Xerox Buys ACS, Enters Enterprise Services Market

by CXOtoday Staff    Sep 29, 2009

Xerox has moved away from a pureplay photocopier and document management provider to a more holistic IT services provider with its $ 6.4 billion acquisition of Affiliated Computer Services (ACS).

The acquisition, announced yesterday, will enable Xerox to compete more effectively in an enterprise services space currently dominated by IBM’s Global Services Division.

Recently, hardware vendors have been showing interest in branching out to enterprise services through acquisitions (as in the case with HP) or organic growth (as with Canon).

"With the economy kicking back in 2010 the timing is just right for Xerox to integrate ACS.  Market dynamics might favor the integration process, possibly accelerate it as well. Xerox will now combine the ACS’s business of providing services to automate paper-based work processes with its own document management offerings," said Chandramouli, director (advisory services) of Zinnov Management Consulting.

He further said the acquisition may also be timed to boost Xerox’s services capabilities ahead of President Obama’s ambitious overhaul of the U.S. healthcare system, which involves replacing paper-based systems with state-of-the-art systems.

"By combining Xerox’s strengths in document technology with ACS’s expertise in managing and automating work processes, we are creating a new class of solution provider," said Ursula Burns CEO of Xerox. "A game-changer for Xerox, acquiring ACS helps us expand our business and benefit from stronger revenue and earnings growth.

ACS’s expertise is in managing paper-based work processes and providing specialized BPO and IT services for industries that range from telecommunications, retail and financial services to healthcare, education and transportation. ACS is the largest provider of managed services to government entities in the United States.

Xerox expects to achieve annualized cost synergies that will increase to the range of $300 million to $400 million in the first three years following the close of the transaction. The synergies are primarily based on expense reductions related to public company costs, procurement and using ACS’s expertise in back-office operations to handle some of Xerox’s internal functions.

ACS will operate as an independent organization and initially will be branded ACS, a Xerox Company. It will be led by Lynn Blodgett, current CEO of ACS, who will report to Ursula Burns.

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