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Xerox announced its plan to split into two independent, public companies on January 29. The pending separation could be complete by the end of 2016. The split is a strategic decision to align business to current market dynamics, simplify organizational structures and more efficiently allocate capital. The resulting companies would be:

  • The document technology company focusing on document management and document outsourcing. In 2015, this part of the Xerox business brought in approximately $11 billion in revenue.
  • The business process outsourcing (BPO) company focusing on helping clients with operational and transactional business processes, such as HR, payroll, information technology, communications, finance and accounting outsourcing. In 2015, this part of the Xerox business brought in approximately $8 billion in revenue.

xerox logoLate last year, billionaire activist investor Carl Icahn bought an additional 7.1 percent stake in Xerox (making him the company’s second-largest shareholder with more than 82 million shares) and announced some of his ideas for the company’s future, which included Xerox splitting into two companies. He also said he wanted seats on the BPO company’s board.  So far, he seems to be getting his way; the Wall Street Journal reported Icahn is taking three board seats with the BPO company.

What does this mean for current Xerox BPO/HR technology clients?

Stability is a key factor, given the propensity for mergers and acquisitions (M&A) activity within the industry. Hopefully, the split will mean better service for clients as Xerox will be able to better align business goals and focus on that side of the business. Although not necessarily a bad thing, history shows that M&A-type activity can distract an organization that doesn’t have a clear continuity plan. There is the possibility that the split could distract the company from providing great service or new products as it works to identify new workflows, roles and internal channels.

As can be inferred from Ichan taking three seats on the BPO company’s board, the market valuation, and past performance, the BPO company is Xerox’s crown jewel. It appears the BPO company has more potential and will likely be where most of the energy and resources are invested over the next few years. We wouldn’t be surprised to see the document technology company bought up by a competitor even. This is just another example of how quickly the HR technology landscape is changing!

We’d love for you to share your thoughts and predictions on the split.