Xerox to Double Ad Spending to Rebrand as Services Company‏

Bloomberg

 

Xerox Corp., trying to shuck its image as only a maker of copy machines, plans to double advertising spending as it makes an effort to show that it also is a business-services company.

The marketing campaign, which starts Sept. 7, features customers including Target Corp. and Marriott International Inc. hiring Xerox to handle tasks like customizing direct mail programs and automating invoices. The ads will run in magazines, on television and in interactive airport billboards, mostly over the next 15 weeks.

Xerox Chief Executive Officer Ursula Burns is trying to change the image of a company so closely associated with copying its name is often used as a verb. Burns bought Affiliated Computer Services Inc. for $6.2 billion this year, the company’s largest deal ever, tripling revenue from services and making that segment equal to its equipment unit.

“The perception of the Xerox brand is well-entrenched in a legacy business -- that being the copier business or the printer business,” Chief Marketing Officer Christa Carone said in a phone interview this week. “We’re trying to broaden it.”

The increased advertising spending was accounted for in this year’s earnings forecast, Carone said. She declined to comment on the specific amount.

Other featured customers include Procter & Gamble Co., the New York Mets and the University of Notre Dame.

“Competition is so fierce that you really want to be in your customer’s face,” said Angele Boyd, an IDC analyst based in Boston who’s covered Xerox for more than 20 years. “They may not realize what you do in other parts of your business.”

Office Processes

Xerox, based in Norwalk, Connecticut, rose 11 cents to $8.93 at 4 p.m. in New York Stock Exchange composite trading. The shares have climbed 5.6 percent this year.

Xerox’s acquisition of Affiliated Computer in February added office processes including automating student loans to its document-management services.

The company is ahead of its target to save more than $100 million this year as a result of the takeover, Burns said in July. The number may top $375 million in three years.

New sources of revenue related to the purchase are “on track” as well, Jim Firestone, head of corporate operations, said in an interview. Xerox has signed at least 10 deals by selling ACS services to Xerox customers, the company said in July. In May, ACS signed a $1.6 billion contract to manage California’s Medicaid information system for 10 years.

It’s not the first time executives have tried to change the image of Xerox, which marketed the first photocopier in 1960. Two years ago the company retooled its logo, ditching the capital letters that had been part of the brand since 1961 and adding a red sphere marked with an “x.”

The equipment business and its associated sales of supplies and paper are still an important part of Xerox’s image and business, bringing in half of total revenue, Firestone said.

“We don’t want to jettison that -- we want to build on that,” he said. “It will take time.”

Why Printers Get no Respect

The Wall Street Journal

 

Daniel Blackman loves gadgets. The 47-year-old chief operating officer of Howcast Media Inc., a New York Internet video company, has already replaced his iPad with an iPad 3G. He also has a Canon DSLR camera, a Sony handicam and a high-definition home theater projector. One item that he hasn't tried to upgrade to the newest, latest, best: a printer.

Fussy and prone to paper jams, the printer has been trying tempers in offices and homes since the dot-matrix days when paper came in perforated accordion stacks. As other gadgets, from flat-screen monitors to wireless mice, have sprinted ahead toward gasp-inducing irresistibility, one electronic has failed to thrill.

"It's kind of like a toaster," says Jeffery Lauria of iCorps Technologies, a Boston-based information technology provider.

The problem, sometimes, isn't the printer. It's the people printing, printer manufacturers say. Rough handling and mistreatment often upset sensitive machinery. "With computers, people don't want to mess with it. But with a printer, everyone thinks he's a mechanic," says George Lemus, senior manager of ABC Computer Services, a New York repair company where 40% of the business is fixing printers.

Hewlett-Packard Co., the leading maker of printers, said this month that its new printers would come with email addresses, so users can print from smartphones or any other Web-enabled device. It also has laser printers that automatically detect the location of a paper jam and show users where to find it on the screen. H-P says its inkjets failed 25% less often in 2009 compared to 2006, and laser printers improved 20%. The company declined to say how often the machines still misbehave.

