Monday, September 28, 2009

First Perot-Dell and now ACS-Xerox ... Two Sides of the Same Coin?

I've been asked more than a few times recently whether the recently-announced acquisitions of Perot (by Dell) and ACS (by Xerox) were a surprise. In all candor, I am not surprised in the least that Perot and ACS were acquired and I'm similarly not suprised that Dell and Xerox are acquirers.  The combinations themselves, however, take some pondering.

I resonate with the observations of Phil Fersht at http://www.fersht.typepad.com/.  As usual, Phil cuts to the chase with his observation that "if you combined the new Xerox with the new Dell, then you'd be looking at a company with a lot of future potential...".  Maybe he's prescient?

It's been no secret that Dell has been prowling for an acquisition.  The infusion of ex-EDS leadership within Dell's Services business was an early hint at this.  I've long held the view that the reality (yes, it's real) of virtualized infrastructure services will give rise to a new breed of ITO provider.  I take seriously the ability of Google, Amazon, and Dell to compete for scaleable storage, server, and desktop service.  I think this vision exists within the EDS-HP combination, too (although it's not yet been made evident).

But, does Perot really advance Dell's infrastructure services ambitions?  I think it does.  Perot is a very capable provider of operationally-sound computing and communciations services.  Those skills are essential for a business like Dell's as they serve the operational needs of companies.

The nonsequitor, in my mind, are Perot's applications-oriented and business process services. I imagine that the Clients of Perot's applications services or BPO operations are wondering what benefit they glean from this combination. Perot was, arguably, one of the leading healthcare-oriented service providers - with scope of responsibility well beyond infrastructure operations. I'm not clear on how Dell will advance that position.

Fast-forward a week's time and we have Xerox taking out ACS. Unlike Perot, ACS has very little "vertical" BPO but they are quite capable in both infrastructure and horizontal BPO. I've always admired the ACS leadership for being the first-mover on global delivery solutions. This company is more global than many of their Clients and paved the way for technology-enabled BPO.

Xerox is a very interesting acquirer. They needed a strategy for broader business services and found ACS's portolio attractive. I see a lot of logic in this ... much of ACS's business today is enabling and automating the flow of paper-based work processes.

The paradox with the ACS-Xerox combination, in my mind, is the converse of the Perot-Dell marriage. If you're an infrastructure Client of ACS', do you see value in having Xerox in the middle of your data center operations?  Hard for me to see.  (And, ACS has some very high-profile infrastructure clients).

My take-away ... two different bets are being take with these combinations:

  • Dell is doubling down on the infrastructure services business and is likely willing to see Perot's applications and BPO business diminish (or, maybe they sell that book of business?), and
  • Xerox is betting that ACS will fuel a deep portfolio of business process management offerings, with some risk that their infrastructure relationships are lost over time to a specialist.
I can't help be be reminded of a prediction I made about a year ago that said that the industry Service Providers are facing a choice between the horizontal and the vertical axis. Consolidation would be driven by this choice - either to become leaders in the component parts of business operations (such as infrastructure operations or cross-enterprise BPO) or to focus on the integration of technology + applications + operations for industry-specific business processes.

These two moves look, to my eyes, as examples of the former.  The players for the latter - those betting on a vertical strategy for integrated technology and operations - are still taking form.

Pity those caught in the middle.  The music is still playing, and the chairs are moving around.

1 comment:

  1. An insightfull post. Will definitely help.

    Thanks,
    Karim - Mind Power

    ReplyDelete