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Xerox Channels President on the 112-Year-Old Company's Uphill Battle

The last few months have exposed Xerox's underbelly. Can it bounce back?

COMPTIA CHANNELCON — It’s been a tough year or so for Xerox.

Last September, the New Zealand operations of Fuji Xerox, a joint venture from the two companies, filed civil proceedings against former senior executives for fraud over a $355 million accounting scandal. The joint venture worked under an agreement that essentially keeps Xerox out of the APAC market and Fuji out of the Western market.

January brought an acquisition offer from Fujiprompting a lawsuit by Xerox’s third-largest shareholder, who alleged that the agreement “allows Fuji to control Xerox's intellectual property and manufacturing rights in the $36 billion Asia-Pacific market in the event Xerox were to sell to another suitor.” 

Xerox’s legal troubles took a 180 in April, when a federal grand jury handed down a 63-count indictment against five men, including a Xerox channel reseller, accused of defrauding Xerox of $25 million by reporting false sales, receiving millions in automatic toner shipments and then selling the toner to an individual in Miami for profit.

But the company was back in the hot seat that same month when U.S. courts blocked Fuji’s attempt to buy Xerox.

The hits just keep on coming. In June, the Texas Supreme Court ruled that Xerox is responsible for the $1 billion in fraudulent Medicaid payments the company made while overseeing pre-authorizations for Texas Medicaid patients’ dental work in dealings with a Xerox subsidiary called Texas Medicaid and Healthcare Partnership.

Last month, CEO John Visentin, who was brought in this past spring after activist investors pushed for management changes, said not only that Xerox is not actively for sale, but that it’s putting an end to the Fuji Xerox market separation agreement. This is in apparent response to Fuji chairman and CEO Shigetaka Komori’s assertions that the company would not consider raising its bid for Xerox.

That brings us up to date on the high points of the 112-year-old company’s year of legal woes, which have put its stock in decline and company spokespersons on the defense. This is the environment in which Pete Peterson, president of channels at Xerox, took the stage at CompTIA ChannelCon Wednesday for a fireside chat with CompTIA CEO Todd Thibodeaux.

Xerox

Pete Peterson

Xerox has been on a hard and heavy campaign of reinvention since Visentin took the helm, and Peterson today laid out a frank vision for the future while also admitting to some significant challenges the company has to overcome if it hopes to make a space for itself in a new digital economy where traditional print is quickly fading and connected application-centric technology is essential to success.

“It’s the speed of change” that Peterson says Xerox has to watch out for. “Success today is measured in weeks and months, not quarters and years … it’s what keeps me up at night.”

Xerox is leaning on organizations like CompTIA and its partner community to help it evolve into an agile business that can survive in today’s landscape. Today’s printer, says Peterson, isn’t your grandfather’s printer, and Xerox’s partner community has a lot to do with that. Peterson told Thibodeaux that more than half of its 75 applications were developed by its partner community, and those types of “smart” capabilities are representative of what Xerox is leaning on to carry it into a digitally-enabled business environment.

Still, there are areas where the company is lagging and definitely shouldn’t be. For a printing company that’s been around for more than a century, its inability to commercialize its 3-D printing R&D is incredulous. Thibodeaux pointed out the recent legislation that allows for the 3-D printing of firearms; such developments in a sector as slow moving as the federal government are something that Xerox should be able to stay ahead of.

But the nature of titans of business, which Xerox undoubtedly is, prevents an environment of agility. And the company’s recent legal snafus haven’t helped. Peterson briefly glanced over the convoluted nature of its international business, telling Thibodeaux and the audience that due to the nature of the Fuji joint venture, its enterprise-market presence in the EU hasn’t taken off in a global way.

But the company and Peterson have hope, and legitimately so. One of the refreshing things about Xerox is its ability to admit its weaknesses. Granted, its recent high-profile troubles are impossible to ignore, and a PR strategy that tries to do so would undoubtedly end in failure. Still, Peterson’s candidness on stage in front of an audience of skeptics is remarkable in itself. When asked how he hopes Xerox is viewed in five years, Peterson didn’t revert to PR talking points, but instead addressed the company’s current challenges head on and commented on the ways he thinks it should and can improve.

Historically, said Peterson, Xerox has been a very innovative company, and few would dispute that claim. “Xerox” is ubiquitous with copiers and printers for a reason. In decades past, it saw a market opportunity and jumped on it, but it's been too long since it showed that risk-taking spirit. Peterson hopes in five years the company isn’t viewed as just a printer and copier provider. It wants to be associated with workplace solutions that center on software, applications and emerging technology like artificial intelligence and voice recognition rather than solely relying on devices to drive its revenue.

Most pertinent to the channel, Xerox wants to be simpler and easier for solution providers to do business with. Currently, the company has more than 1,400 subsystems that its partners have to navigate, learn and sell. Peterson said that reality was a “real eye-opener” when he came on board in April of 2017.

Like many tech companies that have held sway over the market for decades, grown too big for their britches and gotten comfortable in the corner of the market they’ve historically owned, Xerox feels like an organization that clawed itself to the top of the heap and wound up not liking the view. There’s very little chance the company will go the way of past behemoths like Compaq and fade into obscurity, but if it doesn’t hustle in terms of its innovation and tighten up its operations in order to keep its revenue out of the courts and devoted instead it to profit-generating activities, it may well cease being a brand that’s synonymous with enabling offices around the world.

Wednesday’s talk at ChannelCon, however, gave audience members some degree of confidence that Xerox's shareholders and leadership have stopped taking its market share for granted and instead begun to regard certain aspects of its business as more entrepreneurial than industry mainstays. Here's to hoping, anyway. Any company that takes its success as a given these days is undoubtedly doomed for failure, including (and especially?) one as entrenched as Xerox. Executives like Visentin and Peterson profess to understand that and appear to be looking ahead of the curve.

Whether or not they can guide such an old and giant device manufacturer into that new era has yet to be determined, but Xerox's push toward market dominance in a digital world will certainly serve as a modern case study of old-school tech forging ahead into an app-centric, connected-device era. 

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