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Services a Key Driver
Access to new products is great, but many VARs see the biggest growth opportunity with Xerox in services. Indeed, the key driver behind Xerox’s restructuring is its increased focus on services following its acquisition of Affiliated Computer Services in September 2009. That purchase doubled Xerox’s services revenue and bumped up its services mix to about 50 percent of the company’s $22 billion in sales last year.
The ACS acquisition gave Xerox a big splash into the business process outsourcing (BPO) market which, combined with its managed print services and nascent IT outsourcing (ITO) services, gives the company a well-rounded services portfolio to attract large enterprises. Xerox spent the past 18 months honing those offerings into a solutions-based model and now is developing ways to bring those services to SMB customers.
“A year from now, I won’t be talking to you about ACS, I’ll just be talking to you about BPO and ITO,” Burns told Wall Street.
About 85 percent of Xerox’s services revenue now is recurring/annuity-based revenue, according to Xerox, a figure that many VARs would love to replicate.
“Clearly, we’re not far down that path,” Burns said, referring to VARs partnering with ACS. “But no, there’s no doubt there will be a set of questions and an appetite by Xerox and by partners so that we can morph some of these offerings [and] figure out how they can be applied to the customer base our partners cover.”
Gary Gillam, vice president of North American channel operations at Xerox, believes VARs could attain margins of 40 percent or more by partnering with ACS on some opportunities, which is why the company is feverishly looking to attract more MSPs now for when a formal partnership program with ACS can be rolled out.
Gillam has recently spent more time recruiting than Mike Krzyzewski and Jim Calhoun, scouring conferences such as Ingram Micro’s VentureTech Invitational and Synnex’s VARnex to garner interest in managed print and BPO partnerships among MSPs.
“I think that ACS is great opportunity for this group. I’d love to scale some solutions to this group,” Gillam said. “We’ve got 100 percent share with a lot of the [print] guys. It’s the managed services guys we need to go after, guys where the customer is not asking about [managed print or BPO].”
It’s Xerox’s belief that the service-heavy business models of MSPs would provide a smoother transition to add managed print and BPO services compared to a traditional print VAR. MSPs’ customers also are more likely ready candidates to buy those services, said Tom Gall, director of value channel marketing at Xerox.
“Customers get it. Adding one more thing to the monthly bill is not that big a deal. If I’m selling you data security services, are you going to trust me with your printers? Probably,” Gall said. “The folks on the MSP side view it as low technology. The reality is there’s money there to be made. It’s not a new technology to get the CFO to buy into. They’re already spending money on print. You’re just getting them to buy in a different way.”
NEXT: Managed Print Services