Big I, Little t' is megatrend next in IT

Anne Mulcahy, chairman and CEO, Xerox Corporation, is responsible for turning around the fortune of Xerox in 2002. Rolly Dureha caught up with Mulcahy at the recent Xerox Industry Analyst meet in New York.

Mulcahy elaborated on the recent trends in the IT space and Xerox’s plans for the emerging markets. Excerpts from the interview:

What trends do you foresee in the IT arena?

There are certain megatrends visible in this space. The first of them is customization/personalization that in fact goes hand-in-hand with digitization. The evidence of this mega-trend is seen everywhere. The mass market is disintegrating and everyone expects information relevant to them. And the customers are finding it on the Internet, in specialty publications and other interesting places.

Another mega-trend, in our view, happens to be a phrase we have service-marked: Smarter Document Management. With all their unstructured, meandering ways, documents are the lifeblood of entire organizations. All these documents and the processes behind them need to be smartened up. And we believe it is starting to happen on a level that qualifies not only as a mega-trend, but also as a core aspect of our mission at Xerox.

The next megatrend is the Big I, Little t. The new world of IT is made up of a big I and a little t. And more focus must be placed on what really matters: Information.

In this shift, documents are the containers in which information is presented for human processing. Now, with the help of technology, we know how to make information containers behave as masters of their own destiny. All the building blocks are there and all kinds of enterprises are putting them together to benefit from the Big I, Little t mega-trend.

You have elaborated on the strategic megatrends and Xerox’s alignment to them. However, the Wall Street is quite skeptical towards these trends.

Some of the strategic megatrends are personalization, smarter document management and certainly a lot of our services initiatives. But the financial community talks about how many boxes sold; how much business volume and feels much more connected to the more traditional business. I do not think that one gets to make an ‘either…or’ choice here. I think we have to do both. We have to be successful in the traditional aspect of our business; we expect to grow our market share into products; we expect to drive pages in terms of our output business and we are doing that. While, at the same time, we also look as to how do we deliver the value that brings us to the future and does not drag us into the past. This is important, because we know that the hardware cycle is one that certainly does not sustain a lot of growth over time. We have to look for new sources of revenue and that is where services become incredibly important: in the transition to color; the transition from offset to digital, all those trends really bring incremental revenue to the portfolio. So, it is necessary for the future that we really focus on those initiatives. But then, we have to walk on two roads at the same time. We have to deliver the results in both our emerging businesses as well as our traditional businesses and we have to invest in future trends so that we are well positioned as a market force.

Retail is a major channel to reach the SMB segment but the presence of Xerox in this segment is not very visible. What are your comments?

We are looking at retail in different ways. We know that in some markets we have to be in retail like in Latin America, Western and Eastern Europe. We are looking at it and are not shutting down the options to be a participant in the retail segment. But we do not want to make that mainstream and will work on it through partners. We also have to work in ways that are efficient from a cost perspective. Although it will not be our main strategy but we will clearly look for opportunities, where it is important to have a presence in retail so that we can distribute to small and medium size customers. We are beginning to experiment in this area and are piloting some things, as we speak here, in the different parts of the world, where retail is very important. Our developing markets team is very focused on where we need to be a participant in retail in the right way. For instance, there will not be much of retailing in North America where the other channels are distributing more of the low-end devices. But certainly in other parts of the world we will be very open to think about retailing as a distribution channel.

Xerox has made some acquisitions in the recent past and it is believed that some more are on the cards. Can you elaborate on what type of technology are you looking at acquiring?

When I had spoken about the megatrends earlier, those are the areas that we are looking to bolster—Personalization: Acquisition of personalized or mainstream software suites would be an area that we will be looking forth to add within our portfolio. As far as the Smart document management area is concerned: We would be keen on acquiring companies that will be able to help us to move our services business quicker. So, one can look in those areas of growth which are more future-oriented than necessarily current portfolio oriented. I would look at these two trends and say that the vast majority that we are looking at an acquisition perspective will be the personalization and smart document management trends.

How do you see the printers segment evolving in the next five years?

I think that there will be less and less of standalone inkjet-based devices. There will be more workgroup network capability than standalone single function devices. Work group devices and multifunction devices are getting powerful along with getting more economical. And most of the things will be driven to be on the network. There will probably be distributed type devices but not on every desk. There will be more work group devices and maybe you will still see high-end centralized capabilities, but you will not be walking up to those devices, you will be assigning jobs through the web. This will drive the cost down and raise the productivity levels.

What revenue does Xerox realize through its printers business?

Printers constitute about one and a half billion of our $16 billion portfolio, though we actually do not report it separately. But that is not the only way we serve this part of the market as we are more focused on multifunction devices than on standalone printers. So a lot more revenue comes from our multifunction business, because we think that is the core capability, which over time will replace standalone devices. So printers are important to the developing markets and we want to deliver them. We are going to have a big array in printers but we are also going to focus a lot on multifunction technology, which we think over time will be the more prevalent technology in the marketplace.

What is the importance of developing country markets from Xerox’s perspective?

I do believe that developing markets are an important part of our portfolio. Our developing country markets are becoming more and more strategic by the day, providing great growth and innovation opportunities. We are very pleased with the results and progress across the world and we aim at bringing the right product portfolio, the right partner relationships to the emerging markets. We would like to continue to be a great partner in the developing markets with regards to both technology and services. And we believe that there are a lot of opportunities that we can participate in, if we listen and respond to the particular needs of the markets individually. We see a lot of upside opportunity in the developing markets segment that is going to continue on a path of growth and contribution to the overall corporate portfolio.

Given the current trends what is the kind of business revenue that Xerox is expecting from the developing countries in the next few years?

We knew that the emerging markets will be a source of higher growth, compared with the more mature markets in Europe and North America and that is now proving to be true. Today, developing markets represent maybe about 11-12 per cent of the revenue and it is growing almost twice as fast as the developed markets right now. We are of the opinion that the developing markets are going to be a bigger and bigger part of the revenue portfolio. If the developing markets continue to grow twice as fast, then in three-five years, they could be 20-25 per cent of the whole revenue portfolio of the company.

Is Xerox planning to open an R&D center in India in the near future?

No, as of now there is no specific plan in the offing. We continue to look for opportunities on a global basis for everything -- from traditional off shoring for other kind of operations, for R&D and manufacturing across the globe. So there is a lot of work being done regarding exploring opportunities in India as well as other countries, as we make future decisions about where we invest in partnering capabilities that we think would really advantage Xerox. India clearly offers a lot of opportunities that we would be looking at in the future.

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