Xerox Focuses on Hardware and Technology at Analysts’ Conference

Urusla Burns

Wirth Consulting recently spent a day with Xerox executives and some 60 analysts hailing from around the globe to discuss Xerox market strategy and preview new technology. The major theme was that while services revenue continues to increase, Xerox remains committed to the hardware market—from A4 desktop printers, to A3 enterprise MFPs and digital production printers. 

While in the last several months, Xerox has been emphasizing its acquisition of Affiliated Computer Services (ACS), this time the focus was equally on document hardware, with Xerox emphasizing its continuing commitment to the hardware end—printers, MFPs, and production printing, with the company previewing several new hardware and print solutions.

While in the last several months, Xerox has been emphasizing its acquisition of Affiliated Computer Services (ACS), this time the focus was equally on hardware, with Xerox emphasizing its continuing commitment to the hardware end—printers, MFPs, and production printing, with the company previewing several new hardware and print solutions.

Xerox’s CEO and Chairwoman Ursula Burns kicked off the conference, held in Rochester, NY, noting that services (versus print hardware) revenue is increasingly making up a greater share of revenue. Today, over 50 percent of Xerox revenues are obtained from services, much of it obtained from Xerox’s acquisition of Affiliated Computer Services in 2010. In contrast, in 2009, services made up approximately 25 percent of Xerox’s revenue, with services consisting of customers outsourcing their printing to Xerox. Today, however, with the ACS acquisition, Xerox is also taking on many customers’ backoffice and IT tasks.  

At the same time, Burns emphasized that Xerox will continue to seek to strengthen its presence in both the SMB, office and production segments, noting, “We must continue to play in the technology market and lead there…. Where the pages are, that’s where we’re going to throw our energies…. I can’t see a time where we would not be a manufacturer.”

Within the technology/hardware (non-services) market, color imaging revenue continues to make up a greater portion of hardware revenue. In contrast, two years ago, 30 percent of revenue was obtained via monochrome black imaging systems, while today, monochrome black makes up just 17 percent of revenue. Xerox consequently sees both color imaging systems, as well as the small and mid-size business (SMB) market, as areas of growth, along with developing markets around the world. 

Xerox will also seek to expand its indirect channel for the SMB market by seeking new partnerships. The move follows SMB channel expansion with Xerox’s acquisition of Global Imaging several years ago, as well as the company’s ongoing acquisitions of resellers in Europe. 

Burns also touched on Xerox’s current overall strategy—exemplified by the firm’s prominent Real Business ad campaign. In a nutshell, Xerox seeks to take on a business’s document processing workload—from processing invoices, to producing user manuals—leaving the business to focus on its real business, whether it’s selling motorcycles or playing professional baseball, as the ad campaign illustrates. “More companies are looking for someone to take on their business processes so they can focus on their real business,” notes Burns.

Toward that end, Xerox will employ two key strategies for handling customers’ document processing: cloud-based resources and mobile printing, with Burns aptly noting, “I don’t go to work anymore, the work follows me around.” As many workers now find themselves mobile and out of the office, easy-to-use mobile printing will become an increasingly important capability. Burns also expressed a renewed commitment to digital production printing, and in particular, sees the book-publishing industry moving towards shorter runs and on-demand publishing. She also sees high-end ink-jet printers (such as Xerox’s recently introduced waterless-ink digital color production printer) as playing a larger role in the high-end digital print market.

The firm’s overall growth focus will be: 

  • Services – Business process outsourcing provided by Xerox’s ACS, and Xerox’s IT outsourcing.
  • Global Expansion – Extend business process outsourcing globally. One advantage Xerox brings to ACS is that in the past, ACS was primarily limited to business in the United States; Xerox will use its existing global presence to help expand ACS’s business outside of the United States. Along with this, Xerox will focus on SMB markets globally, for instance in Europe, as well as focus on opportunities in developing, emerging markets such as in South America.
  • Grow “High-Value” Page Volume – High-value pages refer to printed pages that are distributed and retained, and tend to be printed in color, versus low-value pages that tend not to be distributed and are more quickly discarded. Along with growing its high-value print volume, Xerox says it will continue to advance color imaging products, as well customized high-end digital printing.

 

Xerox projected market share based on internal market data. The company projects four and five percent compound annual growth rates for color MFDs (MFPs) and color production systems respectively for 2010 to 2014.

