Xerox Knocks on the Office Door Again

Information Processing

Office Automation

After 10 Years of Failure, the Company is Bringing a Whole New Batch of Products to the Market

By Geoffrey C. Lewis and Marilyn A. Harris in New York
Business Week

May 13, 1985

Ten years of false starts and marketing gaffes would be enough to discourage most enterprises. Not Xerox: The $8.8 billion company remains determined to make it big in office automation. It has retrained its huge copier sales force, doubled its advertising budget, and even sold its publishing subsidiaries -- all to prepare for a go-for-broke launch of new office computer systems.

To get the message out, Xerox Corp. scheduled a lavish product launch at New York's Vivian Beaumont Theater on Apr. 30. The guests of honor: A new IBM-compatible personal computer, another more powerful computer, a word processor, and two laser printers. Xerox also proudly announced agreements to market AT&T's new computer network -- and hinted that it might soon sell other AT&T products.

Executives insist they've learned from their mistakes. A key lesson is that customers don't want to automate their offices in one fell swoop. A group of personal computers sharing a printer is less intimidating, the company now believes. "Five years ago we had a picture of large-scale office automation systems," says John F. Shoch, vice-president of Xerox's Office Systems Div. "We now have a better idea of what the market wants. We realize that we don't have to supply every piece for every user."

Instead of trying to be all things to all customers with products of its own manufacture -- which rarely sold well -- Xerox will concentrate on what it does best: putting words and images on paper. The strategy is to leverage the company's expertise in laser printers, the most promising products in its $2 billion information systems lineup and the ones most closely related to Xerox's copier technology.

The most important new product is a desktop printer that computers and word processors can share. This machine costs $5,000 -- $2,000 less than a slower, lighter-duty model from Apple Computer Inc. Xerox is also pushing its six-year-old Ethernet communications system or AT&T's lower-priced Starlan network to link its hardware. "The thrust is the creation, distribution, and dissemination of documents," Shoch explains.

TINKERING

Xerox has picked Italy's Olivetti to supply its personal computer. Analysts say the new machine performs better than Xerox-built models -- but that it is still far from perfect. The Olivetti-Xerox machine, for example, mimics International Business Machines Corp.'s nearly four-year-old PC, even though competitors are already producing clones of the newer PC/AT. There are marketing challenges, too: American Telephone & Telegraph Co. has been selling the same Olivetti-built model since last summer with little success.

On the made-at-home front, Xerox is still tinkering with its Star computer. In four years the company hasn't combined marketing, performance, and pricing well enough to make this machine sell. The current strategy for a derivative dubbed Starlet is to slash the price and add an option that runs IBM software.

Some analysts, however, see flaws in the latest Xerox thrust. The company has neglected to include a powerful central computer, essential for coordinating groups of smaller machines. Executives hint, however, that Xerox will cover that base over the next 18 months with a computer purchased outside.

Other experts also question the premise that printers -- no matter how highly regarded -- will create demand for computers. "Xerox is really betting on document production being the central issue, and that is very definitely risky," says Linda O'Keeffe, a Dataquest Inc. analyst. But Apple Computer also takes that tack, and between the two O'Keeffe puts her money on Xerox: "The company has a name. It's definitely a blue blood."

Turning all this into profits is the job of Xerox's 4,000-person sales team. Marketing Vice-President Frank D. Steenburgh admits that the range of equipment options could resemble a "confusing mess." So salespeople will tout solutions for specific jobs -- for instance, one system for in-house print shops, another for design engineers.

Despite the hoopla, Xerox's perennial critics aren't convinced that much has changed. "The general reaction is that this won't make Xerox a significant factor in the office automation market," says Amy D. Wohl, one of 10 consultants who previewed the new products.

By now, Xerox is used to such flak. Moreover, with growth in the copier business slowing, the company has little choice but to keep plugging if it wants to stay in high tech.

GRAPHIC: Picture, NEW PLAYERS FOR TEAM XEROX, Xerox links these new products with Ethernet, its communications network. It will also market a low-cost AT&T computer network.