In 2009 Xerox made a large acquisition to be able to move to penetrate the technology outsourcing business on the computer and systems side. Understanding that much of the growth of business technology systems business required a congruence between the hardware and print business and the network business that was connecting all the devices the strategy was to get a foot in both camps.
On January 29th Xerox announced it was splitting into two public companies, one focused on document technology (the 'old' print business) and one on business process outsourcing by the end of 2016. The two companies will be independent with two CEOs, two boards and separate business operations. It essentially says that the combined strategy has not worked and that a different structure is needed going forward.
It is very interesting to look at this announcement in light of the split that HP has also undergone. In the HP situation the decision was to create two companies with different market targets based upon size and business type. HP Inc. retains the personal computer and printer business while a newly formed Hewlett-Packard Enterprise would focus on the services, server and storage businesses primarily focused on larger enterprises.
Whereas HP defined the new roles by market segment primarily by size keeping services and hardware in both new entities, it appears that Xerox has decided to keep its traditional hardware business in one company and spin the technology services business of into a new entity.
Of course both strategies have merit depending upon the strengths of the originating operations and there are businesses that have successfully rebuilt themselves like this before. One which comes to mind is IBM which has transformed into almost exclusively a services business after selling off its hardware operations to Lenovo, first on the PC side and then in a subsequent deal on the server side as well.
What a new Xerox will end up looking like is anyone s guess at this point. Will the retrenching of the traditional document focused print side stay as is or will it be able to make changes to compete in an area of business that is very different than it was only ten years ago.Read More