Tuesday, September 29, 2009

What will Xerox do? Beats me, but keep your eye on the independents.

With yesterday's announcement Xerox is revealing what the last few years have been about.

It's clear that the global growth market is in Managed Print Services. Also called Business Process Outsourcing. At the top, in the natural English countries we now have HP + EDS , Xerox + ACS and Donnelly + Astron. Dell + Perot Systems may turn out be a fourth player.

The real challenge, however, is going to come from the independents
The independents have the advantage of speed and granular knowledge of local conditions. They also have the entrepreneurial dna that drives adoption at real life speeds. In a world where the margins on boxes will keep being squeezed, they have what might turn to be there greatest advantage in being able to easily choose the best and ignore the rest.

Rioch, Cannon and the other Japanese globals are the titans of OEM. Now that the new Prime Minister has made it clear that the yen will move to it's natural level, it's likely that their resources can be more strategically used to either wage a long war or purchase whatever pieces they need. Given the rush to BRIC I have to believe they will be forced to move much faster than previously.

The Japanese titans are the source of power for the independents.

My question concerns whether Xerox and HP will be able to get actionable intelligence to be able to take advantage of the gezillion opportunities that will be open for only a couple of years.

The most natural(2me) way for the whole thing to evolve is Xerox, HP and Donnelly for the Globals. The independents for everyone else.

Where are commercial printers going to wind up?
It's still unclear(2me). But it seems likely that it's going to be the franchises and big box retailers to be the customer facing piece with print manufacturers doing the work in the background. The real challenge there will come again from the independents. PSDA seems to be the "strange attractor" for the ferocious activity in that space.

Added: 8.08 AM EDT from Bloomberg http://ilnk.me/eb

The money quote for me.
ACS is the U.S.’s biggest student-loan processor and operates the E-ZPass toll-collection system.
This could turn out to be a problem for Oce and other OEM that output for those industries.

Xerox’s acquisition will help triple the amount of revenue it gets from services, reaching about $10 billion, the Norwalk, Connecticut-based company said yesterday. Affiliated Computer, based in Dallas, helps customers outsource tasks such as human- resources management. It’s also the U.S.’s biggest student-loan processor and operates the E-ZPass toll-collection system.

The total business-process outsourcing market is valued at about $150 billion, Xerox said yesterday. Almost 90 percent of Affiliated Computer’s new business contracts came from outsourcing last year. The big challenge for Xerox will be fitting the pieces together, said Keith Bachman, an analyst at BMO Capital Markets in New York. That’s left investors uncertain about the deal.

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