According to the Gartner Group: Xerox named long-time employee Anne Mulcahy as its new CEO. Although Mulcahy has started Xerox down the road to services and solutions, she and Xerox need to do three things to stay on course. Event On 26 July 2001, Xerox announced the appointment of Anne Mulcahy as president and CEO, replacing Paul Allaire, who returned to that post to replace Rick Thoman in mid-2000. Mulcahy was formerly Xerox's president and COO. Allaire intends to continue as chairman until the end of 2001. First Take In May 2000, Gartner research predicted that Allaire's second stay as CEO would be temporary and that Mulcahy would be named as CEO by mid-2001. She ascends to CEO as Xerox is executing a recovery plan that follows a series of failed reorganizations. Although many pundits will argue that Xerox needs an outsider, Mulcahy knows the Xerox culture and people well. She now needs to use that knowledge to help the company use its strength in the hardcopy area to grow its capabilities in the electronic document areas. Mulcahy faces a threefold challenge: * To motivate Xerox people to be open to new ideas and embrace change * To attract outside talent, particularly in marketing, to help drive revenue * To lead a push into the digital document arena by focusing on solutions and services. Although Mulcahy deserves credit for the initial push into solutions, she needs to maintain a sustained effort in this area across multiple vertical industries. Xerox has a successful outsourcing practice, but it collapsed that channel into its primary sales channel in 2000. Other firms, notably Hewlett-Packard and IBM had to develop separate channels to sell hardware, software and services. Xerox tries to cover all three areas with one sales force. In Gartner's opinion, Xerox will revert to a separate sales organization for services by year-end 2002. Xerox still faces the challenge of returning to profitability and should do so by 4Q01. In addition to considering the standard products Xerox offers, enterprises should ask Xerox about the solutions they offer across various industries.