Xerox looks to leapfrog in Latin American markets with ACS purchase

Monday, November 7, 2011

Latin American countries are set to leapfrog in terms of technology, and Xerox (NYSE: XRX), with its purchase of US business process outsourcing company Affiliated Computer Services (ACS), is expecting to cash in on this trend, Hervé Tessler, Xerox's president of Developing Markets Operations (DMO), told BNamericas.

"Because countries in Latin America are growing so fast and they have far fewer legacy systems than in the US or Western Europe, they can really jump quickly to cutting-edge technology. That's where we've got the most opportunities," he said.

Xerox breaks business down into two main areas - technology, which is the legacy business with printers, copiers and platforms; and services such as BPO and ITO, which according to Tessler has tripled in size after the ACS acquisition. Each area represents about half of the US$22bn company, he said.

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Latin America has been growing about 10-13% a year for Xerox, the executive added. But "in the developing markets in Latin America, we have a very small services business. Most of our business is technology. If you keep that growing and then you add to that the potential in the ACS offering, as we're doing, then you can really accelerate growth. We should begin to jump to a very different level of growth."

The overall DMO unit brings in some 10% of revenues for Xerox, "but that 10% is growing 5-6 times faster than the total company. We're an engine of growth" as the company overall expands in the low single digits, he added.

The executive sees two different layers driving BPO growth - the current engagement of worldwide Xerox customers like banks and telcos that are looking to expand, as well as some big local companies like Banco do Brasil. "If you look at the current pipeline in developing countries, about 50% is BPO, and of that, half is linked to global customers and half is new business with local, big players. The most relevant offerings have to do with customer care and developments in finance and accounting, and HR services," Tessler said.

"We've been working in all geographies with ACS for about a year, and we've signed about US$50mn-60mn with ACS. More importantly, we're seeing a growing pipeline that's not far from half a billion dollars, which has been in a short amount of time," he added.

In Q3, Xerox posted global revenues of US$5.58bn, up 3% year-on-year. Net earnings surged 29% to US$329mn.