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Доклад SFN 8.3. -  Возвращение к аутсорсингу / Outsourcing Revisited
 

Доклад SFN 8.3. - Возвращение к аутсорсингу / Outsourcing Revisited

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    Доклад SFN 8.3. -  Возвращение к аутсорсингу / Outsourcing Revisited Доклад SFN 8.3. - Возвращение к аутсорсингу / Outsourcing Revisited Document Transcript

    • Shaping the Future of the Newspaper STRATEGY REPORT ANALYSING STRATEGIC DEVELOPMENTS AND OPPORTUNITIES IN THE PRESS INDUSTRY Volume 8 N°3 MARCH 2009 © WAN 8.3 Outsourcing In a challenging economy, newspaper companies around the world have implemented Revisited outsourcing and offshoring strategies across the value chain in order to reduce costs, realise process efficiencies and focus on core competencies www.futureofthenewspaper.com All the strategy reports are available to WAN members and subscribers at the SFN Web site
    • Shaping the Future of the Newspaper www.wan-press.org A WORLD ASSOCIATION OF NEWSPAPERS PROJECT, SUPPORTED BY WORLD LEADING BUSINESS PARTNERS www.atex.com/ THE LEADING SUPPLIER OF SOLUTIONS AND SERVICES FOR DIGITAL, ADVERTISING, CONTENT MANAGEMENT AND SUBSCRIPTION APPLICATIONS. www.man-roland.com/en/p0001/index.jsp A LEADING COMPANY FOR NEWSPAPER PRODUCTION SYSTEMS www.telenor.com/ THE LEADING NORWEGIAN TELECOMMUNICATIONS, IT AND MEDIA GROUP www.norskeskog.com/ A WORLD LEADING PRODUCER OF NEWSPRINT AND MAGAZINE PAPER, WITH 18 PAPER MILLS AROUND THE WORLD © WORLD ASSOCIATION OF NEWSPAPERS, 2009
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED TABLE OF CONTENTS Executive Summary 5 Introduction 7 1 2009 WAN Outsourcing Survey 9 Accounting Function 11 Administration Function 13 Advertising Function 15 Circulation Function 17 Customer Service Function 19 Editorial Function 21 Human Resources Function 23 IT Function 25 Printing Function 27 2 Why Newspapers Outsource 29 Survey Respondents Discuss Outsourcing Measures 29 ValueNotes Research 32 3 How Newspapers Manage Outsourcing 37 The Miami Herald 37 Firsthand Account: Sub-Editor Prepares to Offshore Job 40 RCS Quotidiani S.p.A. 41 Tips from Newspapers on Outsourcing and Offshoring 41 4 Outsourcers Discuss Their Businesses 43 Advertising, Design and Artwork 43 Tips from Outsourcing and Offshoring Companies 45 Editorial 48 Outsourced Printing 50 Conclusion 53 3
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER 4
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED Executive Summary As economic challenges escalate for developed in 1990 by Gary Hamel and C.K. newspaper companies, many are seeking new Prahalad, starts the strategic process at the ways to reduce costs, create efficiencies and centre of the company’s core strengths, with a earn new revenues. Newspaper companies higher quality, at a lower cost and faster than have found that outsourcing various company their competitors. functions can save an estimated 10 percent to In most categories, the 2009 survey findings 50 percent of in-house costs. If the outsourcing mirrored the results of the 2005 WAN partnership is well-managed, it can produce as Outsourcing Survey, with circulation, IT and good or better results in quality and efficiency printing being the most popular departments to than if the functions remain in-house, outsource either partially or fully in both according to publishers surveyed and surveys. Between 50 and 60 percent of the interviewed for this report. 2009 respondents said they fully or partially outsource these departments. According to the 2009 World Association of Newspapers’ Outsourcing Survey, most The least likely department to be outsourced is publishers focused on two main objectives editorial, with 52.5 percent of the respondents when engaging in outsourcing: cost savings saying they had no plans to outsource editorial and their core competencies, typically defined functions, the same percentage as in 2005. But, as editorial and advertising. A popular theme as a slew of editorial and advertising resounded in the survey and follow-up outsourcing companies emerge both interviews: Newspapers must focus on their domestically and abroad, the world’s core competencies of advertising and editorial newspaper companies are experimenting in in-house, and many of the rest of the company outsourcing functions that do not fall under the functions can be outsourced cost-effectively if all-important categories of gathering news and these situations are managed well. selling advertising. The “Core Competence” business model, These ancillary advertising and editorial 5
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER functions that are ripe for outsourcing and owned subsidiaries, designed to focus on offshoring are typically administratively and excellence in each competency, but with technically focused, such as ad production and separate budgets and with contractual ties to call centres for the ad departments, and page the mother ship. Subsidiaries that serve as makeup, sub-editing, listings compilation and outsourcers are particularly common among online forum moderation in the editorial larger media companies and multi-national departments. newspaper companies. While offshoring is by far less popular than “The primary reason for outsourcing our domestic outsourcing, the editorial and activities was our company strategy with its advertising departments are the most likely focus on the core business. The other reasons functions to be offshored. According to the were cost-related through better utilisation of 2009 survey, respondents said 28.6 percent of the (parent) group resources, but also to enable their editorial outsourcing is offshored, while better focus for the outsourced companies and 27 percent of their advertising outsourcing was development of core competencies, further on offshored. – more transparent structure and internal This report details five of the most prominent relations,” said a respondent from a 100,000 offshoring companies for advertising and circulation newspaper in Eastern Europe, editorial, with production centres in India, the which saves 20 percent of its total costs on Philippines, Australia and the United States. outsourcing six of its key departments to These expanding businesses, many of which companies owned by its parent company didn’t exist in 2005, may be part of the reason within its country’s borders. for the uptick in outsourcing and offshoring in Sound advice from both outsourcing advertising and editorial departments. companies and the publishers that hire them is Respondents who had no plans to outsource published in this report. Among the many tips advertising functions fell from 47 percent