couple months. Here's a look at the four items on the to-do list:
- Talk to customers. With ACS, Xerox gets a more diversified customer base. For some of these customers there are multiple opportunities to cross sell services and expand globally.
- Become more efficient. Although the ACS purchase wasn't billed as a big synergy-laden deal, there are cost efficiencies that can be gained. Firestone said corporate overhead will be cut and Xerox will look to ACS to manage some internal functions. In other areas, Xerox processes and technology will lead.
- Innovate and create new offerings. In the short-term, Firestone said there will be an "immediate leveraging smarter document technologies to distilling insight of data." This technology will increasingly be used in ACS' process outsourcing services to reduce the amount of manual intervention needed.
- Transform the services Xerox-ACS can provide. "We want to do something we haven't done before and couldn't do individually," said Firestone.
Blodgett added that there are about 60 different projects within the 100-day plan. The companies aren't trying to do anything crazy---like have Xerox salespeople suddenly selling business process outsourcing services. Overall, Blodgett added that there isn't a lot of IT system consolidation. The approach to business processes such as finance and accounting and human resources will mirror what ACS does for customers in some respects, he added.
On what customers will see on day one:
Firestone said that Xerox-ACS has identified customers where the merger could provide value. Some customers have already leveraged relationships with one company into bigger deals. Customers that have ACS for business process outsourcing (BPO) are now considering Xerox for managed print services as a way to consolidate vendors. "They like the fact that they can take advantage of more capabilities from one vendor," said Firestone.
Blodgett said the most important aspect of combining the companies is to avoid any disruption in products or services.
Firestone said the real gains from the deal may occur as Xerox expands ACS' global footprint. "Xerox has strong established operations in large countries around the world," said Firestone. "We have prioritized markets around the world and can grow through acquisition or start by landing a large contract. The first order of business is protecting and growing the U.S. market, which is the largest for both ACS and Xerox. After that Xerox will try to grow ACS' presence in Europe where it already has BPO deals in the United Kingdom. "We can build off that base," said Firestone.
In addition, ACS, which has multiple contracts running transportation systems like EZPass, will also look to grow in developing markets where infrastructure is being built.
On technology synergy:
When asked about a specific scenario where ACS could use Xerox technology Firestone laid out the following example.
ACS runs the IT behind the EZPass system and processes "a tremendous amount of transactions," but many of them require human eyes to look at license plate numbers and violations, explained Firestone. Xerox has technology that can identify those details electronically and deliver more information about car types. Put together, Xerox and ACS can provide better services. That same example could apply to ACS' services for the government like Medicaid form processing.
"The most readily attackable thing is Xerox's technology around imaging," said Blodgett. "We will be able to do a lot more things with Xerox technology. We deal with 100s of billions of images annually and we can handle unstructured data a lot more easily with Xerox technology." On the future of BPO:
Blodgett said BPO is in transition. Initially, BPO was all about the labor arbitrage---outsourcing processes and the labor that goes with them to save money. "Today it's about technology enabled business processes," said Blodgett. He added that BPO and IT are coming together and attracting customers. Firestone added that the growth picture is solid for BPO.