Topping the list of common customer complaints are paper jams and problems connecting to a printer. In inkjet printers, the ink often dries out or gets clogged. In laser printers, the culprit is often the fuser, the part that presses the toner to the page and can cause some elements, such as stickers or labels, to melt.

Xerox Corp. makes what it calls "self-healing" machines that monitor their components to anticipate problems and adjust automatically. For example, the printers, starting at $399, can sense internal temperature and humidity and recalibrate their performance accordingly to maintain a consistent print quality. Xerox printers can also automatically notify Xerox when they need new parts or service.

The only people happy about printers? The technicians who repair them. They prefer fixing printers to computers because printers' simpler function means fewer things can go wrong, and there's no shortage of times when they do.

One recent afternoon, ABC Computer Services, the printer repair company, received an "emergency" call from the Somme Institute, a cosmetics maker.

"People say that all the time," said ABC Computer Services technician Roland Chen. "It's just a jam," he predicted.

At the Somme Institute office, Mr. Chen found an HP LaserJet 3390 churning out pages marked with eight circular bruises.

Edward Fallas, a Somme Institute spokesman, told Mr. Chen that he was printing labels. They must have come off inside the printer because now each page bore their imprint.

Mr. Chen suspected the fuser had melted the stickers. It would be impossible to clean off the adhesive gunk, so the fuser would have to be replaced—a $200 cost on a year-old $1,000 machine, plus $85 for Mr. Chen's visit.

"It was a major disruption," Mr. Fallas said later.

Donald Barthelemy, 26, has been a Paramus, N.J.-based technician with Best Buy Co.'s Geek Squad for six years. He makes four to five daily service calls to homes and businesses, and three to four of them involve printer-related problems. (Geek Squad declined to say how much of its business company-wide comes from printers.) Often, Mr. Barthelemy says, the machines show signs of neglect (dried-up ink cartridges) or abuse (broken parts).

The worst call came about six months ago at a now-defunct trucking company in Paramus he declines to name. It was Friday—pay day—and the firm needed the printer to print the paychecks. The printer wouldn't align correctly, rendering the checks either unreadable or made out for the wrong amount. Some employees walked out, Mr. Barthelemy says.

"They wanted to bash that printer in because it was the reason they weren't getting paid that day," Mr. Barthelemy says. He determined the printer couldn't be fixed and needed to be replaced.

Man-on-printer violence is a burgeoning YouTube subgenre. Many videos pay homage to the 1999 cult classic film "Office Space," in which the heroes abscond with their employer's printer, take it to an empty field and beat it with a baseball bat.

One video was posted by Taylor Fox, a 23-year-old MBA student at the University of Missouri. He made the 23-second clip, in which he throws his Dell printer against a dumpster and stamps on it, three years ago when he was moving from Arizona State University to Missouri and was deciding what to bring.

Fed up with the cost of ink cartridges, he says, "the printer didn't make the cut."

About 10,000 electronic customer feedback forms are processed by Lexmark International Inc. every month. The printer maker and service provider sorts them by common issues, which it calls "pain points."

Printer manufacturers compete fiercely on price. Many home models cost less than $100. In general, the profit margin is higher on ink refills than on printers themselves. H-P now sells cartridges for as little as $10, and Lexmark for as low as $5.

More companies are urging people to cut down on printing not just to save paper but also to save money. Printer supplies and maintenance are typically the largest cost for IT departments, accounting for up to 40% of their budgets, which can be up to 5% of a company's revenue, says Robert Sethre, a Warwick, N.Y.-based partner at research firm Photizo Group LLC. Many companies in recent years have shifted to having employees share a few heavy-duty machines on a network instead of having small printers at every desk.

Those small desktop printers, "they're pieces of junk," says Larry Frydman, owner of Computer Professionals USA, a New York network and printer maintenance company. "They work as long as they work, and when they don't work, they're meant to be throwaways."

Firms Jockey for Space in Tech Services

The Wall Street Journal

Big Competitors Join Increasingly Crowded Market as New-Deal Spending Slows

 Michael Dell, left, and Ross Perot Sr. Dell bought Perot Systems in 2009.

