Dawn Of A New Era: Xerox-Conduent Split Complete, Xerox Partners Hope For Better Pricing, Support

Xerox partners are optimistic that completing the spinoff of its $6.7 billion business process services division will result in better products, pricing and support for the channel.

"Being totally focused on Xerox's key expertise will make Xerox a better company, which will lead to a better experience," said Troy Tafoya of Fort Collins, Colo.-based Professional Document Solutions (PDS). [New CEO] Jeff [Jacobson] is taking Xerox to a more focused company that will reinvest R&D to keep Xerox at the leading edge of technology with the most complete portfolio."

The separation of the business process outsourcing division - which has been renamed Conduent - from Xerox's legacy $11 billion document technology practice closed Sunday and was announced Tuesday morning, essentially undoing Xerox's $5.6 billion purchase of Affiliated Computer Services (ACS) in February 2010.

[RELATED: CRN Exclusive: Xerox to Move Tens of Thousands of Direct Accounts to Channel Partners]

"Today is a historic day for Xerox. The successful completion of the separation sharpens our market focus and commitment to our customers," Jacobson said in a statement. "I am confident the transformational actions we are implementing position Xerox for long-term success and unlocks shareholder value."

Jacobson – who led Xerox's technology business since July 2014 – has taken over as Xerox's CEO, replacing Ursala Burns, who will continue serving as the chairman of Xerox's board. Ashok Vemuri – who served as president and CEO of Bridgewater, N.J.-based iGate from September 2013 to October 2015 – will fill the CEO role at Conduent.

"We have already begun laying the groundwork to drive profitable growth through sharpened go-to-market capabilities and greater consistency in applying our automation, analytics, innovation and expertise," Vemuri said in a statement. "Our significant transformation program will position our new company for long-term success."

Conduent executives will ring the opening bell at the New York Stock Exchange Tuesday morning, while Xerox executives will ring the opening bell Wednesday morning. Xerox shareholders Saturday received one share of Conduent stock for every five shares of Xerox stock they had as of Dec. 15, while Xerox received a $1.8 billion cash transfer from Conduent, which it intends to use to retire debt.

Conduent will begin its first ever day of trading at $14.90 per share, while, due to the split, Xerox shares were down 28 percent in pre-market trading Tuesday to $6.30 per share. Conduent - which was known as Xerox Global Services up until the separation - is No. 9 on the CRN SP 500 and the world's largest pure-play business process services company.

3i International has seen Xerox shift from a direct to channel-friendly sales strategy over the past half-decade and has been receptive to feedback from elite dealers about shortcomings and suggestions for improvement, said Mark Elliott, president of the Houston-based multi-vendor Xerox dealer.

"Every time there's been an area where they need to adapt, they've leaned on the counsel of their channel partners," Elliott told CRN. "For a multibillion dollar vessel, they've been able to turn on a dime like a speedboat."

Xerox executives have indicated that the Norwalk, Conn.-based company plans to move tens of accounts of its directly-served upper mid-market and smaller enterprise accounts to the channel, and add 500 new U.S.-based partners with more than $5 million in annual sales.

"Those are the types of dealers we want them to add," Elliott said. "Let's do 800, not just 500."

A more robust dealer network would have come in handy for 3i when the company landed a large project for Delta Airlines out of New York's John F. Kennedy International Airport. But since 3i didn't know other dealers in the New York area who could help with the install, Elliott said the company had to fly engineers from Houston to New York and put them up in the Big Apple for three weeks.

"We need to know who's good, who's bad and who's mediocre," said Elliott, who would like to see Xerox land more dealers with the infrastructure needed to provider Tier 1 support.

Some Xerox-exclusive agents and multi-vendor dealers might be concerned about conflict as Xerox brings on more channel partners, said Tafoya, president of Xerox agent PDS. But Xerox should be expanding to areas where they don't have adequate coverage rather than areas of channel strength if they are managing the initiative effectively, Tafoya said.

"This is such a large market, and there's plenty of pie to go around," Elliott said. "In the end, you allow the best partner to service the client."

Acordis International said it has struggled with only having access to a limited selection of Xerox's lower-end product due to its status as a multi-vendor dealer, according to Rehan Khan, president and CEO of the Miramar, Fl.-based company. Khan would like to see the playing field leveled for multi-vendor dealers and Xerox-exclusive agents so that dealers also have access to higher-end products.

"We lose business," Khan said. "We walk away from business."

Going forward, Xerox plans to bring a broader set of products and services to the table for its multi-brand dealers, including access to a full line of large, free standing A3 printers and significantly expanded offerings available in the smaller, tabletop A4 space, according to Kevin Warren, Xerox's new chief commercial officer.

In fact, 16 of the 20 new offerings in Xerox's latest product launch are A4 devices, according to Mike Feldman, Xerox's North America president.

Acordis has experienced back-to-back price increases from Xerox, Khan said, and is experiencing margins that are more narrow today than they were three to five years ago. Khan said he expects Xerox's "take it or leave it" attitude around pricing to change if the vendor is committed to gaining market share.

Xerox had historically treated every one of 3i's accounts on a "one-off" basis, Elliott said, meaning the vendor would look at each individual customer and decide whether or not to offer a discount on a case-by-case basis. That had required 3i to build out a five-year business plan to each major account, which Elliott said is a five-to-15-hour proposition.

Conversely, Elliott said Xerox competitors such as Cannon and Ricoh set their pricing for major accounts upfront based on annual volume, meaning 3i can determine the price of a product in less than two minutes. Xerox has recently moved in the direction of Cannon and Ricoh, Elliott said.

Khan would like to see a more formal training program focused around the best practices in geographies which have strong dealers with successful operations, addressing market retention strategies and common areas of struggle.

Specifically, Khan said more hands-on training around emerging market segments and product categories would make it easier for dealers to win net new business.

Xerox has lost some of its focus on ease of doing business over the years, so Tafoya said he's pleased that Jacobson is recommitting the vendor to focusing on customer experience.

"I am hopeful that it [the split] will just make them a stronger, more profitable company, which will help them invest in the things my company needs to create a better customer experience," Tafoya said. "A great customer experience is everything to me. It is how I have grown."