EUROPEAN BUSINESS SPENDING €55 BILLION ON OUTSOURCED DOCUMENT SERVICES

Use of multiple third-party suppliers amplifying organisational document cost, as report identifies multi-billion market opportunity for Xerox Global Services

Uxbridge, UK, 20 December 2004 – Major European organisations are spending circa three per cent of their annual revenue on the outsourcing of creative development, production, distribution and storage of documents, according to an RS Consulting research report commissioned by Xerox Global Services. However, while organisations are spending such a considerable sum on outsourcing these business functions, the spending is at a tactical rather than strategic level. The research results suggest that European businesses would reap much greater efficiency and cost savings if they were to outsource more of their document activity, but to a lesser quantity of external suppliers.

The report is based on more than 600 one-to-one interviews conducted with senior management in more than 250 leading businesses in Belgium, Czech Republic, France, Germany, Hungary, Italy, the Netherlands, Spain, Sweden, Switzerland and the UK. The report found that an example company with annual sales revenues of €145m is likely to spend €4.35m on outsourced document services, but 90 per cent of businesses are sub-contracting only splintered parts of their document activity to third party suppliers.

“The research highlights two critical issues,” explains Shaun Pantling, director and general manager, Xerox Global Services, Xerox Europe. “Firstly, less than one in five organisations within that 90 per cent outsource to one or a few, select suppliers. This means that the organisation as a whole is failing to reap economies of scale across the business. Secondly, because outsourcing decisions are being taken at a tactical i.e. departmental level, senior management within that organisation may be unaware of the true cost to the entire organisation of document management and outsourcing.”

Pantling continues: “Both we and RS Consulting suspect that few European businesses are currently aware of this issue. RS made the results of this first round of research available to us in the first quarter of 2004, and we believe it is still the only in-depth research into this issue in Europe. We are monitoring it at regular intervals because we believe that, at the moment, it is still going unchecked.”

However, RS Consulting also found that there are additional savings to be made by European businesses by actually outsourcing more of their document-intensive processes.

Bryan Atkin, managing director, RS Consulting comments: “Put simply, organisations are spending money on document outsourcing, but not necessarily in the right way. In most companies there is little evidence of strategic management of spending on document related services. Tactical decision making and budget responsibility operating at functional department level has led to services being provided under multiple contracts by many vendors with no overall view, let alone control, of total outsourcing spend. There is an opportunity here for senior company management to audit where and with whom the company is spending money on outsourcing, in order to develop a solution that is best for all. Until companies start to do this in all European countries, then one must conclude that the European market for outsourced document services is still in its infancy.”

Detailed report findings are in use by Xerox Global Services now to help Xerox refine its offerings to European organisations who seek to reduce costs, increase the value provided by every document in the organisation, and reduce the time-to-market of new products and services by ensuring that accompanying product information is delivered as rapidly as possible to new markets.

- Ends -

About Xerox
Xerox markets a comprehensive range of digital document solutions and services, as well as associated supplies and software. Its offerings are focused on three main areas: offices from small to large, production print and graphic arts environments, and services that include consulting, systems design and management, and document outsourcing.

Xerox also has manufacturing and logistics operations in Ireland, the UK and Holland and a research and development facility (Xerox Research Centre Europe) in Grenoble, France. For more information, visit www.xerox.com or www.xerox.co.uk.

About Xerox Global Services
Xerox Global Services, one of the three main business units of Xerox, offers a broad portfolio of services including consulting and systems integration, imaging, content management and outsourcing. We work with our clients to improve and manage their document intensive business processes - everyday processes like customer communications, billing, training, or records management. Please refer to www.xerox.co.uk/globalservices (insert local country website address) for further information.

Xerox®, The Document Company® and the digital X® are trademarks of Xerox Corporation. All non-Xerox brands and product names are trademarks or registered trademarks of their respective companies.

About RS Consulting
Established in 1984, RS Consulting is a highly respected independent research consultancy employing around 40 staff in the UK, and with an annual turnover in excess of £6 million. RS Consulting specialises in market research for leading players in the following sectors: technology; corporate finance; public policy; and industry & supply chain. More than 90 per cent of RS’ consulting and research work is international, with the company providing customers with information on: market sizing and forecasting; segmentation; pricing; new product development and concept testing; channel strategy; customer satisfaction and loyalty; buyer behaviour and the decision process. RS’ global headquarters are in central London. Please refer to www.rsconsulting.com for further information.