to are: 42.4 percent from 2005 to 2009. • Create a thorough analysis of each Compared with the 2005 outsourcing survey, department’s process and identify which printing and IT continue to be among the most functions would be appropriate to outsource. outsourced departments in responding newspaper companies, and growing. In 2005, • New roles must be created when adding 52 percent of the respondents partially or fully outsourced functions to any company, outsourced IT, or were planning to do so including in-house project manager. within two years, compared with 64.5 percent • Check references of the vendor, and in 2009. Regarding printing, those respondents thoroughly review a vendor's progress in the who either partially or fully outsourced first months of the contract. printing rose from 52 percent to 56 percent • Make sure the vendor offers business from 2005 to 2009. continuity. Do they have data backup? Will A variety of case studies are featured in the they still be able to operate and provide the report, including the outsourcing practices of service if a problem develops? the Miami Herald in the United States (editorial), RCS Quotidiani S.p.A. in Italy • Visit the facility. “You can tell the minute (prepress, IT and printing) and News you walk in what you're going to get.” International’s Newsprinters plant in the • Understand the company's finances. Find out United Kingdom (printing), as well as a who owns the company, and whether they are variety of outsourcing anecdotes from media sustainable. companies that did not wish to be identified. • Top management must buy into the Among the objectives for outsourcing include outsourcing concept, and support those who the important goals to improve quality, are carrying out the outsourcing strategy. efficiency, speed and know-how in the company. • There must be clear benchmarks and a broad agreement on how the project will scale up. Respondents report an interesting outsourcing theme: the domestic outsourcing of key departments within the company to wholly- 6
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED Introduction Newspaper companies around the world are Why Outsource? facing a preternatural challenge: audiences are expanding, but revenues are contracting. As As the road to outsourcing becomes more readers migrated to the Internet and ad travelled, newspaper companies are finding revenues dwindled along with a sickly global that not only does outsourcing help them economy, newspapers increasingly sought new achieve savings and limit expenses, it also ways to make their budgets stretch, all while allows for greater flexibility to experiment maintaining the quality levels in their content. with new revenue streams in today's dynamic At first, many newspaper executives and their environment. But most importantly, staff felt outsourcing was a betrayal of their outsourcing done right allows them to focus on own business, wanting to keep all functions in- and strengthen core competencies. house. But as times got tougher, the industry “Look at what makes you unique, what brings reached a tipping point, and the road to value, and outsource the rest,” said Robert outsourcing began. Berkeley, CEO of offshoring company Express KCS. Today, although outsourcing is nowhere near a Respondents to the 2009 World Association of point of saturation, it is in current or future Newspapers Outsourcing Survey said the business plans of most newspapers. ability to focus more on their core business ValueNotes Research, for example, estimates was the main reason to outsource non-core the current opportunity to provide offshore functions. services to the newspaper industry in the United Kingdom and United States alone is Common functions or departments to about US$3.5 billion. Offshore vendor outsource include accounting, administration, revenues in India are currently valued at $35 circulation, customer service, IT and printing, million – just 1 percent of the total the survey found, while those less likely to be opportunity. outsourced were advertising and editorial. 7
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER “The key reporters and editors that create not a silver bullet. One European newspaper content are exclusive and unique to us, so we executive pointed out that although had to identify these areas where we thought outsourcing creates opportunity to gain more we could achieve some savings that didn't control, reduce costs and reshape departments, impact that more sophisticated news it also comes with new challenges to be met. gathering,” said Rick Hirsch, multimedia In-house, existing employees must work with editor of the Miami Herald, which has four the outsourcer as if the work was still internal. ongoing projects with India-based Mindworks “This is still your business and you are still Global Media Services. responsible,” the executive said, whether that “I think in the environment we're in, you really work is done in-house, in another city or need to check out what possible alternatives around the world. are. Again, the goal is to make sure we can do Several respondents to WAN's survey said they investigative reporting and cover local news, learned early on how important it is to define so if there are experiments you can do to tasks in outsourcers' contracts, as hiring bolster those resources and save costs someone outside the company makes it elsewhere, we want to try them.” necessary to clearly define the scope of services, yearly outlay and cost controls in the Cutting Costs contract. When an industry must reduce its operating When it comes to offshoring, one of the most costs, it becomes ripe for outsourcing. common challenges is “bridging the cultural Currently, the newspaper industry in many divide – a key factor for the newspaper countries is at a point in which “everyone industry that thrives on its ability to connect climbs on the band wagon,” said Ken with the masses,” according to ValueNotes. Swanson, CEO of offshoring company Affinity Express. “In the last two years (newspaper This means that while functions such as ad outsourcing) went from experimentation, and imaging, content management and pagination they kind of had a choice, to 'we have no have high offshore potential, functions such as choice. We have to do this, and do it right ad ideation, copy editing and copy writing away. Forget experimentation, it's part of our have low potential for offshoring success, the strategy.'” report states. Functions that go outside learned skill sets, such as design or digitisation, and To understand how costs might be cut through venture into areas that require knowledge and outsourcing or offshoring a function, Swanson understanding of local culture are more advises clients think of cost in three ways: difficult, as they cannot be taught. 