Xerox announced that its acquisition of ACS was completed today, transforming Xerox into a $22 billion global enterprise, tripling the size of Xerox’s service business to $10 billion, with annuity revenue representing 80% of total revenue. Xerox held a press call to discuss how the integration would be managed, with nearly 140 attendees.

In today’s press call, Xerox’ Jim Firestone, Xerox Executive Vice President, described the combination of these complementary organizations as “A New Class of Solutions Provider,” combining business process expertise from ACS with document technology expertise from Xerox. “This creates a new context for the operations of the Xerox enterprise,” he said, “and a new platform for growth.”

Xerox will manage ACS as an independent end-to-end business with ACS President & CEO Lynn Blodgett reporting directly to Xerox CEO Ursula Burns.  ACS will remain the core ITO and BPO organization within Xerox, and anything non-print-related in Xerox will ultimately be transferred to ACS over time.  Xerox’ Enterprise Print Services, launched last October and not really a BPO offering according to Firestone, will remain within the Xerox core business although the company will clearly look for synergies between the two organizations. The ACS leadership team will remain in place.

From a branding perspective, all ACS materials will bear a new logo and Xerox ownership message effective today; by mid-year, Xerox plans to transition ACS to Xerox brand identity, but maintain the name ACS, A Xerox Company.  This is hoped to reinforce brand strength for ACS, but using ACS to give Xerox a “believability hook” in the ITO/BPO space. Firestone intimated that this branding strategy will continue to evolve over time.  One could imagine the ACS name ultimately going away, based on experiences with Xerox acquisitions in the past.

Tomorrow (February 9), Xerox will begin a global print campaign to inform people that Xerox is a different company, and that, as Firestone said during the call, “something new has happened and Xerox is a different company than they have come to believe.”  The new theme of the ads is “Ready for Real Business – Xerox.”

Tom Blodgett, Executive Vice President and COO of ACS, reported that there are already 25 teaming agreements in place to date, even before the close of the acquisition, largely driven by customers approaching Xerox or ACS because they saw value in the combination.  As an example, ACS signed a long-term BPO contract with a large manufacturing company of 9-year duration.  When the acquisition was announced, the customer came back to Xerox and asked Xerox to extend the length of its existing 5-year contract to have expiration dates coterminous.

When the acquisition was first announced, it was noted that ACS had no Xerox printing equipment installed.  Blodgett indicated that among other things, Xerox will be installing Xerox equipment in ACS accounts, one could presume fairly quickly. In fact, Blodgett stated during the call that ACS had been exploring some investments with Canon, which he indicated would likely be put on hold.  In addition, the companies are already identifying quick hits that can use Xerox smart document technologies within ACS operations, such as Xerox Document Recovery technology, which allows processing of image scans more efficiently, yielding $25K in savings for every million documents processed, and minimizing human-oriented exception processing of “bad scans.”

Xerox claims this acquisition increases its addressable market opportunity to $500 billion, a space that is growing at 5%.  This breaks out into the BPO market, which Blodgett estimated at about $150 billion, the Xerox legacy print business comprising another $150 billion, and a third area, ITO or information technology outsourcing comprised of data center and midrange networks for a total addressable market of $500 billion.

In terms of the $400 million cost and revenue synergy figure that was projected as a result of the combination of the two firms when the acquisition was announced, Firestone indicated that these figures will not be updated until either first quarter results are reported or during the company’s May investor’s conference.

Blodgett concluded the conference by saying that after working on this deal for about six months and gaining a better understanding of Xerox strengths and culture, ACS’ excitement level has increased and Blodgett is happy “this deal got across the finish line.”  Firestone added that Xerox is very clear about the assets it purchased with this acquisition, being ACS’ management process, management team and approach to the marketplace. He indicated that Xerox is taking a very conscious approach to preserve these assets, but to add to them Xerox technology, brand, global presence and scale.

This combined organization bears watching as its strategies unfold and its impact on the marketplace begins to take shape.