Xerox Buys ACS: Who’s Next in the Hardware Invasion?

Last year, HP bought professional services giant EDS.  Last week, Perot Systems was bought by Dell.  This week, hardware giant Xerox purchased ACS.

Joe Doherty had this to say about the acquisition: “This deal is game-changing for both companies. It will create a $22 billion global corporation with $17 billion in recurring revenue. It enables ACS to quickly expand its global reach and benefit from Xerox technology and innovation…What makes this deal unique is that our combined companies will provide the information needs of the business process – the data, documents and transactional touch points – along with a tier one, globally capable IT services organization serving both government and private sector clients.”

Hardware giants are shoring up their shaky bottom lines by tapping into the virtually recession-proof professional and government services market.  The only question is: who’s next?

First, the buyers.  Cisco, a major provider of network architecture and servers, might be looking to expand their services business with an acquisition.  And, while software firm Oracle is still working on its acquisition of Sun Microsystems to build its hardware business, their next acquisition could be in IT services.

Next, the service providers.  CSC is an obvious choice: its strong public services sales are practically immune to recessionary pressures and its diverse customer base means it can meet the challenges of a large hardware firm.  In fact, after the acquisition was finalized, CSC’s stock jumped 5% as investors hurried to jump on board the next service provider to be bought out.  But, with annual revenues around $16 billion, CSC would carry a hefty price tag.

Perhaps more affordable would be CGI. Its strong federal services business and corporate culture of transparency make it a possible candidate for acquisition.  And, at $4 billion in annual revenue, they are in the same revenue ballpark as Perot Systems and ACS.

Time will tell who is purchased next, but Xerox’s acquisition of ACS is just the latest example of major hardware firms purchasing high-performing service providers to shore up revenues.

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