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Xerox to Spinoff Business Process Outsourcing

After acquiring ACS back in 2010 for $6.5 billon, Xerox is changing directions and splitting off its business process outsourcing division.  It’s obvious that DocuShare will stay with Xerox.  The platform continues to hold a good position in the market.  The true outsourced scanning operations will become part of the new organization.  But what will happen to Xerox Professional Services?  And what else might happen?

First off, these are my personal opinions and not those of Big Men On Content (BMOC) as a whole, any other BMOC blogger, nor our affiliated companies past or present.  This opinion has been formulated based on my years in the industry along with what I’ve seen or heard in the news.

Spinning off outsourcing is a good idea as it lets both organizations focus.  When a company is looking to buy a solution from a technology vendor they are not necessarily looking to outsource.  As a technology vendor you don’t want to limit with whom your customer can go for their outsourcing either.  So spinning off outsourcing services is a good thing, but that leaves professional services.  Where will they fall?

In large consulting organizations, outsourcing is often a different division from professional services.  I think this is where we may see Xerox go.  A large part of XPS (Xerox Professional Services) may move along with the BPO group, leaving smaller groups that support specific products like DocuShare.

I would have ended my story here, but as I was researching I found that someone was speculating that the spinoff could allow for new technology acquisition by Xerox.  For long time readers of this blog, you know that acquisitions are of particular interest to us.  So while it seems to me to be a stretch that Xerox would acquire a new company while spinning off another seems a stretch, why not speculate on who?

Xerox Might Be Looking to Acquire?

A Wharton management professor and divestiture expert speculated that Xerox may acquire a document-type enterprise to increase its market share.  It’s not hard to see that Enterprise Content Management is where Xerox would consider acquisition.  Lexmark has its own document management solution in Perceptive so it would make sense that Xerox would do the same.

Who Might Xerox Consider Acquiring

I speculated that EMC might spin off Documentum last week but I had missed the Xerox announcement.  This announcement adds a new option to Documentum.  But that would be a very complex relationship of moving parts of EMC, Dell, Xerox, and the new Xerox BPO.  I just don’t see all of that happening.  Yet there is something about Documentum’s origins with Xerox PARC that leaves me thinking.

I find OpenText another intriguing option.  There is constant speculation that OpenText might be acquired.  It started when both FileNet and Documentum were acquired.  Still over the years OpenText remains independent.  OpenText’s market cap is around $5.5 billion.  I’m not sure that Xerox would consider such a large acquisition being that their market cap is $8.8 billion and there are other options out there.

I think Hyland is a possible option.  In November 2014, Hyland Software and Xerox announced a partnership.  So there’s an existing relationship between the two companies.  Hyland is strong in the midmarket and this would match well with Xerox’s sweet spot.

But the more I think about it I really like Lexmark.  Rumors are that they are looking to be acquired.  Lexmark would bring their multifunction printer line, which would increase Xerox’s market share in the MFP market.  It also gives Xerox the document management products and scanning products with Perceptive Software and Kofax.

Right now we will all just have to wait and see.

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