Kevin Kyser, COO of ACS's Information Technology Outsourcing group: There's great synergy between the two companies in IT outsourcing. That's where the ACS business started, and that's where we've continued to grow in tough economic times. But now we can help companies run their entire business more efficiently--not just IT. That's going to be a great differentiator in the marketplace--thinking through the big issues with our customers that we didn't have the bandwidth or processes for before.

In the world of IT services, Xerox is famous for inking one of the first single-source outsourcing mega-deals. Recently, you shifted to a multi-vendor approach. Now that you've acquired ACS, will the pendulum swing back in the single-source direction?

McDermott: I now have the opportunity to insource [some IT services] and become [ACS's] largest and best customer. Years ago, Xerox made the largest EDS deal of that time. It was a monolithic arrangement, and only a thin veneer of IT talent remained within Xerox. Over time, we rebalanced that and moved key knowledge back into Xerox. As we began to manage more discretely by tower or application area, that led to the notion that we could get partners with more specific expertise at a lower cost by multi-sourcing. Four years ago, we started down that path with considerable success in reducing costs and improving service levels. That required us to put in place vendor management capabilities to make sure problems that needed to be coordinated could be effectively done. That provided a good backdrop to bring in the ACS services and get rid of some of the others.

Will ACS eventually become Xerox's only outsourcing provider?

McDermott: I make Kevin compete for his incremental business here. We have every intent to move more services to ACS and we have already committed ourselves to replacing EDS with ACS. EDS is now part of HP, so that relationship has become a little awkward for us.