After spending more than a decade perfecting the copying/duplicating process, Xerox introduced their model 914 copier in 1959. Sales of the copier went from $32 million in 1959 to $1.1 billion in 1968. Also, employment went from 900 in 1959 to 24,00 in 1966. By 1970, Xerox held a 95 percent market share of the plain-paper copier market.

From 1976 to 1982 however, Xerox’s share of the US market dropped to 13 percent due to competition from Canon, Minolta, and other companies introducing copiers. Between 1971 and 1978, 77 different plain-paper copiers were introduced in the United States.

After struggling to develop a strategy to address its newly competitive environment, in 1980 Xerox began to aggressively pursue benchmarking and employee involvement. Xerox embraced quality as its basis for competition. The emphasis on participation, benchmarking, and quality seemed to work in the marketplace as well. Between 1984 and 1993, Xerox’s market share in low-end copiers rose from 8 percent to 18 percent, while for mid- and high-end copiers its share rose from 26 percent to 35 percent

Despite improvements in market share, overall corporate performance declined in the early 1990’s. In 1992, Xerox announced a major reorganization. Xerox planned on creating nine divisions along market segment lines and three customer operations along geographic lines. The nine market segment divisions were created to move decision making closer to the customer.

Reorganizing the corporation along customer lines meant redefining and management processes. The company also focused on its core competencies. In 1993, Xerox announced they would get out of the Insurance and Financial Services businesses. Also in 1993, Xerox announced that it would be reducing the size of its workforce by 10,000 or approximately 10 percent over the following two or three years.

Xerox established corporate information management in the early 1970s to be responsible for managing data centers and networks. In 1987, Information Management was moved to a separate division called the general services division. Diffusion of authority in IT decision making had created many IT problems at Xerox. So, in 1993, in order to align Information Management with the direction the company was taking, Patricia Wallington, which was the head of corporate information management, asked for and received direct authority over Information Management worldwide. The Information Management workforce tried to support the new Xerox divisional structure, but it became obvious that the existing information systems infrastructure was inadequate.

To help address the problems with Information Management, an IM 2000 project was started in 1993. The team was formed to identify problems and come up with strategies to address them. Some of the problems were the legacy systems, financial challenges, the high cost of keeping up the legacy systems, and duplication of effort in Information Management across functional areas. The IM 2000 team came up with the following four strategies.

• Reduce/Redirect - IM would seek to reduce overall costs and redirect the savings to buy new applications and hardware.
• Infrastructure Management - IM would move to an industry-standard infrastructure that would be managed centrally.
• Leverage Worldwide IM Resources - IM would create a library of shareable core modules, which could be used locally to create solutions.
• Business Process Driven Solutions - The current portfolio of applications was to be retired or replaced with solutions supporting new Xerox business processes.

Another option was to outsource some the IM work. At first, many IM managers felt that outsourcing was unnecessary and that they could accomplish the needed changes internally. The IM managers quickly realized that they could not handle the changes do to internal problems.

A global outsourcing team was created to examine the benefits and feasibility of outsourcing. Based on first-level feasibility studies, completed in November 1993, the team, having identified numerous potential benefits, decided to pursue an outsourcing arrangement.

Financial benefits from outsourcing included rapid funding of new systems development and economies of scale and scope. Also, the team expected to capitalize on outside vendors extensive IT problem solving knowledge.

The outsourcing process includes choosing a partner, coming up with a contract, and finally implementing the contract. Xerox chose EDS as their partner and in June 1994, Xerox signed a $3.2 billion 10-deal with EDS. The contract was implemented and everything seemed to proceed smoothly, largely because of the sense of partnership.