digibyte - Xerox turnaround taking time and costing jobs
- Summary:
- Xerox is axing 3000 jobs and pausing on its healthcare ambitions as turnaround trundles on.
The re-invention of Xerox is proving painfully slow, with fresh plans in place now to lay off 3000 workers worldwide after the services giant saw revenues fall 7% year-on-year.
Total revenue was down to $4.6 billion, while the document technology business was down 12% to $1.9 billion and the services business — representing more than half of its overall revenue — was down 3% to $2.6 billion
In Dec 2014, Xerox announced an agreement to sell the ITO business to Atos. The sale was completed on Jun 30, 2015 for approximately $940 million. Now the focus is on margins, says CEO Ursula Burns, who announced plans to cut jobs and pull back on its government health care strategy.
Burns insists that, despite the shortfall in revenues, the company is working to a plan and is on a path from which it mustn’t deviate:
Our direction has been consistent. We are making progress in some areas, but we know we can and should do better in other areas. Our direction is unchanged. We are making several shifts in the way that we execute against it.
First, we have taken steps to create much greater focus in our Services business. We completed the divestiture of our ITO business enabling a clear focus on the BPO and document outsourcing businesses. Last Friday, we announced a major change in our government healthcare strategy. We are focused on ensuring the success of the existing health enterprise implementations by limiting new pursuits with this platform.
We have the right business strategy, we are reprioritizing investments and accelerating our restructuring actions and services to improve revenue and margin. While we have more work to do, we are making decisions and changes that will deliver attractive return to our investors.
One of those decisions is to limit Xerox’s health enterprise business to the six US states that the firm currently has on its customer roster. This does not mean that Xerox is turning its back on the healthcare market, insists Burns, but rather that it wants to be sure that it’s delivering on the deals it has in place:
That was a fundamental strategic change and the change was not that we didn’t want to be in health enterprise. We just want to get what we had underway kind of embedded down and tightly focused. We have big states, New York and California, New York just starting, California kind of in the middle of its journey. What I ask the Services team to do is to actually focus on those big implementations. The six states that we have, let’s make sure we get those settle down and then we’ll start to pursue to market again in the future if we think it’s actually useful.
This ‘make sure we can deliver on what we’ve got’ mentality is probably wise. According to Dakin Smoyer, analyst with research house Technology Business Research Inc (TBRI):
Xerox will need to invest additional efforts in the government healthcare space, which TBR estimates made up 8.5% of revenue in 2Q15, to improve service quality. For Xerox to regain the confidence of government healthcare clients, after recent contract losses in 1Q15, the company will provide additional attention to current customers while refraining from adding contracts until completing the implementation phase of existing projects.