A couple days after Lexmark announced it was “exploring strategic alternatives [see DIR 10/30/15],” its MFP/MPS competitor Xerox announced “our Board determined that undertaking a comprehensive review of structural options for the company’s portfolio is the right decision at this time.” This announcement was made in conjunction with Xerox’s Q3 financial report, which showed adjusted revenue of $4.4B or a 4% decline measured in constant currencies.
For the quarter, Xerox Services generated $2.4B, or 57% of Xerox’s total revenue, while Document Technology (the hardware-related business) generated $1.8B. Xerox Services’ adjusted revenue was reported as flat YOY, while Document Technology was down 9% in constant currency. This is somewhat consistent with what we’ve seen in the MFP industry at large, with hardware revenue falling—although Xerox has also struggled a bit recently in Services and before adjustments took a Q3 charge of $385M related to failed Medicaid projects in a couple of states.
That said, Xerox, like its competitors, seems focused on driving more of its business upstream into solutions-centric markets like ECM and BPO. DIR recently caught up with Joseph Hanania, who this summer was appointed SVP of Global Document Outsourcing at Xerox. GDO represents a $3.5B annual operation for Xerox, which Hanania described basically as MPS (managed print services). As the head of GDO, he reports directly to directly to Mike Feldman, president, Large Enterprise Operations (LEO), which became part of Xerox Services starting this year.
On par with GDO under LEO are Xerox’s Workflow Automation and Global BPO groups. “This alignment has been done so that customers can move in a continuum through our different levels of solutions,” Hanania told DIR. “At Xerox, it’s our goal to manage the information needs of our customers, no matter what format that information is in. Whether our customers want to print or work with their information in electronic format, our job is to ensure that their documents are available and secure—and that the customer can access them with ease.”
According to Hanania, Xerox is the clear market leader in MPS. “According to IDC’s June figures, Xerox had an MPS market share of 34.4%,” he told DIR. “This was approximately equal to the combined percentage of our two closest competitors.”
Hanania noted that not all of Xerox’s MPS customers will automatically embrace Enterprise Workflow and BPO. “I view our LEO offerings like a pyramid,” he said. “MPS has the widest adoption at the bottom part. We try and present these three types of solutions in ways that lead into each other. It’s important that we provide customers with options to move up the pyramid based on their requirements.”
A continuum of services
Xerox uses a grid to diagram the three tiers of its LEO operations. “On the X-axis, from left to right, you have MPS, Workflow Automation, and BPO,” he said. “On the Y-axis, in ascending order, you have assessment and optimization of the customers’ document environment; that moves up to security and integration, and finally you have automation and simplification.
“Basically, we start by managing the print needs of the customer. We explain that optimizing their print processes can save them money. This often leads to the next level, where we offer to automate some of their processes, which we explain can save even more money and enable them to operate more efficiently. This is where Workflow Automation comes to into play. We look at things like how to automate the capture of documents and how to archive them, integrate them within our customer’s business, and add security to them. As they add automation, more and more of the services we are providing can be administered remotely, which can lead to BPO and us providing even more value.
“What really counts that is that we can manage the entire journey for the customer. Some may not need anything beyond MPS, they might be happy with that. Some customers might like what they’re getting with MPS and evolve into Workflow Automation. The idea is to be able to complement whatever services they are getting from us with the next level of services if they require it.”
ECM acquisition a possibility
MPS is a natural offshoot of Xerox’s history in printing. The BPO business is founded on the ACS acquisition that Xerox made in 2010. Both ACS and Xerox have historically been leaders in their respective markets. The Workflow Automation business is kind of a cross-section between the two.
ACS has always offered imaging and workflow services as part of what it does, while Xerox, like other MFP vendors, has offered some level of capture and document management software and integration for more than 10 years. It seemed as if Xerox’s partnership with Kofax, which was announced earlier this year, might be a stepping stone to launching Xerox much deeper into the ECM market [see DIR 1/23/15]. However, that partnership was scuttled when Lexmark moved in and acquired Kofax a few months later [see DIR 3/27/15].
Hyland is currently Xerox’s primary partner for Workflow Automation, although X
erox has several other smaller partners as well. Earlier this year, Xerox announced that it had allocated $900M for acquisitions in 2015, which would seem to preclude Hyland as a target (as the Cleveland-based ISV recently received an investment that valued it at $1.4B [see DIR 6/12/15]), but Hanania would not rule out an acquisition related to Workflow Automation. Perhaps the current review by the Xerox Board will increase the acquisition budget.
“Xerox is committed to being a market leader in every type of service we offer,” Hanania said. “As part of that commitment, we will pursue whatever avenues make sense, not just to maintain our position, but to lead the market. We want to have leadership in MPS, workflow automation, and BPO. So, the implied answer is that yes, acquisition could be part of our Workflow Automation strategy.”
Where is MPS headed?
Hanania joined Xerox from Oracle, where most recently he led global sales development for Advanced Customer Support. He has also had executive roles with HP and Microsoft. “I have spent the past 28 years in the IT industry,” he told DIR. “I bring a lot of experience as a general manager and leading sales teams to address the needs of the customer. Also, from my days at HP, I have experience with evolving a business as market requirements change—how to become a market leader and how to maintain that once you are there.”
Going forward Hanania sees the line blurring between the three business categories managed under LEO. “As digital content become more pervasive, a lot of what used to separate MPS, workflow, and BPO starts to fade away,” he said. “On top of that, we are getting requests by customers who want to know more about who is using their content, how it is being used, and how to leverage that information to grow their business even more. This gets you into analytics.
“As we move forward, I think users will also be looking to do more sophisticated things with their content without really following a specific structure. If you look at how younger people today conduct their personal business, we have to devise a way that they can access business content in the same way—anywhere at any time, without a big infrastructure.
“If you look at MPS specifically and how it’s evolving, the trick is to understand that it’s not just about print—it’s about marrying print to the digital part of a users’ core strategy. While we want to provide the best ROI, quality, and reliability when it comes to print, we also want to provide a path toward managing digital content in any feasible way that the user wants. Yes, we are committed to addressing print requirements, but we are equally committed to evolving in the market as the market leader. Our customers expect us to have solutions not only to keep up but to lead them to where the market is going.”
For more information: http://bit.ly/XeroxHanania
