'Developing markets could be 25% of the whole revenue portfolio for Xerox in 3-5 years'

Anne Mulcahy, Chairman and CEO, Xerox Corporation, was responsible for
turning around the fortunes of Xerox in 2002, and is now looking to get the
company back on top of the tech world. At a Xerox Industry Analyst meet in New
York recently, she elaborated on the trends in the IT space and the company's
future plans for emerging markets. Some excerpts from the interview:

Which trends do you foresee taking over the IT space?

There are certain mega trends visible in this space. The first is
customization/personalization that in fact goes hand-in-hand with digitization.
The evidence of this mega-trend is seen everywhere. The mass market is
disintegrating and all expect information relevant to them. Customers are
finding it on the Internet, in specialty publications, and other interesting
places.

Another mega-trend, in our view, happens to be a phrase we have
service-marked: Smarter Document Management. With all their unstructured,
meandering ways, documents are the lifeblood of entire organizations. All these
documents and the processes behind them need to be smartened up. And we believe
it is starting to happen on a level that qualifies not only as a mega-trend but
also as a core aspect of our mission at Xerox.

The next mega trend is the “Big I”, “Little t”. The new world of IT
is made up of a big “I” and a little “t”. And more focus must be placed
on what really matters-Information.

In this shift, documents are the containers in which information is presented
for human processing. Now with the help of technology, we know how to make
information containers behave as masters of their own destiny. All the building
blocks are there and all kinds of enterprises are putting them together to
benefit from the Big I, Little t mega-trend.

You were speaking on strategic mega trends and Xerox's alignment to
them. But, how do you interpret Wall Street's skepticism towards this?

As I have elaborated earlier, some of the strategic mega trends are
personalization, smarter document management, and certainly a lot of services
initiatives. But the financial community talks about how many boxes sold, how
much business volume; and feels much more connected to the more traditional
business. I do not think that one gets to make an either/or choice here. I think
we have to do both. We have to be successful in the traditional aspect of our
business: we expect to grow our market share into products; we expect to drive
pages in terms of our output business and we are doing that. While, at the same
time, we also look as to how do we deliver the value that brings us to the
future and does not drag us into the past. This is important because we know
that the hardware cycle is one that certainly does not sustain a lot of growth
over time. We have to look for new sources of revenue and that is where services
becomes incredibly important-in the transition to color; the transition from
offset to digital, all those trends really bring incremental revenue to the
portfolio. So it is necessary for the future that we really focus on those
initiatives. But then, we have to walk on two roads at the same time-we have
to deliver the results in both our emerging businesses as well as our
traditional businesses and we have to invest in future trends so that we are
well positioned as a market force.

Retail is important for SMBs, but Xerox is not very visible here. Any
comments?

We are looking at retail in different ways. We know that in some markets we
have to be in retail like in Latin America, Western and Eastern Europe. We are
looking at it and are not shutting down the options to be a participant in the
retail segment. But we do not want to make that mainstream and will work on it
through partners. We also have to work in ways that are efficient from a cost
perspective. Although it will not be our main strategy but we will clearly look
for opportunities where it is important to have a presence in retail so that we
can distribute to small and medium size customers. We are beginning to
experiment in this area and are piloting some things, as we speak here, in the
different parts of the world where retail is very important. Our developing
markets team is very focused on where we need to be a participant in retail in
the right way.

Xerox has made some acquisitions in the recent past and news is that some
more are in the pipeline. What type of technology are you looking at?

When I had spoken about mega trends earlier, those are the areas that we are
looking to bolster-Personalization: Acquisition of personalized or mainstream
software suites would be an area that we will be looking forth to add within our
portfolio. As far as the smart document management area is concerned: We would
be keen on acquiring companies that will be able to help us move our services
business quicker. So, one can look in those areas of growth which are more
future oriented than necessarily current portfolio oriented.

How important are developing country markets from Xerox's perspective?

Very important. Our developing country markets are becoming more and more
strategic by the day providing great growth and innovation opportunities. We are
very pleased with the results and progress across the world and aim at bringing
the right product portfolio, the right partner relationships to emerging
markets. We would like to continue to be a great partner in the developing
markets with regards to both technology and services. We see a lot of upside
opportunity in this segment.

What kind of revenue figures do you expect from these countries in the
next few years?

We knew that the emerging markets will be a source of higher growth as
compared to the more mature markets in Europe and North America and that is now
proving to be true. Today, developing markets represent maybe about 11-12% of
the revenue and are growing almost twice as fast as the developed markets right
now. We are of the opinion that the developing markets are going to be a bigger
and bigger part of the revenue portfolio. If the developing markets continue to
grow twice as fast, then in 3-5 years, they could be 20-25% of the whole revenue
portfolio of the company.

Does an R&D center in India feature in your future plans?

No, as of now there is no specific plan in the offing. We continue to look
for opportunities on a global basis for everything-from traditional
off-shoring for other kind of operations, for R&D and manufacturing across
the globe. So there is a lot of work being done regarding exploring
opportunities in India as well as other countries, as we make future decisions
about where we invest in partnering capabilities that we think would really
benefit Xerox. India clearly offers a lot of opportunities that we would be
looking at in the future.

Rolly Dureha

The author was hosted by Xerox at New York