Xerox Global Services Makes Sun Shine Brighter

Case study written for Xerox Global Services Europe, October 2004.

When leading IT manufacturer Sun Microsystems wanted to find additional ways to streamline the costs of its document production and management processes, Xerox Global Services rose to the challenge.

Sun Microsystems is renowned globally as a market leader in IT hardware, software, and services. In Europe and South Africa the company operates 119 sites in 31 countries, employing 11,500 people, and had a global revenue of US$11.185 billion in the last fiscal year. Larry Matarazzi, director for Workplace Resources EMEA, Sun Microsystems explains, “Over the last few years Sun has been affected by the global down-turn in the IT sector, with 9/11 and the bursting of the dotcom bubble affecting the technology sector as a whole. Even though there was little ‘new business’ activity at that time, Xerox Global Services approached us proactively with an innovative solution at a time when we needed it most and were already looking to cut costs aggressively. It doesn’t get much better than that.”

Documents represent a huge hidden cost to organisations but they are the lifeblood of business operations, coursing through every PC across every department and across every output device. But research carried out by Xerox Global Services and analyst group IDC indicates that a staggering 90 per cent of European companies cannot even estimate the cost of document processing to their organisation. Xerox Global Services estimates that this figure rests between 5-15 per cent of a company’s annual revenue.

Due to Sun’s understanding of technology, the processes it had in place to deal with managing documents was more advanced than many companies, according to Bernie Gooch, service development manager, Xerox Europe.

“When we first visited Sun and carried out an audit of its document processes, we found that there were seven users per device, which is a lot better than average, but we still found that up to 25 per cent savings could be made,” Gooch explained.

An excess of document processing equipment, such as disparate stand-alone printers, copiers, fax machines and scanners, presents significant maintenance costs and unwanted time burdens on the IT department. These disparate devices can typically be replaced with multifunction devices placed strategically about the office premises. In September 2003, a project commenced to reduce Sun’s total document spend, starting with six key sites across Europe in Camberley, Munich, Dublin, Amersfoort, Berlin and Toulouse. The project was implemented by Xerox Office Services, one of three lines of business within Xerox Global Services.

Across these sites, Xerox Global Services found the following inventory when carrying out its due diligence assessment:

Total Devices 1,744
Suppliers 19
Models 174
Annual Impressions 63.77m

Following its audit, Xerox Global Services proposed a rationalisation plan to reduce the quantity of those devices and reapportion them across the offices to ensure Sun gets the best from each individual device. Xerox Global Services is bound by a service level agreement (SLA) to provide 25 per cent savings on Sun’s print-related costs.

The hidden costs of managing all these devices included warranties and printer disposals, time and material repairs, recycling and unserviceable devices. A lot of devices and consumables were not covered by a service agreement, which presented multiple problems. A solution was needed, as Matarazzi explained.

“We had to decide who would take ownership of the budget as the project fell between IT and facilities management,” he said. Xerox Global Services pitched the project not only to Sun’s IT management and facilities management, but also to Sun’s senior management, and then managed the entire programme from its Ballycoolin site outside Dublin.

The process was guided by Xerox Global Services’ “Lean Six Sigma” techniques for resolving problems. Six Sigma involves five steps to successful project implementation including design of solution, measurement of existing processes, analysis of problem creation, implementation of new solutions and a 12-month period of ‘control’ to assess results.

At the same time, Xerox Global Services has also assumed responsibility for liaising with 27 different European device manufacturers, consumables suppliers, and maintenance contractors whose equipment is still in use at Sun, with the sole responsibility for resolving device queries from all the company’s employees through its Xerox Global Services support centre in Ballycoolin.

The multi million Euro project is already yielding benefits, according to Matarazzi. “In effect, the initial benefits we’ve seen already are two-fold,” he commented. “Where sheer financial administration is concerned, we have gone from having to process over 3,000 invoices per quarter across Europe for all our document or device-related suppliers, to just one invoice per country per month from Xerox Global Services.”

Matarazzi added that Sun’s employees have reported a dramatic impact on customer service when it comes to device problem resolution across Europe. “We set Xerox Global Services a target of resolving 80 per cent of issues immediately, but Xerox Global Services is actually resolving close to 99.8 per cent, and Sun has already cut its ongoing European print costs by around ten per cent,” he said.