1. Direct costs: Everything associated with that function. Achieving Long-Term Success 2. Indirect costs: The building, equipment, utilities, human resources, etc. The impetus to outsource is nearly always 3. Activity: Labour, time and resources related financial, but along the way, outsourcing can to the function. For example, managers needed lead to efficiencies in other areas and position to oversee that department, time it takes to newspapers to better compete in an plan that function in a meeting, etc. increasingly crowded information marketplace. “For a typical newspaper publishing operation, the direct costs form approximately 81 percent “Newspapers are beginning to see there is a of the total costs. Amongst the direct cost trade-off, and they need to protect their heads, production constitutes 34 percent of the investments and refocus on creating unique key cost components,” ValueNotes Research and compelling content,” said Tony Joseph, states in ch. 2. CEO and co-founder of offshoring company Mindworks Global Media Services. “We believe all (cost-cutting) solutions, in some Lessons Learned places have diminished newspapers, in a time Newspapers incorporating outsourcing into when the core should be strengthened – and their business plans are finding that that core is compelling and unique local outsourcing is a piece of the strategy puzzle, content.” 8
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED 1. 2009 WAN Outsourcing Survey The World Association of Newspapers conducted an online survey from November Survey Responses by Region 2008 to February 2009, aimed at Total responses: 59 understanding the outsourcing and offshoring Latin efforts in different functions of newspaper America North 10.2% publishing companies around the world, America including: 23.7% 6 14 • Levels of outsourcing • Performance measurement post outsourcing • Decision making for outsourcing or not outsourcing Africa 3 5.1% 23 Europe Among the 59 respondents who completed 39.0% the survey, 39 percent are from Europe, 23 11 percent are from North America and 18 percent are from the Asia Pacific region. Asia 2 Another 10 percent came from Latin 18.6% Australasia America, while only about 5 percent and less 3.4% than 3.5 percent are from Africa and Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 Australasia, respectively. According to the survey, IT, printing and partially or fully. The lowest levels of circulation are the functions with the highest outsourcing went to accounting and editorial outsourcing levels, with more than half of the functions, with more than 50 percent of the companies outsourcing those functions responding companies not outsourcing them. 9
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER Outsourcing Level Fully Partially Will be outsourced Will be outsourced in the No plans Don't know/NA outsourced outsourced within next two years future; but no timeline yet Accounting 5.08 20.34 6.78 8.47 54.24 5.08 Administration 5.08 44.07 3.39 3.39 40.68 3.39 Advertising 3.39 38.98 1.69 8.47 42.37 5.08 Circulation 8.47 45.76 5.08 5.08 27.12 8.47 8.47 Customer service 6.78 27.12 6.78 5.08 47.46 6.78 Editorial 35.59 1.69 5.08 52.54 5.08 HR 3.39 32.20 8.47 49.15 6.78 IT 5.08 55.93 3.39 11.86 20.34 3.39 Printing 25.42 30.51 1.69 6.78 32.20 3.39 % 0 10 20 30 40 50 60 70 80 90 100 Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 The most satisfactory post-outsourcing The majority of companies still chose not to performance measurement went to editorial – offshore across functions. However, more than half of the companies said the companies named advertising, circulation, quality and efficiency of outsourced editorial customer service, editorial and IT as work has improved. More than 50 percent said functions they are more likely to offshore – efficiency has improved on administration, at least two out of 10 said they have advertising and printing functions after offshored those functions either fully or outsourcing. partially. However, less than one-fourth said the quality of circulation and customer service has improved after outsourcing, according to the survey. Percentage of Companies with Improved Performance after Outsourcing 39.10 Accounting Quality 47.80 Efficiency 40.00 Administration 53.30 40.00 Advertising 53.30 21.60 Circulation 40.50 23.80 Customer service 47.60 52.20 Editorial 60.90 33.30 HR 42.90 IT 35.10 43.20 37.10 Printing 51.40 % 0 10 20 30 40 50 60 70 Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 10
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED Offshore Outsourcing Level by Function Yes, totally offshore Yes, partially offshore No Don’t know/NA Accounting 3.60 7.10 78.60 10.70 Administration 11.80 79.40 8.80 Advertising 2.70 27.00 67.60 2.70 Circulation 2.30 18.60 72.10 7.00 Customer service 10.00 10.00 70.00 10.00 Editorial 3.60 28.60 64.30 3.60 HR 11.50 80.80 7.70 IT 21.30 68.10 10.60 Printing 10.00 87.50 2.50 % 0 20 40 60 80 100 Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 Accounting Function OUTSOURCING LEVEL Of all the respondents, more than half said To break down by region, the survey shows at they have not and do not plan to outsource least half the respondents across all regions accounting work, while more than 20 do not outsource accounting. In Asia, more percent have already partially outsourced than 35 percent partially outsource the accounting. accounting function. Outsourcing Level: Accounting Function by Region Africa Asia Australasia Europe Latin America North America Fully outsourced count 0 0 0 3 0 0 % of all companies in the same region 0% 0% 0% 13% 0% 0% Partially outsourced count 0 4 0 5 1 2 % of all companies in the same region 0% 36% 0% 22% 17% 14% Will be outsourced within next two years count 0 0 1 1 0 2 % of all companies in the same region 0% 0% 50% 4% 0% 14% Will be outsourced in the future; but no timeline yet count 1 0 0 2 1 1 % of all companies in the same region 33% 0% 0% 9% 17% 7% No plans count 2 6 1 12 4 7 % of all companies in the same region 67% 55% 50% 52% 67% 50% Don't know/NA count 0 1 0 0 0 2 % of all companies in the same region 0% 9% 0% 0% 0% 14% Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 11
