InformationWeek

September 29, 1997

Ikon Office Solutions: A Strategy Worth Copying

kon Office Solutions Inc. is embarking on a strategy to become the "EDS for midsize companies," says Mike Anderer, Ikon's VP of systems integration.

If Ikon's name doesn't ring a bell, there's a good reason: The systems integrator got its start operating a national franchise of copy-machine dealerships.

Last year, Ikon began a buying spree, acquiring more than 100 smaller companies in 12 months. The buys are designed to take the company into IT services, including software programming, network integration, and Internet solution building. About 30 of the acquisitions were systems inte grators, software developers, and training companies.

"It's our strategy to offer high-end services without costly overhead," says Anderer, who joined Ikon with its acquisition last year of the Computer Group, a $50 million systems integrator. "If we can offer the same level of service that an EDS or Andersen Consulting offers, but with much less overhead, we can provide a better return to the customer. We can adapt to local demands and conditions, and keep our best talent out close to the customer-not in an ivory tower."

Although Ikon employs 35,000 people nationwide, only 200 work at headquarters in Valley Forge, Pa. Nationwide, Ikon has about 3,000 people dedicated to IT services, Anderer says. Their ranks should swell further, as Ikon expects to acquire another 100 or so companies over the next 12 months, featuring a similar mix of IT services companies and formerly franchised copy-machine dealers.

The target market is the midtier corporate buyer, which includes companies with annual revenue o f under $450 million, but also departments within the Fortune ranks, says Anderer. "That middle tier is growing faster than the large enterprise segment," he says.

So far, the strategy seems to be working. Over the last 12 months, Ikon's IT services and product sales have grown to about $450 million. While that's still a relatively small share of the company's overall revenue-$4.1 billion in fiscal '96-Ikon expects that to change. By the year 2000, Ikon aims to increase its revenue to $10 billion, with IT services contributing $2 billion to $4 billion.

"If demand for digitized services takes off as much as we expect, the contribution from this revenue stream will be on that higher end," says Anderer.

Network Game
It was the evolution of copier technology to digitized imaging that prompted Ikon to enter the systems-integration market in the first place. "Copier technology has become a network game," says Darl McBride, Ikon's VP of technical services, who joined the company in 1995 afte r holding several executive positions during an eight-year stint at Novell.

Also, Ikon's IT services strategy is not focused entirely on acquisitions. Partnerships also play an important role, says McBride. In August, for example, Ikon disclosed strategic partnerships with Compaq Computer, Hewlett-Packard, IBM, Lotus Development, NEC Computer Systems, and Novell. Under the pacts, Ikon has been authorized to resell these vendors' products and feature them as part of its own network and systems-integration solutions, says McBride. Even before the partnerships were formed, sales of products such as PCs, routers, and software generated about 40% of Ikon's technology division revenue in 1996, says McBride.

Ikon kick-started its acquisition strategy last year with the purchase of "high level" services companies such as Anderer's former employer, Computer Group. Another key acquisition was Integra, a Tucson, Ariz., provider of wireless personal digital assistants and high-end software-development services, offered through an affiliate in India. Also among the acquisitions were 19 US Connect affiliates, a chain of IT services companies. This gain lets Ikon provide an array of mobile, wireless, and handheld and Internet solutions to customers, including Fleet Mortgage.

"Ikon has deeper pockets, more resources, and greater geographical presence than US Connect had," says Marc Robling, manager of engineering at Robert Bosch Corp., a $30 billion maker of automobile parts in Farmington Hills, Mich. "This is good for us because we can expand the services we get from Ikon to cover different regional facilities."

What's next? Anderer and his colleagues are setting their sights overseas. First stop: the United Kingdom.

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