Sun has also seen major ‘human’ benefits, such as improved morale and better staff productivity, Matarazzi added. “We are also receiving regular management reports and, again for the first time, are aware exactly how much we are spending on printing documents and maintaining these devices,” he continued. “We’re now looking forward to the financial cost savings that will come from having an optimised fleet and document processes that will better suit the needs of our personnel.”

Xerox Global Services’ aim was to bring the number of users per device up to 17, representing a significant reduction in inventory and releasing office space. As part of the project Xerox Global Services employees are dedicated to assisting Sun, including on site visits to help resolve problems, provide productivity and document consultancy as well as make recommendations. This is in addition to the Xerox Global Services personnel providing technical support at Ballycoolin.

Due to the success – and the gains achieved in the initial stages - of the European project, Sun is now considering using Xerox Global Services to manage its document services globally. Matarazzi concludes: “One of the key reasons why we picked Xerox Global Services for the job in the first place was because it was the only company we felt could deliver in every country we operate in. We’ve had colleagues from the Asia Pacific region on the project team since day one, they are now very interested in using Xerox Global Services in their region too.

Xerox Global Services: Media Backgrounder

Xerox Global Services is one of three business groups within Xerox Europe, and is the closest of these groups to traditional consultancy, concentrating more on services than products or technologies per se. The other groups are the Production Systems Group (PSG) and Xerox Office Group (XOG).

Xerox is the global leader in document management, offering the widest array of products, services and solutions in the industry. The Xerox Global Services vision is to be the world’s leading innovator in the outsourcing of document activity, and in the transformation of organisations’ document-intensive business processes. Xerox Global Services works with its customers to deliver cost savings and efficiency, by managing and improving their document intensive business processes - everyday processes such as customer communications, billing, training, or records management.

Xerox Global Services was created at the beginning of 2004 via the merger of Xerox Business Services (XBS) and Business Innovation Services (formerly XISS). This enables Xerox to have one services business for Europe with a single, stronger value proposition for its customers. Xerox Global Services is also better able to meet the demands of large and complex deals, to defend Xerox from competitors, and to consolidate all the necessary resources and expertise required to succeed.

Xerox Global Services now operates in 17 European countries. It works closely with its fellow business groups, adapting new technology from Xerox Research Centre Europe (Xerox’s sole European R&D facility) for use ‘in the field’, and sourcing the most appropriate devices and functionality from the XOG and PSG business groups to suit the needs of its customers. Its heritage in documents has made it the market leader in document outsourcing. In addition, Xerox Global Services is one of the best suppliers at delivering against its service level agreements (SLAs) - a statement corroborated by analyst house IDC .

Using these attributes, Xerox Global Services intends to grow its client base in 2004, as well as contributing to the success of XOG and PSG by promoting sales through its outsourcing and consultancy projects. Xerox Global Services will continue to grow in numbers and expertise through the transfer of personnel from customer organisations in large outsourcing contracts.

Ultimately, Xerox Global Services’ “raison d’être” is to help organisations make their document processes more efficient and effective. Even today, many European companies still perceive documents as something made of paper and with four corners (established by the IDC study commissioned by Xerox Global Services in 2003, “Documents – The Life Blood of Your Business?”)

In reality, documents are hard or soft copies including faxes, e-mails, presentations, web pages, and even music or still/moving picture files. The study revealed that most organisations are unaware of the actual costs associated with these various types of documents - only 10 per cent of the 956 organisations interviewed could estimate how much they actually spent on documentation, yet 82 per cent state that documents are ‘crucial to the successful operation of their organisation’. With the average cost of documents to a company running at up to 15 per cent of its revenue, there is a significant market for Xerox Global Services to help organisations identify these costs and help manage and reduce them. As an example, Xerox Global Services can save a €100 million revenue organisation with a document spend of €2.1M over €420,000 in document costs alone. Xerox Global Services counts Lloyds TSB, Siemens, EDS, Microsoft, Sun Microsystems, and Bouygues Telecom amongst its European customers.

Xerox Global Services delivers its services to customers via 180 sales personnel and 250 document consultants based in Europe, and employs approximately 4,000 people in total. All services can be delivered to customers on their own sites, but Xerox Global Services also has facilities around Europe where large projects can be completed away from the customer premises if preferred. Xerox Global Services is split into three lines of business: Document Outsourcing, Xerox Office Services (XOS), and Business Process Services (BPS).