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER FACTORS LEADING TO OUTSOURCING Outsourcing Level: The most popular accounting functions Accounting Function outsourced by the responding companies include Don't know/NA recording, classifying and summarising financial Fully 5.08% outsourced information, interpreting the financial results and 5.08% invoicing and receipting. Cost savings was the 3 3 Partially main factor in the decision making process on outsourced 20.34% whether to outsource accounting, followed by being able to focus on core competency. Lack 12 of in-house expertise and sharing risks are No considered less important factors, according to plans 32 54.24% the WAN outsourcing survey. 4 Will be outsourced within next Most Important Reasons 5 two years for Outsourcing Will be 6.78% the Accounting Function outsourced in the future; (5-point scale, 1 means least important, but no timeline yet and 5 means most important) 8.47% Source: WAN Outsourcing Survey 2009 Sharing Risks 1.79 © World Association of Newspapers 2008-2009 Lack of In-House 2.48 Expertise Quality POST-OUTSOURCING PERFORMANCE Improvement 2.96 MEASUREMENT Focus on Core 3.50 Competency Among the companies that have partially or Cost Savings 4.07 fully outsourced the accounting function, more 0 1 2 3 4 5 than 55 percent said the performance has Source: WAN Outsourcing Survey 2009 remained the same in terms of quality, while © World Association of Newspapers 2008-2009 nearly 40 percent said it has improved after outsourcing. Four percent said it has deteriorated. OFFSHORE VS. ONSHORE/DOMESTIC OUTSOURCING In terms of efficiency, 47.8 percent of Nearly four out of five companies that respondents said performance has remained outsourced accounting did so domestically. the same or improved. Only 7 percent partially offshored the function, while another 3 percent did so completely offshore. After outsourcing, has the performance of the accounting function in your Is the outsourcing of the company improved, deteriorated, accounting function offshore? Yes, or remained the same totally Don’t know/ in terms of quality and efficiency? offshore NA 3.60% 10.70% % Yes, 60 Quality partially Efficiency offshore 56.5 50 7.10% 47.8 47.8 40 39.1 30 20 10 No 0 4.3 0.0 0.0 4.3 78.60% Deteriorated Remained Improved N/A the same Source: WAN Outsourcing Survey 2009 Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 © World Association of Newspapers 2008-2009 12
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED Cheaper labour costs was listed as the biggest Administration Function reason to offshore the function, as opposed to outsourcing it domestically. OUTSOURCING LEVEL DECISION MAKING FOR NOT About 45 percent of respondents partially OUTSOURCING outsourced the administration function at their publications, while another 40 percent did not The companies that decided to not outsource outsource or plan to do so at all. Only about 5 any part of accounting said they made their percent fully outsourced the administration decision based on existing adequate in-house function. expertise. Other top factors include a loss of control, as well as the cost to outsource would be too expensive. Outsourcing Level: Administration Function Don't Most Important Reasons know/NA Fully 3.39% outsourced for Not Outsourcing 5.08% the Accounting Function 2 3 (5-point scale, 1 means least important, and 5 means most important) No plans 40.68% 24 Adequate In-House 4.02 Expertise Loss of Control 3.49 26 Too Expensive 3.14 Partially Political outsourced Sensitivities 2.51 44.07% 2 2 Organisation 2.33 Will be Resistance outsourced Lack of in the future; Will be Outsourcing 2.33 but no outsourced Experience timeline yet within next 3.39% two years 0 1 2 3 4 5 3.39% Source: WAN Outsourcing Survey 2009 Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 © World Association of Newspapers 2008-2009 Outsourcing Level: Administration Function by Region Africa Asia Australasia Europe Latin America North America Fully outsourced count 0 0 0 3 0 0 % of all companies in the same region 0% 0% 0% 13% 0% 0% Partially outsourced count 1 6 0 9 3 7 % of all companies in the same region 33% 55% 0% 39% 50% 50% Will be outsourced within next two years count 0 0 0 2 0 0 % of all companies in the same region 0% 0% 0% 9% 0% 0% Will be outsourced in the future; but no timeline yet count 1 1 0 0 0 0 % of all companies in the same region 33% 9% 0% 0% 0% 0% No plans count 1 3 2 9 3 6 % of all companies in the same region 33% 27% 100% 39% 50% 43% Don't know/NA count 0 1 0 0 0 1 % of all companies in the same region 0% 9% 0% 0% 0% 7% Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 13
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER To break down by region, the survey found that in Europe, Asia, Latin America and Most Important Reasons North America, the outsourcing level of for Outsourcing administrative functions were especially high the Administration Function – at least half of respondents from these (5-point scale, 1 means least important, regions said they partially or even fully and 5 means most important) outsourced the function. Focus on Core Competency 4.24 POST-OUTSOURCING PERFORMANCE MEASUREMENT Cost Savings 4.09 More than half the companies that Quality Improvement 3.56 outsourced administrative work said the Lack of In-House efficiency has been improved after 3.38 Expertise outsourcing, while another 43 percent said it Sharing Risks 2.40 remained the same. In terms of quality, 40 percent said it has improved, while over half 0 1 2 3 4 5 Source: WAN Outsourcing Survey 2009 said it remained the same. © World Association of Newspapers 2008-2009 After outsourcing, OFFSHORE VS. ONSHORE/DOMESTIC has the performance of the OUTSOURCING administration function in your Nearly four out of five of those surveyed said company improved, deteriorated, they chose to outsource administrative or remained the same functions domestically, while 11 percent chose in terms of quality and efficiency? to do so partially offshore. Cheaper labour % 60 Quality costs and lower taxes were the top reasons to Efficiency outsource the administration function offshore. 50 53.3 53.3 40 43.3 40.0 Is the outsourcing of the 30 administration function offshore? 20 Don’t know/NA 8.80% 10 Yes, partially 0 3.3 0 3.3 3.3 offshore Deteriorated Remained Improved N/A 11.80% the same Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 DECISION MAKING FOR OUTSOURCING No 79.40% The administration functions most typically outsourced include maintaining Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 photocopiers, fax machines, and postage meters; maintaining established shipping/receiving procedures; and ordering, DECISION MAKING FOR NOT storing and distributing supplies. OUTSOURCING The most important reasons for publishing When asked why they chose not to outsource companies to outsource the administration the administration function, these companies function is to focus on core competency. said it was because they had adequate in-house Cost savings is also another important factor, expertise, and were afraid the outsourcing according to the WAN Outsourcing Survey. would cause a loss of control. 14
