Case Analysis – Xerox Outsourcing Global

Information Technology Resources

Submitted by: GROUP 2

Ankit Kumar PGP/14/264

Anurag Patra PGP/14/265

Aparajita Tripati PGP/14/266

Arjun N.Rao PGP/14/267

Ashok Prasad PGP/14/268

Barun Bora PGP/14/269

Chhavi Anand PGP/14/270

Dola Halder PGP/14/271

• Xerox was a global company that developed, manufactured, marketed, serviced and
financed a complete range of document processing products.

• It marketed copiers, duplicators, digital production publishers, electronic printers,

• In 1968, Sales increased for Xerox from $32 million to $1.1 billion and by 1970 Xerox
held a 95% share of the plain-paper copier market.

• From 1976 onwards though, Xerox saw a drop in its market share owing to competition
from Japanese companies like Canon, Ricoh and Sharp.

• In 1980, under the leadership of David T. Kearns, it adopted a program called

• Though this improved the market share, Xerox experienced decline in corporate
performance in 1990s.

• In 1992, Xerox won the European award for Quality

• Created nine divisions on market segment line to improve market share and three
customer operations on geographic line segments.

• This was in line with making the decision making process closer to customers

Xerox had established Corporate Information Management (CIM) unit in 1970 to manage data
centers and networks but in 1987a separate division was created for the same. Major problems
pertaining to Information Management were:

• Aging application portfolio built on proprietary technology

• Outdated legacy systems

• Lacked effective staff management system

• Newly introduced divisional structure making access to information tough

• Autonomy led to duplication of efforts and corresponding inefficiency

• No consolidated list of applications

To address IM problems IM 2000 Project was introduced which had four major strategies:

1. Reduce/Redirect – Reduce cost by cutting expenses on legacy systems and savings to be

2. Infrastructure Management – Move to industry standard infrastructure that would be

3. Leverage worldwide IM resources – Create a library of shareable core modules, centrally

4. Business Process driven solutions – replace current with new processes

Outsourcing Decision:

• Xerox is a technology-driven leading edge company.

• It has a global reach into 130 countries with different language and cultures. It is under
intense competitive and financial pressures that it has sustained heavy losses and incurred
major restructuring charges before returning to its core document activities.

• Initially outsourcing was thought of as unnecessary but later managers felt it will help
solve internal obstacles.

• If the problems were to be solved internally the solution would have to contend the
relationships between Xerox’s IM, its customers and the business divisions which were
not possible.

• Since the money was being spent outside, it would be tracked in a better manner and
sharper decisions would be taken.

Also though the firm would be able to solve the problems internally, the time taken would be
more. As the situation demanded adapting quickly to the rapid changing situation and to achieve
the objectives of IM 2000, Xerox decided to go for outsourcing.

Without outsourcing it would have been possible to fulfill the following motives:

- Reduction of costs on legacy environments and investments in IT infrastructure

- Improve cost and Quality of IM services quickly

- Focus of company’s resources on its primary mission ‘The Document Company’

- Immediate Finance requirements

Selection of Vendor

Vendor selection was a long-drawn process. The global outsourcing team began by inviting
numerous companies to bid. These were companies which Xerox had either done business with,
were doing business with or were their major customers. Most potential bidders drew back
considering the size and complexity of the deal. Only two vendors and one vendor team formally
responded. The outsourcing team then created a list of criteria providing a general sense of how
potential vendors would be judged. These criteria were vendor qualifications, human resources,
technical solutions, financial factors and “soft” criteria. Another vendor was eliminated at this
stage. Finally after intense negotiations, EDS was chosen.

It was realized that a very important part of the contract was not just its terms and agreements but
the process of implementation. So a core team of three members each form Xerox and EDS was
formed which ensured a shared vision operated for both the organizations. It was assured to the
participants that whatever was discussed in these core meetings would not be shared outside.

Xerox wanted both the parties to gain from the bargain and so didn’t want EDS to make losses
owing to its extremely low competitive bid while it reaped profits.

A summary of the 50-page contract was prepared and distributed among the senior Xerox
management to ensure that everyone understood the spirit of the relationship.

Unique features of the Contract

• Evergreen contract

• Cultural difference to promote “Out of the Box thinking”

• Termination on requirement

• Pricing and Benchmarking

Key learning and comments on future sustainability of the relationship:

The key lessons learnt from going through this case about the IT outsourcing process of Xerox
were the urgent need for change in the top management’s attitude towards the role of IT in an
organization. The top management at Xerox saw IT merely as a support centre. Rather it should
be treated as a part of the overall business strategy. IT needs to be integrated within an
organization.

The decision to outsource IT operations was a sensible one and it is imperative to check for any
inconsistencies in your outsourcing partner’s and your strategy before finalizing the vendor.
The three main questions that need to be answered when such an IT outsourcing situation
presents itself are:

1) What to outsource?

2) How to and whom to outsource the entity to?

3) How to ensure collaboration?

Some of the Lessons learnt:

• Methodical and quality process works for outsourcing

• Good understanding of objectives is essential for good results

• A multidisciplinary team even if it is informal is necessary.

• Human resource is a key success factor.

• Global integration of Information Management is necessary for a global contract.

Importance of this case:

• The case discusses the transition process undertaken by Xerox in order to execute a
successful outsourcing agreement with EDS. Outsourcing is of utmost importance for
every industry around the globe and hence the case underlines in the importance of
creating a strategic relationship based on a shared vision. Xerox, a global company,
effectively chose a competent vendor and then took sufficient steps to ensure smooth
functioning of the relationship.

• This case presents a lot of learnings which would benefit us in the course of strategic IT
decision making as well as the importance of Integration and information management in
the functioning of an organization. As such, a case focused on global outsourcing in a
complex environment is relevant as well as essential.