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Sep 28, 2009

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Lee Ann, while the deal has received a lot of coverage from the BPO perspective, I would like to clarify that Xerox cares a lot about the ITO portion of our business as well. Xerox will boost the global reach of our ITO business and will allow us to expand our services to their Managed Print Services customers. I also agree with the posts by Dave and Rand about the opportunities in end-to-end processing!

Phil,

I think that this is a pretty cool move for both of them. Xerox is obviously very interested in increasing and locking down their footprint in the multi system market and wants to be able to compete with HP, Dell, and many others. Part of what occurs in the BPO services industry is at the back end where there can be much copying, printing, scanning, and faxing in terms of the completion of the business process. While many of the other BPO service providers may have some second thoughts about working with the ACS part of Xerox, locking in all of ACS' customers maybe a very good thing. I really don't know when the math on the upside is done compared with the downside math, whether this is a gain or not, but it should at least lock in Xerox customers.

This may also help to straighten out some of the balance sheet issues that ACS has had, where they even considered going private to help resolve them.

Dave

For FAO, this is a refreshingly good idea and the operational synergies are huge. The document management services from Xerox have been evolving into end-to-end data management, but Xerox needed something to further develop this pre-Process BPO concept. With the Xerox behind them, ACS will be able to strengthen the end-to-end processing (purchase-to-pay, quote-to-cash, record-to-report) and walk into the potential clients with one of the biggest questions already answered: Who will handle the front end? I really think Finance Organizations will respond well to this.

Phil - thanks for the post. We see this move as a signal that ACS and Xerox are moving down the IT services food chain. http://blog.equaterra.com/ And, it's not necessarily a bad thing. The data and data entry oriented process, document management, transaction-based services provide huge market opportunities for the combined firm.

Our real question lies in how effectively ACS will be able to compete in the fiercely competitive high-end ITO space. We see a real opportunity for a new player to emerge in the enterprise infrastructure space based on the declining number of options. Will it be Xerox/ACS? Time will tell.

@Rebecca: thanks for chiming in. (For all you visitors here, Rebecca Scholl is CMO for ACS and a great former Gartner analyst). These business services mergers always thorw up a number of questions - culture, integration, sales synergies etc. Always a lot more complex than a straight software / IT play. Time will tell if it's successful...

I guess many of the major positives are that there are not many areas of overlap from the service-side, so the potential is there if you guys can figure it out, leverage the global scale that you both bring and the sales channel effectively. My concern is how quickly you can build the newly integrated business, stave off very tough competition and leverage the IT capabilities globally. Judging by the drop in Xerox shares this morning, the strategic fit is not viewed as that compelling - but let's hope you can prove the Street wrong.

I think everyone in the business wishes both firms luck.

Cheers,

PF

Phil – Let me offer the opportunity to help with the fit between Xerox and ACS. While there has been a lot of movement on the services front lately and competition in the BPO space in particular is heating up, we firmly believe this move is spot-on, differentiating Xerox from the other players in the space. What differentiates this deal from others: our combined companies will focus on the business process – the data, documents and business process touchpoints. Not solely the software applications or IT infrastructures that other companies address. You’ll now think of Xerox for document and business process management. In short, Xerox is accelerating its roadmap in the services space with what is arguably the premier provider of BPO in the U.S. The end result? Dramatically enhanced value for our shared customers and other stakeholders.

@Tony - good call re the ACS leadership. This is a nice deal for them, and you would have thought most of the ACS staff should be safe for a while. Xerox need to ensure they keep the critical staff onboard and retain / hire some leadership to build out the ACS business. Definitely a curious fit, let's hope Xerox has the resources and drive to transform the ACS portfolio, add to their own before it's too late.

PF

This is a good move by Xerox. The ACS acquisition complements & Strengthens Xerox Global Services division.

Xerox is one of the big vendors for Managed print services, and has multi year contracts with many utilities, Banks, Credit Card companies.

They will leverage this relationship to offer other platform based services to their existing clients.

Sure, there are sales synergies, and Xerox is experienced enough to cross-sell hard. Very hard.

However, it is hard to see the operational synergies. Reorganizing around services unrelated to making/maintaining copiers is probably going to be one heck of a cultural change. Especially for a company like Xerox, which is well known for long term employees...

...and to engage in the Indian BPO market's aggressive pricing is going to be a huge learning lesson for Xerox. Pray the ACS leadership sticks around instead of taking their long awaited liquidity event into retirement...

Agree completely on the Dell comment...if Dell had bought Xerox, Dell and Xerox would have gained substantially. However, the cultural fit would have been even more challenging given their "coop-etition" positions in the current market.

Wish Xerox luck - choice is great from a customer perspective and Xerox has some good ideas and market offerings. Existing ACS customers definitely don't want deteriorating service...

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