 

 

Hewlett-Packard Co., Dell Inc. and Xerox Corp. are seeking new profits in the technology-services industry. But those companies face a major challenge: While competition is intensifying, their corporate clients are spending less on new deals.

Over the past two years, H-P, Dell and Xerox have spent billions to muscle their way into better positions in tech services. The market, traditionally led by International Business Machines Co., is regarded as attractive because it provides steady revenue from customers who pay recurring amounts to outsource their tech systems like email or payroll.

But even as the total number of new services contracts awarded each year more than doubled globally between 2000 and 2009, the amount spent on those new contracts fell to $74.5 billion from $90 billion in the same period, according to tech-consulting firm TPI. The market is expected to remain tight even amid a recovering economy.

Behind the slowing growth are companies like Dow Chemical Co. that are signing smaller, shorter-term tech-services contracts. In 2000, Dow Chemical signed a seven-year deal to outsource parts of its information-technology systems to IBM. Last year, it signed a new services deal with IBM for just five years. IBM and Dow Chemical declined to disclose the dollar values of the deals.

"From a buyer point of view, you always want smaller contracts," says Dave Kepler, Dow Chemical's head of IT. Dave Liederbach, general manager of IBM's strategic outsourcing division, acknowledges that "the deal size, on average, is going down."

Industrywide, "we're increasing the number of deals, but revenue isn't increasing at the same rate," says Tom Blodgett, head of corporate tech services for Xerox, which last year acquired services provider Affiliated Computer Services Inc. for $6.4 billion.

The declining growth started last decade, says Don Mann, who heads Dell's services unit for large businesses. "The deals kept getting smaller and smaller and smaller," he says. In the past, it was common for large companies to sign 10-year outsourcing agreements with tech-services providers like IBM.

But a growing number of players in the services market, including low-cost Indian competitors like Infosys Technologies Ltd., have made the market more competitive and given customers more leverage, says TPI vice president Mike Slavin. That's allowed customers to grab smaller, cheaper deals that can be frequently renegotiated.

Such dynamics haven't dissuaded tech giants from investing in tech services. Dell last year bought Perot Systems Corp., which specializes in public-sector tech services, for $3.9 billion—a 68% premium over Perot's share price at the time the deal was reached. H-P spent more than $13 billion to purchase Electronic Data Systems. The wave of acquisitions came as profits fell in areas like computer hardware and printers.

Since the services industry has no one dominant player—IBM had less than 8% of the total market by revenue in 2008, the last year for which data are available, according to market-research firm Gartner—the big tech companies saw an opportunity to grow, says TPI's Mr. Slavin. They also saw services as a way of developing new customers who would buy computers, he adds.

In response to the slowing growth, H-P, IBM, Dell and others are also trying to cut costs by creating new software, developing niche specialties in areas like health care, and shifting to employees in lower-cost countries like India. IBM, Mr. Liederbach says, has been sending research scientists to develop new software with companies like Dow and now bids for smaller, short-term contracts with customers in the hopes of securing larger ones in coming years.

Dell's Mr. Mann says his company has created new offerings for health-care customers, which stand to receive more than $19 billion in federal funding to computerize patients' records, enhancing health care seo. Xerox's Mr. Blodgett says his company is focusing on outsourcing specific functions, like employee benefits, which ACS started managing for Ford Motor Company last year.

Still, customers such as General Motors Co. appear to have the upper hand. GM, which at one point owned EDS, played a big role in the move toward smaller contracts when it changed its outsourcing strategy in 2006. Until that year, GM outsourced almost all its technology to EDS, but in 2006 sought bids from other providers to get away from giant, single-vendor contracts. GM awarded a $700 million contract to H-P (which had not yet purchased EDS) for certain systems and also outsourced pieces of its IT to IBM and Wipro Technologies Ltd.

EDS said in 2006 that it still expected to get about $1.2 billion a year from GM, though it only had 70% of the outsourcing work, rather than close to 100% as it had in years past. A GM spokesman declined to comment. An H-P spokeswoman said the company still does work for GM.