Japan Update

Among the executives to kick off the conference was Wim Appelo, senior vice president of Xerox’s Global Business and Services Group. According to Appelo, the March 2011 Japan disaster has “had no major affect on Fuji Xerox facilities or personnel…. I think we’ve been in good shape, and in general, we’ve made good progress.” Appelo did note however that customers should expect some longer delivery times for products—for instance, although Fuji Xerox facilities were not affected by the disaster, many parts of Japan have been affected by rolling power blackouts for several months. 

Update on Printers and MFPs for the Enterprise

Over at Xerox’s Gil Hatch Center in nearby Webster, NY,  Rick Dastin, who manages Xerox’s A3 office lineup and is vice president of the Enterprise Business Group, discussed Xerox’s office strategy, which is focused on four initiatives:

  • Managed print services – Via Xerox’s cloud-based resources that provide device discovery, assessment, monitoring, and management, as well as via new partnerships, and bolstered by Xerox’s recent acquisition of New Field IT, as well as a partnership with Cisco, the latter of which will integrate Xerox managed print services into the network.
  • Mobile printing via Xerox Mobile Print and Global print drivers.
  • Enhanced distribution via indirect channels.

As with rival Hewlett-Packard and others, Xerox sees mobile printing as an increasing source of page volume, but executing it so that it’s easy for users is the challenge. Dastin noted, “If mobile printing is a pain … then no one will use it, and the pages will go away.” According to Dastin, Xerox’s Mobile Print Driver has been downloaded over 1 million times.

While Dastin noted that post-recession reality is that enterprises are downsizing from A3 (11″x17”) to less-expensive A4 (8.5”x14”) printers and MFPs, Xerox’s 41-ppm+ A3 market share is growing. 

Dastin also acknowledged that Xerox’s research and development spending has decreased, but noted, “We’re getting more technology out per dollar.” (Currently Xerox and partner Fuji Xerox jointly invest some $1.5 billion in R&D annually.) “Overall, we’re on an 18-month (product) refresh strategy. We’ll refresh 60 percent of A4 color by year-end, and 41 percent total (monochrome and color) A4 by year-end.” For its A3 product lineup, Xerox will refresh 83 percent of A3 color by year-end, and 55 percent of its total (color and monochrome) A3 product lineup by year-end.

 

Entertainment was provided by Bela Fleck and the Flecktones at the Eastman Theatre in downtown Rochester, NY.

Update on A4 Printers and MFPs

Noting the trend to smaller, lower-priced A4 printers and MFPs for the office, Xerox’s Carl Bothner noted, “We’re moving from a structured, centralized environment to virtual and distributed, and to continued migration to more local devices.” The move to A4 has been especially pronounced in the post-recession era, where A4 printer and MFPs—smaller and less expensive than their A3 counterparts—are continuing to gain traction (A4 printers and MFPs print on media only up to 8.5”x 14” in size, while A3 printers and MFPs print on up to 11”x17” media). Bothner, who is vice president of Xerox’s Indirect Channels Business Group, says Xerox will continue to invest in A4 across all print-speed ranges, and also noted that these smaller A4 devices are just as capable of providing add-on solutions (for instance, for automatic routing of scanned documents, enhanced security, integration with software applications, etc.) as their more expensive  A3 counterparts.

As part of that investment, Xerox will incorporate its Extensible Interface Platform open-development platform into its A4 product lineup, as well as mobile printing. It will also extend its hybrid pricing plan throughout its solid-ink color family. With hybrid pricing, under a cost per plan, the customer pays for color prints based on the amount of average color page coverage; the less color page coverage, the lower the color cost per page.    

Summary

Overall, our impression at this analysts’ conference was that Xerox will continue to be one of the key players in the hardware market and will continue to expand on the office MFP’s capabilities. Its Extensible Interface Platform (EIP) will play an increasingly important part in the company’s MFP, linking ACS’s business processing with Xerox’s EIP. With this linking, the MFP becomes an onramp/offramp to automating business workflows. From the MFP’s touch screen, the document is linked to processing by solutions and applications, making everyday business tasks—processing applications payroll, billing, orders, etc.—faster and more accurate, with documents routed to appropriate destinations, such as a software application, and documents even converted from one language to another. True to its word, Xerox showed its commitment to hardcopy with demonstrations of several new hardware technologies, as well as intriguing new solutions. As soon as they are officially announced, we’ll take an in-depth look at them.  

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