With Xerox offering to pay a healthy premium for Affiliated Computer Services just a week after Dell announced its acquisition of Perot Systems, investors and customers alike will have to hope that competition in back-office outsourcing will be healthy for profits as well as service.
But those of Xerox have a reason for skepticism here. The company is anything but new to the computer business, and its history isn't at all reassuring.
The company entered the business way back in the late 1969, when it bought Scientific Data Systems for nearly $1 billion in stock, only to close it down six years later. Xerox also formed Xerox Computer Services in 1970, bought several smaller computer firms in the next few years, and opened the Xerox Palo Alto Research Center (PARC) in California.
About the most noteworthy result of this foray was the mismanaged invention of the personal computer, several of whose features ended up on the Apple Macintosh. Meanwhile, PARC's other innovations were overlooked by its parent, while the latter introduced new products out of its office products division in Dallas that Palo Alto had never even seen.
Of course, back-office outsourcing is a lot different than product development. And Xerox may let ACS do what it does best. But in announcing the deal with Xerox, ACS CEO Lynn Blodgett indicated that it needed Xerox's expertise to grow. "We need a partner with tremendous brand strength and leading innovation."
If Xerox's track record is any guide, Blodgett may have to settle for one out of two.