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED Most Important Reasons Outsourcing Level: for Not Outsourcing Advertising Function the Administration Function Don't know/NA Fully (5-point scale, 1 means least important, 5.08% outsourced and 5 means most important) 3.39% 3 2 Adequate In-House 3.88 No Expertise plans Loss of Control 3.23 42.37% 25 23 Too Expensive 2.9 Organisation Resistance 2.63 Political Partially Sensitivities 2.31 outsourced Lack of 38.98% Outsourcing 1.96 5 1 Experience Will be outsourced Will be 0 1 2 3 4 5 in the future; outsourced Source: WAN Outsourcing Survey 2009 but no within next © World Association of Newspapers 2008-2009 timeline yet two years 8.47% 1.69% Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 Advertising Function To break down by region, both of the two responses in Australasia chose to partially OUTSOURCING LEVEL outsource the function, while in North More than 40 percent of the publishing America, nearly 60 percent did so. In Africa, companies surveyed said they have not and do two of the three respondents said they have no not plan to outsource advertising, while plans to outsource advertising, while the third another 39 percent said they have partially said although there are plans to do so in the outsourced that function. future, there is not yet a timeline. Outsourcing Level: Advertising Function by Region Africa Asia Australasia Europe Latin America North America Fully outsourced count 0 0 0 2 0 0 % of all companies in the same region 0% 0% 0% 9% 0% 0% Partially outsourced count 0 3 2 8 2 8 % of all companies in the same region 0% 27% 100% 35% 33% 57% Will be outsourced within next two years count 0 0 0 1 0 0 % of all companies in the same region 0% 0% 0% 4% 0% 0% Will be outsourced in the future; but no timeline yet count 1 2 0 2 0 0 % of all companies in the same region 33% 18% 0% 9% 0% 0% No plans count 2 5 0 9 3 6 % of all companies in the same region 67% 45% 0% 39% 50% 43% Don't know/NA count 0 1 0 1 1 0 % of all companies in the same region 0% 9% 0% 4% 17% 0% Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 15
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER POST-OUTSOURCING PERFORMANCE OFFSHORE VS. ONSHORE/DOMESTIC MEASUREMENT OUTSOURCING More than half of the companies that have Compared to the accounting and outsourced advertising functions said administrative functions, more companies efficiency has been improving, while 40 chose to outsource advertising offshore – percent said the quality has become better. nearly 30 percent partially outsourced it Fifty percent said the quality remained the offshore, while about 3 percent did so same after the outsourcing, while 36.7 percent completely. However, 67 percent of companies said so in terms of efficiency. However, 6.7 said they outsourced the advertising function percent of the companies said both quality and domestically only. efficiency became worse after outsourcing. A majority of the companies choosing to outsource advertising offshore picked India, After outsourcing, due to the cheaper cost of labour there, the has the performance survey found. Other options include Egypt and of the advertising function in your the United Kingdom. company improved, deteriorated, or remained the same in terms of quality and efficiency? Is the outsourcing of the % Quality advertising function offshore? 60 Yes, Don’t Efficiency totally know/ 50 53.3 50.0 offshore NA 2.70% 2.70% 40 40.0 36.7 Yes, partially 30 offshore 27.00% 20 10 6.7 6.7 3.3 3.3 0 Deteriorated Remained Improved N/A the same Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 No 67.60% DECISION MAKING FOR OUTSOURCING Source: WAN Outsourcing Survey 2009 According to the survey, the top reasons © World Association of Newspapers 2008-2009 companies outsource advertising functions are to improve quality, as well as to save on costs. Another important factor is to focus on core competency. Most Important Reasons for Not Outsourcing Most Important Reasons the Advertising Function for Outsourcing (5-point scale, 1 means least important, the Advertising Function and 5 means most important) (5-point scale, 1 means least important, Adequate and 5 means most important) In-House 4.48 Expertise Quality 3.65 Loss of Control 3.74 Improvement Political 2.59 Cost Savings 3.64 Sensitivities Focus on Core Too Expensive 2.45 3.31 Competency Organisation Resistance 2.22 Lack of In-House 2.82 Expertise Lack of Outsourcing 2.10 Sharing Risks 2.26 Experience 0 1 2 3 4 5 0 1 2 3 4 Source: WAN Outsourcing Survey 2009 Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 © World Association of Newspapers 2008-2009 16
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED DECISION MAKING FOR NOT OUTSOURCING Outsourcing Level: Circulation Function Of the companies choosing to not outsource advertising, the top reason is that they have Don't Fully know/NA outsourced adequate in-house expertise. Loss of control is 8.47% 8.47% another concern. 5 5 No plans 16 27.12% Circulation Function OUTSOURCING LEVEL 27 Compared to the accounting, administration, Partially Will be 3 outsourced and advertising functions, more companies outsourced 3 45.76% chose to outsource the circulation function, or in the future; but no Will be plan to do so in the future. More than 8 percent timeline yet outsourced of the responding companies fully outsourced 5.08% within next it, while another 46 percent did so partially. two years 5.08% More than 10 percent said they will do so in Source: WAN Outsourcing Survey 2009 the future, while less than 30 percent said they © World Association of Newspapers 2008-2009 have no plans to do so. To break down by region, Asia and Latin America are the areas with the highest percentage of outsourcing. More than 60 Less than 10 percent in Asia chose not to percent of companies in Asia and Latin outsource. The percentage is much higher in America have outsourced the circulation Australasia, North America, Africa and function fully or partially. Europe, with at least 30 percent saying so. Outsourcing Level: Circulation Function by Region Africa Asia Australasia Europe Latin America North America Fully outsourced count 0 1 0 4 0 0 % of all companies in the same region 0% 9% 0% 17% 0% 0% Partially outsourced count 1 6 1 8 4 7 % of all companies in the same region 33% 55% 50% 35% 67% 50% Will be outsourced within next two years count 0 0 0 1 1 1 % of all companies in the same region 0% 0% 0% 4% 17% 7% Will be outsourced in the future; but no timeline yet count 1 1 0 1 0 0 % of all companies in the same region 33% 9% 0% 4% 0% 0% No plans count 1 1 1 7 1 5 % of all companies in the same region 33% 9% 50% 30% 17% 36% Don't know/NA count 0 2 0 2 0 1 % of all companies in the same region 0% 18% 0% 9% 0% 7% Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 17
