Xerox Separates Its BPO Business from Hardware

Xerox formally moved into BPO business in 2010 when it acquired Affiliated Computer Services Inc. for about $6 billion.

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Xerox has decided to separate its BPO business from its core hardware unit, as the U.S. corporate giant scrambles to keep pace with competitors in this fast-changing technology market. The split is part of its plan to save more than $2 billion over the next three years, but the Norwalk, Connecticut-based firm has not disclosed whether it would downsize its workforce.

Xerox, a century-old company known around the world for its copiers, moved formally into BPO business in 2010 when it acquired Affiliated Computer Services Inc. for about $6 billion.

“Document technology and BPO businesses serve distinct client needs, have different growth drivers, and require customized operating models and capital structures,” Xerox said in a press release. “Thus, the separation of the two businesses will enhance their competitive positions and create significant value creation opportunities.”

One of the primary reasons for the split may be the need to free executives to decide which technology they will adopt to streamline operation and compete better with rivals. “The separation will accelerate decision-making processes,” Xerox noted.

Xerox had hoped that the outsourcing revenue might help it offset shrinking profits in the hardware business.  Although the services unit grew substantially in past years, it did not yield the kind of dividends Xerox anticipated five years ago.

Considering its latest quarterly results, sales from services, which includes business process and document outsourcing, fell 4.7% to $10.1 billion.

Xerox runs dozens of call centers and provides several back-office service such bill processing. According to The Wall Street Journal, about 40% of its business is with government entities, such as state Medicare and Medicaid agencies.

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Now, Xerox is saying that its BPO unit would deliver “differentiated” solutions. It is not clear how many people are working for its BPO unit. What is clear, however, is that the acquisition of ACS added 74,000 to its workforce.

Last week, reports surfaced that Xerox would fire 178 customer service agents and shutter its call center in the U.S. city of Cary. Last year Xerox booked $146 million in write-downs after it acknowledged it couldn’t handle some state Medicaid contracts.

The process of separation is expected to complete by end of 2016.

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