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Xerox Global Services: Media Backgrounder (Business Process Services (BPS) Line of Business)

Xerox Global Services is split into three lines of business: Document Outsourcing; Xerox Office Services (XOS) and Business Process Services (BPS). The mission of Business Process Services is to help customers improve and manage their key document-related processes.

The definition of a document has changed. Research sponsored by Xerox and carried out by IDC in late 2003 shows that the definition of a “document” now encompasses far more than just paper. Increasingly faxes (83 per cent), e-mail (78 per cent), electronic files such as Word or PowerPoint (76 per cent), web pages (48 per cent), or multimedia files (46 per cent) are now considered as “documents.” Documents and the information they contain, in whatever format, play a critical role in how organisations manage their business; for many organisations, documents are the product (e.g. insurance policy), support the product (e.g. user manual) or support critical business processes (e.g. invoices in accounts payable). Hence the effectiveness of how documents are used is intrinsically connected to business success. BPS’s focus is on streamlining and automating clients’ document intensive business processes, based on the ‘new’ definitions of ‘the document.’

This is often achieved by converting paper to digital information, and BPS’s services are designed with this in mind, to resolve a specific customer issue, and deliver a clear return on investment. BPS works towards offering its five services as complete managed, outsourced, or hosted services to the client.

1/5 Imaging & Archive Services
Many businesses have a requirement to manage increasingly large volumes of document archives, particularly in industry sectors such as finance or pharmaceuticals - that have significant legislative compliance requirements. This service enables customers to capture documents as digital images and manage them within a business critical process, helps them to meet legislative and codes of conduct requirements, and improves the longevity and security of documents. It allows organisations to make critical documents widely available to all who need them, as well as to those who need to integrate them into other systems. Imaging and Archive Services also saves organisations significant amounts of money in physical storage, rent, heating, and lighting, as documents are stored electronically rather than physically.

2/5 Finance & Administration Services
Businesses depend on their “back-office” finance functions to optimise cashflow, both in and out of the company, and manage the cash required to deliver bottom line financial performance. For accounts payable, the speed at which invoices are paid and cash flow is managed can reduce the quantity of ‘late’ fees incurred. In accounts receivable, invoice disputes must be resolved rapidly to reduce the time wasted in collecting payment. In the logistics function, they need to effectively track and confirm goods deliveries, speeding up the invoicing process, and reducing the cash collection cycle. This service focuses on providing an outsourced service that supports accounts payable, accounts receivable, and logistics functions within an organisation. It manages the electronic capture, indexing, and storage of documents such as invoices, weigh bills, bills of loading and proof of delivery, to optimise back office performance.

3/5 Client Account Lifecycle Management
Businesses that depend on processing incoming customer documentation such as mortgage, insurance and credit card applications, contracts and correspondence, need to process those documents as quickly as possible in today’s competitive environment. At the same time, these businesses may need to comply with legislation that enforces transparency and accountability such as Sarbanes-Oxley and EU Directives on Corporate Compliance and Industry Regulations. This service enables organisations to process these types of documents digitally, therefore improving compliance, responsiveness to customer demands and reducing the complexity of processing client transactions.

4/5 Localisation Services
Many organisations experience the ongoing issue of having to translate crucial documents into multiple foreign languages quickly and accurately. This service uses high levels of automation to translate and validate up to 40 different languages at once. It provides customers with advice on authoring documents in those cases where technology cannot yet automate local variations, such as colloquialisms.

The service also improves translation accuracy and cost-effectiveness through translation memory and terminology management, ensuring that clients realise substantial cost reduction through content re-use, while increased translator efficiency means delivery times are substantially reduced. Localisation Services is a good example of where technology invented by Xerox Research Centre Europe is applied to a real-life business issue and become part of the expertise offered by Xerox Global Services.

5/5 Product Lifecycle Services
This service is targeted at organisations that have to produce documents or manuals to accompany their product, anything from a mobile phone to a car. It involves improving the organisation’s entire document supply chain by managing the content authoring and creation, localisation and translation, production and distribution of accompanying documents to wherever the product is being sold in multiple markets.

Up to 40 per cent reduction can be achieved in the time it takes to get a product manual from the point of creation to mass-production, including all validation, changes, review, pre-production and printing itself. This service can reduce wasted documentation, remove warehousing costs and make it quick and easy for customers to publish documents in different media on demand i.e. in hard copy, on the internet or via mobile devices.

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