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER POST-OUTSOURCING PERFORMANCE function. Focus on core competency and quality MEASUREMENT improvement are also important, they indicated. More companies (40.5 percent) said efficiency has OFFSHORE VS. ONSHORE/DOMESTIC improved after outsourcing, compared to quality OUTSOURCING (21.6 percent). However, nearly 19 percent Among those who outsourced the circulation said both efficiency and quality became worse. function, 72 percent chose not to do so offshore. Meanwhile, 20 percent either partially or fully outsourced it offshore. After outsourcing, has the performance The destinations of offshore outsourcing of the circulation function in your included Saudi Arabia, United Arab Emirates, company improved, deteriorated, Philippines, India, El Salvador and China. or remained the same Cheaper labour costs and being able to penetrate in terms of quality and efficiency? the foreign market more easily are the top two % Quality reasons for outsourcing circulation offshore. 60 Efficiency 50 45.9 40.5 40 Is the outsourcing of the 30 29.7 circulation function offshore? Yes, Don’t 21.6 totally know/ 20 18.9 18.9 offshore NA 13.5 2.30% 7.00% 10 10.8 Yes, 0 partially Deteriorated Remained Improved N/A offshore the same 18.60% Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 DECISION MAKING FOR OUTSOURCING Delivering newspapers to the subscribers, dealers and newsstands were the most No popularly outsourced functions – more than 80 72.10% percent of respondents who have outsourced said they chose to outsource this function. Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 Cost savings is the most important reason companies chose to outsource the circulation Most Important Reasons Most Important Reasons for Not Outsourcing for Outsourcing the Circulation Function the Circulation Function (5-point scale, 1 means least important, and 5 means most important) (5-point scale, 1 means least important, and 5 means most important) Adequate In-House 4.0 Expertise Cost Savings 4.33 Loss of Control 3.5 Focus on Core 3.59 Competency Too Expensive 3.0 Quality 3.39 Political Improvement 2.61 Sensitivities Lack of In-House Organisation 2.39 Expertise 2.69 Resistance Lack of Sharing Risks 2.53 Outsourcing 2.11 Experience 0 1 2 3 4 5 0 1 2 3 4 5 Source: WAN Outsourcing Survey 2009 Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 © World Association of Newspapers 2008-2009 18
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED DECISION MAKING FOR NOT OUTSOURCING has improved, while about 23 percent said customer service has improved in terms of The main reason companies chose to not quality. However, there were still 19 percent outsource circulation is that they have who said the performance, either quality or adequate in-house expertise. Loss of control is efficiency, has deteriorated. another concern. Customer Service Function Outsourcing Level: OUTSOURCING LEVEL Customer Service Function Although about half of the respondents said Don't Fully know/NA outsourced they have no plans to outsource customer 6.78% 6.78% service functions, another 30 percent said they 4 4 have outsourced customer service either fully Partially outsourced or partially. 27.12% The outsourcing level of customer service is 16 relatively low in Asia and Latin America – more than 60 percent of respondents said they have no plans to do so. In Europe and North America, No 28 however, a higher percentage of companies have plans 47.46% chosen to outsource it – more than 40 percent 4 Will be outsourced have done so either fully or partially. 3 within next Will be two years POST-OUTSOURCING PERFORMANCE outsourced 6.78% MEASUREMENT in the future; but no timeline yet 5.08% Nearly 50 percent of companies that have Source: WAN Outsourcing Survey 2009 outsourced customer service said efficiency © World Association of Newspapers 2008-2009 Outsourcing Level: Customer Service Function by Region Africa Asia Australasia Europe Latin America North America Fully outsourced count 0 0 0 2 1 1 % of all companies in the same region 0% 0% 0% 9% 17% 7% Partially outsourced count 1 2 0 8 0 5 % of all companies in the same region 33% 18% 0% 35% 0% 36% Will be outsourced within next two years count 0 0 0 1 1 2 % of all companies in the same region 0% 0% 0% 4% 17% 14% Will be outsourced in the future; but no timeline yet count 0 1 0 2 0 0 % of all companies in the same region 0% 9% 0% 9% 0% 0% No plans count 1 7 2 8 4 6 % of all companies in the same region 33% 64% 100% 35% 67% 43% Don't know/NA count 1 1 0 2 0 0 % of all companies in the same region 33% 9% 0% 9% 0% 0% Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 19
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER OFFSHORE VS. ONSHORE/DOMESTIC After outsourcing, OUTSOURCING has the performance of the Among the respondents who have outsourced customer service function in your customer service, seven out of 10 said they company improved, deteriorated, only did it domestically. Ten percent said they or remained the same completely offshored it, while another 10 in terms of quality and efficiency? percent did so partially. % 60 Quality Efficiency Philippines is the most popular destination for 57.1 sending customer service work offshore, 50 47.6 according to the survey. India is another place 40 respondents mentioned. 30 33.3 Cheaper labour cost is the top reason for companies to outsource customer service 20 23.8 19.0 19.0 offshore, according to the survey. 10 0 Is the outsourcing Deteriorated Remained Improved the same of the customer service Source: WAN Outsourcing Survey 2009 function offshore? © World Association of Newspapers 2008-2009 Yes, Don’t totally know/ offshore NA DECISION MAKING FOR OUTSOURCING 10.00% 10.00% Yes, partially Starting, stopping or suspending delivery of offshore 10.00% the newspaper is the most popular customer service function to outsource, according to the survey, with nearly 85 percent responding that they outsourced it. Web site and billing information/questions is another popular function to outsource – six out of 10 said they have done so. No The most important reason to outsource 70.00% customer service is to cut costs. Focusing on Source: WAN Outsourcing Survey 2009 core competency and improving quality are © World Association of Newspapers 2008-2009 also important. Most Important Reasons for Not Outsourcing Most Important Reasons the Customer Service Function for Outsourcing (5-point scale, 1 means least important, the Customer Service Function and 5 means most important) (5-point scale, 1 means least important, and 5 means most important) Adequate In-House 4.14 Expertise Cost Savings 4.20 Loss of Control 3.78 Focus on Core Too Expensive Competency 3.55 2.92 Quality Organisation 2.09 Improvement 3.31 Resistance Lack of Lack of In-House Outsourcing 2.09 Expertise 2.81 Experience Political 2.05 Sharing Risks 2.54 Sensitivities 0 1 2 3 4 5 0 1 2 3 4 5 Source: WAN Outsourcing Survey 2009 Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 © World Association of Newspapers 2008-2009 20
