The Hindu Business Line : Cleaning up the copybook

A BRIBERY scandal rocked Modi Xerox in 2002, at a time when `the document company' was having troubles in several of its locations worldwide. The relationship with the Indian partner, the Modis, had also been on the rocks for some time. That was enough for many analysts to write off the company.

Xerox itself went into silent mode. The company continued to operate normally, but there was little communication, no press interviews and no hype surrounding the company or its products for nearly two years. The time was taken to rework strategy and evolve a clear business model. Having done that, Xerox is now back in the news, proclaiming that it has bounced back.

In the interim, Xerox had internationally transformed itself from an analogue copier company to become a `total IT company.'

It still sells copiers, but the focus is primarily on being a company selling devices that can print, connect to networks, and is capable of producing complicated documents both for the production-publishing world and the office environment.

Back in India, Xerox Modicorp Ltd Director (Marketing), Gennady German, says the company has evolved an aggressive four-pronged strategy to regain its image in the country. "Our troubles are hopefully behind us and Xerox is back with greater clarity of thought and a complete focus on all segments of the market," says German.

The product strategy of the company is rather simple. Xerox will have a product for every need.

Accordingly, the company's product portfolio has been expanded to 90 products, and will cross the 100-mark this year. "The two key changes in the product strategy are focus on digital copiers and the SOHO (small office, home office) segment. In the midst of our troubles, we lost sight of trends and did not concentrate on digital copiers. Also, the high-volume, top-end products were very high on our priority list. Now all that has changed," German says.

The second aspect of the company's strategy involves sprucing up the delivery network. While the direct sales route is the natural choice for high-value products that cost upwards of $1,50,000, the company is cultivating its channel partners to sell medium and small boxes.

Xerox realises that if it has to grow the market, it has to develop its channel partners. To preserve the loyalty of its prime channel partners, the company must ensure their growth and development.

Apart from offering better margins and protecting their territories, Xerox goes a step ahead and arranges training for the workforce of the dealers under the Prime Partner Programme.

German, who realised the importance of retaining the loyalty of channel partners during the company's darkest hours in his home country Russia, believes that it was the partners who came to his rescue. "In times of crisis, you can only depend on your closest allies. The company was in trouble internationally, but in Russia, we saw that our core channel partners did not desert us. It was then that we realised the importance of preserving this asset," he says.

Xerox now boasts of 16 distributors and 500 channel partners, about 150 of whom form the "core dealers." On the ground, the company is growing in almost all the markets. While the Western region takes in more higher-end products, the South offers balanced all-round growth for the company. The other two regions are also doing well with new teams in place.

Xerox has also realised the need for communication. "It is important how we communicate with the different stakeholders of the market — customers, media, the political establishment and others. We have now decided to talk a lot more, shed the impression of a very serious company and make ourselves completely transparent — everyone should know who is making decisions and how," German says.

Speed of reaching the market, both with products and communication is another virtue Xerox has discovered. "Money travels fast and people make decisions faster. In today's markets, nobody can have the luxury of talking to the customer tomorrow," is the company's credo.

With the go-to-market strategy in place, Xerox Modicorp has identified the growth areas. These include expanding into newer markets, colour printers, service, expanding the lower end of the product spectrum and consumables. The traditional business of being a complete document solutions provider is always a focus area. "We want to step into large corporate offices with the proposition that information is to be used smartly. We already have bagged nearly 20 contracts with multinational organisations operating in India to manage their entire document flow. These bigwigs include the likes of Microsoft and Sun," German says.

Xerox Modicorp has identified Sri Lanka, Bangladesh and Nepal as the new territories where it is making its presence felt. With tourism booming in Sri Lanka, the demand for colour printing solutions has been rising steadily.

Another growth area is low-end products that cater to the home or SOHO segment. The products that are in demand from these categories of customers include small printers, multi-functional devices and consumables. The goal that Xerox keeps in mind is that the customer should not have to buy a separate copier, separate printer, and separate monochrome and colour devices. Rather, he should go in for just one multi-function device, which has all functions built in.

Consumables, such as toners, cartridges and paper, form a separate growth area for the company. Xerox has taken up the challenge to produce and sell these products at a value proposition that is more attractive than its smaller unorganised competitors who offer cheap substitutes.

But is it working for Xerox? German believes so, and cites the figures of 2003 to stress the point. In 2003, Xerox Modicorp revenues from equipment sales grew 39 per cent. The high-end colour products grew four-fold. Revenues from equipment sales stood at 41 per cent of the total, while the rest came from other business activities. But despite impressive growth last year, Xerox Modicorp has barely managed to reach $98 million in 2003, which is just two times that of its revenues ($50 million) when it started its India operations in 1997. It hopes to grow 30 per cent in the current year. That kind of growth rate, if achieved, should take Xerox Modicorp to levels its top management has envisioned for it.

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