From Buyer's Lab

June 23, 2008 - In the year since Xerox acquired Global Imaging Systems, along with access to its 200,000 small to medium-size business (SMB) customers, the transition has gone well from Xerox’s vantage point thus far. In a recent conference call, Xerox reported that today more than 50 percent of the products moving through Global are Xerox. Xerox would not give specifics in regard to the install rate of Xerox products through Global. Global also contributed to a 10 percent increase in equipment sales for Xerox in 2007.

Commenting on how the acquisition has already altered Xerox’s selling style, Paul Schulman, Global’s vice president of operations said that he enjoyed selling against Xerox in the past. “Xerox’s go-to-market style did not allow a sales rep to be flexible enough, with enough range, or enough speed to beat an independent. Xerox is learning how to let a sales rep make a decision instantly, and sales reps are now getting more of the tools they need to be more nimble and quick.”

The transition for Global has been equally rewarding, according to Michael Shea, Jr., president and CEO of Global Imaging Systems. “I am happy to report that the transition has gone terrific from our vantage point,” said Shea. “We actively worked with Xerox to get our entire technical and sales organizations in all of our core companies up and framed. We have had great acceptance from our customer base of the Xerox technology, as well as in our sales force and all of our employees.”

Letting Global Be Global

Equally important is that Xerox has allowed Global to continue to be “Global,” and according to Jim Firestone, executive vice president with Xerox Corporation and president of Xerox North America, has been a primary focus for Xerox. “Left to our own devices, the Xerox organism would try to work its magic to change Global. Our effort has been to create a buffer and allow Global to operate as independently as possible. Through the first year, we were able to achieve that,” Firestone said.

The “buffer,” according to Michael Zimmerman, manager of public relations for Xerox Office Group, is the Acquisition Transition Office (ATO), now headed by Paul Hartley, vice president of acquisitions. According to Zimmerman, the ATO was set up for the Global acquisition. As Shea explained, prior to the Xerox acquisition, Global was a public company, and therefore its entire focus was on operating performance combined with growth. “Xerox has allowed us to continue on with that philosophy,” Shea said, adding that Global is still profit-oriented and very customer-centric in terms of service and support. Global’s acquisition strategy is also alive and well, with Global having completed five acquisitions since the Xerox acquisition, and according to Shea, the addition of Tom Salierno as senior vice president of acquisitions will help the company maintain that momentum.

Xerox also continues to support Global’s structure in which the various Global dealers are responsible for their own management. As such, exactly which third-party products the individual dealers choose to supply is up to those dealers. Indeed, while Canon and Ricoh cancelled their contracts with Global soon after the Xerox acquisition, both Sharp and Konica Minolta renewed with Global. Just recently, six Global dealers—MWB Business Systems, Lewan & Associates, Berney Office Solutions, Dahill Industries, Pinnell and Imaging Concepts of New Mexico—announced new five-year purchasing contracts to supply and service customers as authorized dealers of Sharp MFPs, printers, fax machines, supplies, parts and accessories.

Addressing Channel Conflict

At the time of the Global acquisition, there were concerns among Xerox’s agents and resellers about channel conflict. For its part, Xerox has continued to invest in the agent and reseller channels this past year, claiming in fact to have delivered more improvements to agents in the last year than ever before. As Firestone explained, Xerox introduced a new margin-based compensation plan that pays the agents based on the margins they achieve when they sell. “The market is a mixture of contested sales and uncontested sales,” he said. “Depending on which type of environment agents are in at the time, they will have the ability to influence margin positively.”

Xerox also expanded the products covered by its PagePack program to ensure agents capture more of the post-sale revenue stream. Xerox’s PagePack program enables resellers to sell one- and three-year service and supplies contracts to their customers. It enables customers’ monthly costs to be predictable, and makes sense for resellers because up front with the sale or lease of the hardware, they are guaranteed to benefit from sales of the service and supplies. According to Xerox, PagePack contracts grew by 200 percent from December 2006 to December 2007.

Still, there continues to be no clear line of delineation between agents, resellers and Global in terms of the customer segments they will go after, the mix of hardware, software and services they expect to sell, and the geographic areas each will cover. According to Firestone, the marketplace is evolving, and Xerox is trying to move away from a world where everything is predetermined. “The rest of the industry is more dynamic, and lets customers choose who they want to do business with, and now customers may have multiple Xerox reps calling on them for their business. Those channel partners that are good at getting customers to choose them will grow, and those channel partners that are not good at getting customers to choose them will not.”

Firestone emphasized, however, that the various Xerox channels are not bumping into one another all that frequently. While there are pockets of overlap, it is certainly not a broad-based conflict, and when it is appropriate to coordinate, Xerox does so. Zimmerman added that the ATO mitigates all conflicts between Global and the other channels.

According to Schulman, there are best practices, or rules of engagement, that have been embraced by Xerox, Global, and agents and resellers. “It would be foolish for me to see 100 Xerox units in the field and try to take them out and replace them with other Xerox units,” Schulman said. “It would also be foolish for Xerox [direct sales] to come into a Global account where Japanese-brand machines are placed and attempt to put Xerox machines in.” When no one has the share, “we call it a jump ball,” Schulman said. He went on to say that today there is a grand agenda, and Global will not attempt to undermine a Xerox account. “All revenue is Xerox revenue.”

This article was originally posted at Buyer's Laboratory, Inc.