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED DECISION MAKING FOR NOT OUTSOURCING Outsourcing Level: Editorial Function According to companies that chose to not Don't outsource circulation, the most important know/NA reasons are adequate in-house expertise, as 5.08% well as loss of control. 3 Partially outsourced 35.59% 21 Editorial Function No OUTSOURCING LEVEL plans 31 52.54% Outsourcing levels for editorial functions are Will be 1 outsourced relatively low compared to other functions. 3 within next More than half of the respondents said they two years 1.69% have no plans to let go of editorial work. About Will be outsourced 35 percent said they have partially outsourced in the future; some editorial work, but no respondents have but no timeline yet fully outsourced this work. 5.08% Asia is the region with a high percentage of Source: WAN Outsourcing Survey 2009 editorial functions outsourced – 55 percent © World Association of Newspapers 2008-2009 have done so partially. American respondents, however, have a relatively low percentage – more than 80 percent from Latin America and nearly 65 percent from North America said In Europe, more than half of the respondents they have no plans to do so. said they chose not to do so. Outsourcing Level: Editorial Function by Region Africa Asia Australasia Europe Latin America North America Fully outsourced count 0 0 0 0 0 0 % of all companies in the same region 0% 0% 0% 0% 0% 0% Partially outsourced count 0 6 2 9 1 3 % of all companies in the same region 0% 55% 100% 39% 17% 21% Will be outsourced within next two years count 0 1 0 0 0 0 % of all companies in the same region 0% 9% 0% 0% 0% 0% Will be outsourced in the future; but no timeline yet count 1 0 0 0 0 2 % of all companies in the same region 33% 0% 0% 0% 0% 14% No plans count 2 3 0 12 5 9 % of all companies in the same region 67% 27% 0% 52% 83% 64% Don't know/NA count 0 1 0 2 0 0 % of all companies in the same region 0% 9% 0% 9% 0% 0% Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 21
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER POST-OUTSOURCING PERFORMANCE Design, layout and pagination are also MEASUREMENT outsourced by about six out of 10 companies that chose to outsource editorial. Compared to other functions, post- outsourcing performance measurement of Unlike other functions, quality improvement is editorial is more satisfactory than other the top reason for companies to outsource an functions – more than half said quality has editorial function, while cost savings is the improved, while more than 60 percent said number two reason. efficiency has improved. OFFSHORE VS. ONSHORE/DOMESTIC OUTSOURCING After outsourcing, has the performance Nearly 65 percent said they outsourced of the editorial function in your editorial work domestically only, while nearly 30 percent did so partially offshore, according company improved, deteriorated, to the survey. or remained the same in terms of quality and efficiency? Reasons companies gave as to why they % outsourced editorial work offshore include 70 Quality Efficiency more choice and range and writers with more 60 expertise. 60.9 50 52.2 The destinations for outsourcing offshore are 40 quite diverse – including the United States, Canada, the United Kingdom, Spain, France, 30 34.8 Jordan, India, Egypt and China. 20 21.7 10 8.7 8.7 8.7 4.3 0 Is the outsourcing of the Deteriorated Remained Improved N/A the same editorial function offshore? Source: WAN Outsourcing Survey 2009 Yes, Don’t © World Association of Newspapers 2008-2009 totally know/ offshore NA 3.60% 3.60% DECISION MAKING FOR OUTSOURCING Yes, partially Reporting and writing are the most popular offshore 28.60% functions to be outsourced, with more than 65 percent of the outsourcing companies choosing those areas to be done under another roof. Most Important Reasons No 64.30% for Outsourcing the Editorial Function (5-point scale, 1 means least important, Source: WAN Outsourcing Survey 2009 and 5 means most important) © World Association of Newspapers 2008-2009 Quality 4.00 Improvement Cost Savings 3.70 Focus on Core Competency 3.15 DECISION MAKING FOR NOT OUTSOURCING Lack of In-House 3.00 Expertise According to the companies that chose not to Sharing Risks 2.24 outsource editorial functions, the most important reasons are that they have adequate 0 1 2 3 4 5 Source: WAN Outsourcing Survey 2009 in-house expertise, and do not want to lose © World Association of Newspapers 2008-2009 control over this aspect of their businesses. 22
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED Most Important Reasons Outsourcing Level: for Not Outsourcing HR Function the Editorial Function Don't Fully (5-point scale, 1 means least important, know/NA outsourced and 5 means most important) 6.78% 3.39% 4 2 Adequate Partially In-House 4.77 outsourced Expertise 32.20% Loss of Control 4.17 19 Political 3.24 Sensitivities No Organisation plans 2.87 49.15% Resistance 29 Lack of Outsourcing 2.59 Experience 5 Too Expensive 2.48 Will be outsourced 0 1 2 3 4 5 in the future; Source: WAN Outsourcing Survey 2009 but no timeline yet © World Association of Newspapers 2008-2009 8.47% Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 Human Resources Function OUTSOURCING LEVEL The outsourcing level in Latin America is About half of the companies said they have no relatively high – half of the companies chose plans to outsource human resources. More to outsource HR partially. However, the than 30 percent, however, chose to outsource situation in Europe is quite different – nearly HR partially, while less than 5 percent chose to six out of 10 respondents have no plan to fully outsource it. outsource it. Outsourcing Level: HR Function by Region Africa Asia Australasia Europe Latin America North America Fully outsourced count 0 0 0 2 0 0 % of all companies in the same region 0% 0% 0% 9% 0% 0% Partially outsourced count 0 4 0 7 3 5 % of all companies in the same region 0% 36% 0% 30% 50% 36% Will be outsourced within next two years count 0 0 0 0 0 0 % of all companies in the same region 0% 0% 0% 0% 0% 0% Will be outsourced in the future; but no timeline yet count 1 1 0 1 1 1 % of all companies in the same region 33% 9% 0% 4% 17% 7% No plans count 2 4 2 13 2 6 % of all companies in the same region 67% 36% 100% 57% 33% 43% Don't know/NA count 0 2 0 0 0 2 % of all companies in the same region 0% 18% 0% 0% 0% 14% Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 23
