Xerox Gets Into the Global Sourcing Services Game
Whether Xerox's most recent move of getting into the global sourcing services game ends up being a successful, transformative strategy or the LCCS equivalent of sticking your derrière on the copy maker and dropping off the resulting pictures to the CFO remains to be seen. I must say, I do find it ironic that Xerox would get into the global sourcing consulting/outsourcing game just as volumes are drying up. Seriously, this move will prove itself out to be really prescient or really dumb based not only on the timing but also on Xerox's ability to understand what delivering services externally like this takes. If I were a betting man, I'd wager that this little play will quietly disappear in the coming years specifically because Xerox does not have experience in building a business-process driven services arm serving multiple companies, touching on -- and serving the needs of -- dozens of functions and stakeholders of other organizations. It's one thing to create an internal shared service -- something else entirely to take it outside the company.
But what do I know? Judge for yourself. According to Purchasing's above-linked write-up of the news, "Xerox Corp. is launching a new service for those looking to source components from suppliers in other regions of the world but who may not have the resources to do so on their own." Xerox is "touting its expertise" of "the company’s buyers who purchase direct parts and components who are based at offices located in seven different countries in Asia." Xerox will be offering outsourcing and consulting services on the indirect side of the spend fence as well (even though this market is much more crowded than the direct materials outsourcing market). You know my initial opinion. But what do you think? Can Xerox succeed despite their market timing?
- Jason Busch
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I agree with your prediction that this offering will quietly go away just like other attempts at this profit-center procurement model have. It's just not the core competency of the organization and non-core competency activities are often cut during recessionary times. I recall one pharmaceutical company that tried something similar and it wasn't long before the company wouldn't even let the consulting team fulfill its paid engagements before disbanding them!
I'm not saying that this will happen with Xerox, but I don't think they are going to find a "build it and they will come" reaction in the market.
It wasn't until recently that I stopped seeing trepidation about hiring Ariba for consulting due the the perception that Ariba/FreeMarkets was a "software company."
Now, Xerox is targeting mid size companies and there lies the biggest problem. Supplier that have been providing components to Xerox would not be a good fit to supply mid size companies. These type of suppliers are seldom interested in working with smaller projects/customers. After all, it takes the same effort to get up and running a 1 million parts a year project than a 100,000 parts a year project. Secondly, their manufacturing setting is not designed to be competitive at lowest production batch runs. They simply operate in a different cost structure than smaller suppliers. This would mean that Xerox would have to develop a whole new category of suppliers... and that defeats the whole purpose of trying to leverage their own supply-base.