A lot of Xerox Corp. equipment is made for the company by Singapore electronics manufacturer Flextronics International.
Fuji Xerox, which is Xerox’s partnership with FujiFilm Holdings Corp., also produces equipment as well as technology.
And now HCL Technologies Ltd. of India will handle a sizable piece of research-and-development work previously done by Xerox engineers.
The five-year deal inked a week ago with HCL has Xerox expecting improved R&D and leaves hundreds of affected workers wondering what happens next to their jobs. Under the arrangement, HCL takes over some of Xerox’s technology engineering duties, and 600 Xerox engineers in North America and western Europe — including 250 in the Rochester area — are to become employees of HCL.
For Xerox, the deal is all about expanding its engineering capabilities, said Willem Appelo, president of the company’s Global Business and Services Group, pointing to HCL’s 15,000 engineers.
While Xerox said cost savings weren’t a prime motivator, “offshoring and outsourcing is becoming the watchword of the day” as companies cut costs to compete, said Rudy Hirschheim, a professor at Louisiana State University’s Ourso College of Business.
HCL has offices in 26 nations, posted sales of $2.7 billion in its most recent fiscal year, and employs about 73,000 people globally doing information technology work, business process outsourcing, and software and systems engineering.
Six thousand of those employees are in the United States, and 2,300 of those 6,000 are Americans, said HCL spokeswoman Avena Suri.
HCL said it’s typical for the compensation of employees it absorbs from client companies such as Xerox to remain close to what it had been. Still, experts say the fates of such workers are iffy.
Outsourcing companies, whether overseas like HCL or U.S.-based like Electronic Data Systems, make their money by having cheaper labor costs and greater efficiency than the companies that hire them, said Mary Lacity, University of Missouri professor of information systems.
The workers added from clients typically have a year or so where nothing substantially changes in their jobs, including where they’re based. “That gets the suppliers (in this case HCL) an opportunity to evaluate the workforce,” Lacity said.
“Some of the good talent is going to have a much better career. They’re going to be exposed to all different kinds of clients, get to travel more. The ones who can’t adapt will be gone.”
When asked about the prospects of the 600 Xeroxers, HCL America president Shami Khorana said the company wants to use their abilities first and foremost on work that will benefit Xerox, and then on future contracts with other customers.
“We need them,” Khorana said.
While the notion of outsourcing a company’s manufacturing dates back at least 50 years, it was Eastman Kodak Co.’s deal with IBM Corp. in the 1980s that marked a watershed moment of turning over functions such as IT to an outside party, said Hirschheim, the LSU professor.
“Now even the oil companies are handing over exploration to third-party providers,” he said. “A lot of companies are turning over R&D to China.”
R&D has long been a cornerstone of Xerox’s technology efforts, with the company frequently trumpeting the number of patents it’s awarded each year.
“Innovation is core to Xerox,” Appelo said. “We expect HCL to increase that, to get more innovation out than we have so far.”
Discoveries by HCL engineers belong to its clients, Khorana said. “Our business model has no intention of keeping any patents for ourselves,” he said.
Outsourcing isn’t necessarily a bad word in Rochester. Major locally-based companies such as Paychex Inc. and Sutherland Global Services specialize in handling various functions for other companies.
While parts of business process outsourcing slowed during the global recession, the market is again increasing, Missouri’s Lacity said.
“If you look at Fortune 500 companies, they’ve got about $1.2 trillion of back-office spending … and outsourced $80 billion of that. That will tell you how much growth opportunity we have in there.”
Source:http://www.democratandchronicle.com/article/20110626/BUSINESS/106260314/Xerox-HCL-deal-raises-issues?odyssey=tab|topnews|text|Business
