Xerox and It Management
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Xerox is one of the largest companies in the document processing products and services industry. Xerox held a virtual monopoly in the plain-paper copier market until the Federal Trade Commission intervened. In 1975 Xerox was forced to forfeit patent protection and had to license to competitors. Xeroxs markets share dipped from 80% in 1976 to 13% in 1982. In order to become more competitive, Xerox began to use benchmarking, Leadership through Quality and employee involvement initiatives. These initiatives helped grow Xeroxs market share back to 18% in the low end copier business and 35% in the mid-to-high end. Despite the improvements in market share the financial performance of the company declined. Therefore in 1992 a major reorganization was planned, Xerox would change from a geographic organization to a market segment organization.
Xerox corporate information management (CIM) unit was established in the early 1970s. In 1987, CIM was moved to the General Services Division and was given the task to “Provide the overall information technology leadership to the company.” The leader of the CIM group quickly realized the task was not possible without significant organizational change. After bringing in consultants to review the Information Management at Xerox, the director of CIM realized the Xerox IM infrastructure could not support the companys strategic direction. To address the IM problems, CIM started a new initiative, “IM 2000”. The goal of IM 2000 was to move Xerox to a new information systems infrastructure.
The problems found with Information Management at Xerox
Aging application portfolio built on proprietary technologies
Large cost associated with keeping legacy system running
Duplicate work caused by corporate culture – autonomy
The IM 2000 design team recommended the following four strategies
Reduce/Redirect
Reduce overall costs by reining in the expense of legacy system. Use savings to fund new applications and infrastructure.
Infrastructure Management
Move to a industry standard infrastructure that would be managed centrally – a client server environment.
Leverage worldwide IM resources
Create library of shareable core modules.
Business process-driven solutions
The current legacy system was to be replaced by solutions supporting new Xerox business process.
Xeroxs earlier quality initiatives had created a corporate culture used to having a partner relationship with suppliers. Because of this, management suggested IM should look at outsourcing as an alternative.
Typical Reasons for Outsourcing
Concerns about Cost and Quality
Vendors save money by
Running much leaner overhead structures than their customers
More aggressive use of low cost labor pools (India)
Staff must keep up to date on newest IT practices
Purchasing Power
More efficient use of capacity
Better Control over software licenses
More aggressive management of service and response time to meet corporate standards.
Outsourcing is their only business and their success is measured by customer satisfaction
The ability to run with a leaner management structure
The ability to access higher levels of IT skills.
Creative and more realistic structure of leases
Breakdown in IT performance
Failure to meet service standards – could be impression
The need to rapidly retool backward or obsolete IT structures
Intense Vendor Pressures
Large visibility and aggressive sales force enable vendors to “sell” the value of their services
Simplified General Management Agenda
Allows management to focus on its competitive differentiates as long as IT is not a core competency
Financial factors
Liquidate the IT assets
Up-front capitol paid by vendor
Turn fixed cost business to variable cost
Hard dollar expenditure
Users must use discipline which can be lacking with soft-dollar allocations
Allows firms looking to sell to get value for an asset unlikely to be recognized
Corporate Culture
Allows consolidation of services even if the internal IT department lacks power to do so.
Internal Irritant
Remove tension in the organization
Xerox Explicit Reasons for Outsourcing
Conflict between IM and Division leaders
Business Division did not understand problems faced by IM. Division would overload IM with tasks and complain about how inefficient IM was.
Funding constraints – $55 million just for hardware
Viewed as expense center – no value added
Extremely competitive business environment
The need to adapt IM 2000 quickly
Five factors dictate whether outsourcing benefits outweigh the risks; Position on the Strategic Grid, Development Portfolio, Organizational Learning, A Firms Position in the Market and Current IT Organization. Xeroxs