Key Events Leading to Xerox’s Decision to Outsource IT

How Management Can Evaluate the Necessity of Outsourcing

RE: Case Analysis, “Outsourcing IT at Xerox”

This report analyzes Xerox’s multi-billion dollar decision to outsource IT operations to Electronic Data Systems (EDS.)

Key Events Leading to Xerox’s Decision to Outsource IT

A variety of financial and operational considerations played a key role in Xerox’s decision to outsource. These factors were mainly associated with saving time and money, as well as with improving Xerox’s access to world-class technology while freeing the company to focus on core competencies.

While we agree with Xerox’s decision to outsource IT operations, we feel that if the company were ours, we would have taken more decisive action earlier in the process, when first notified of the monetary and functional problems within the IT operation.

How Management Can Evaluate the Necessity of Outsourcing

Xerox’s decision to outsource IT was based on a variety of financial and operational factors. We believe the decision was correct, though should have come sooner. Xerox will recognize good short and long-term benefits from the arrangement provided they actively watch for and address any obstacles that may arise.

In 1993, Patricia Wallington, head of corporate information management, assumed direct authority over the CIM division in an effort to better align IM operations worldwide. She investigated spending and reported her negative findings at the Xerox Presidents Council. As a direct result, and in an effort to address IM problems and gain control of its mismanaged funds, CIS started the IM 2000 reengineering project in mid-1993.

In 1992, Xerox reorganized its management structure along customer lines instead of geographic lines, forming nine new divisions, in an effort to bring decision-making closer to the customer. During this reorganization it became apparent that the legacy systems in place were too inflexible to provide the divisional presidents with the information necessary to run their divisions. It was apparent that Xerox had a very serious problem with its current IT infrastructure.

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