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER POST-OUTSOURCING PERFORMANCE 55 percent of the companies said they have MEASUREMENT done so. More than half of the respondents who chose Cost savings is still the top reason for to outsource HR said performance in terms of companies to outsource HR, followed by quality and efficiency remained the same after quality improvement. Focus on core the outsourcing. Thirty-three percent said competency, as well as lack of in-house quality has improved, while 43 percent said expertise, are also top reasons. efficiency has improved. OFFSHORE VS. ONSHORE/DOMESTIC OUTSOURCING After outsourcing, More than 80 percent of the companies that has the performance outsourced HR functions only did so of the HR function in your domestically, while another 11.5 percent chose company improved, deteriorated, to outsource them partially offshore. None of or remained the same the companies chose to do so fully offshore. in terms of quality and efficiency? % 60 Quality Efficiency 57.1 Is the outsourcing 50 52.4 of the HR function offshore? 40 42.9 Don’t know/ NA 30 33.3 7.70% Yes, partially 20 offshore 11.50% 10 4.8 0 4.8 4.8 0 Deteriorated Remained Improved N/A the same Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 No DECISION MAKING FOR OUTSOURCING 80.80% Recruiting matters, including recruiting and Source: WAN Outsourcing Survey 2009 staffing logistics, and employee services and © World Association of Newspapers 2008-2009 counseling, are the most popular functions to outsource, according to the survey. More than Most Important Reasons for Not Outsourcing Most Important Reasons the HR Function (5-point scale, 1 means least important, for Outsourcing the HR Function and 5 means most important) (5-point scale, 1 means least important, and 5 means most important) Adequate In-House 4.03 Expertise Cost Savings 3.88 Loss of Control 3.43 Quality Improvement 3.83 Too Expensive 3.04 Focus on Core Political 2.54 Competency 3.75 Sensitivities Lack of In-House Organisation 2.52 Expertise 3.73 Resistance Lack of Sharing Risks 2.68 Outsourcing 2.39 Experience 0 1 2 3 4 5 0 1 2 3 4 5 Source: WAN Outsourcing Survey 2009 Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 © World Association of Newspapers 2008-2009 24
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED DECISION MAKING FOR NOT OUTSOURCING Outsourcing Level: IT Function Companies that chose to not outsource HR Fully functions said adequate in-house expertise is Don't outsourced the top reason for their decision, followed by know/NA 5.08% 3.39% loss of control. 2 3 Partially outsourced No 55.93% plans 12 20.34% 33 IT Function Will be 7 outsourced OUTSOURCING LEVEL in the future; 2 but no IT is the most popular function to outsource, timeline yet Will be according to the survey. More than 60 percent 11.86% outsourced within next of respondents said they outsourced IT either two years fully or partially. Only two out of 10 said they 3.39% Source: WAN Outsourcing Survey 2009 have no plans to do so. © World Association of Newspapers 2008-2009 The percentages of companies outsourcing IT functions are high in Europe, Asia and North America. In Europe, seven out of 10 respondents said they outsourced IT either In Latin America, however, the outsourcing fully or partially. In Asia, nearly 65 percent trend for IT is not yet popular – half of the outsourced it partially, while in North companies said they currently have no plans to America, half said they did so. do so. Outsourcing Level: IT Function by Region Africa Asia Australasia Europe Latin America North America Fully outsourced count 0 0 0 3 0 0 % of all companies in the same region 0% 0% 0% 13% 0% 0% Partially outsourced count 2 7 2 13 2 7 % of all companies in the same region 67% 64% 100% 57% 33% 50% Will be outsourced within next two years count 0 0 0 1 1 0 % of all companies in the same region 0% 0% 0% 4% 17% 0% Will be outsourced in the future; but no timeline yet count 1 1 0 2 0 3 % of all companies in the same region 33% 9% 0% 9% 0% 21% No plans count 0 2 0 4 3 3 % of all companies in the same region 0% 18% 0% 17% 50% 21% Don't know/NA count 0 1 0 0 0 1 % of all companies in the same region 0% 9% 0% 0% 0% 7% Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 25
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER POST-OUTSOURCING PERFORMANCE Cost savings, being able to focus more on core MEASUREMENT competency, quality improvement and lack of in-house expertise are the top reasons More than 40 percent of the companies that companies chose to outsource the function. outsource IT said efficiency has improved, while 35 percent said quality has improved. OFFSHORE VS. ONSHORE/DOMESTIC However, more than 15 percent said OUTSOURCING performance actually has deteriorated in terms of quality and efficiency after the outsourcing. Among those who decide to outsource their IT functions, nearly 70 percent said they did so domestically, while more than 20 percent After outsourcing, chose to partially outsource it offshore. has the performance of the IT function in your India is the most popular destination to company improved, deteriorated, offshore IT functions. Other places mentioned or remained the same include Norway, Sweden, Costa Rica and the in terms of quality and efficiency? United Kingdom. % 50 Quality Efficiency Is the outsourcing 40 43,2 43,2 of the IT function offshore? 35,1 30 32,4 Don’t know/ NA 10.60% Yes, partially 20 offshore 18,9 21.30% 16,2 10 5,4 5,4 0 Deteriorated Remained Improved N/A the same Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 DECISION MAKING FOR OUTSOURCING No 68.10% The most popular IT functions outsourced include networking and engineering computer Source: WAN Outsourcing Survey 2009 hardware, database and software design, © World Association of Newspapers 2008-2009 solving computer-related technical issues, and management and administration of company computer systems. Most Important Reasons for Not Outsourcing Most Important Reasons the IT Function (5-point scale, 1 means least important, for Outsourcing the IT Function and 5 means most important) (5-point scale, 1 means least important, and 5 means most important) Adequate In-House 4.71 Expertise Cost Savings 3.80 Loss of Control 3.08 Focus on Core Lack of Competency 3.70 Outsourcing 2.62 Quality Experience Improvement 3.67 Political 2.54 Sensitivities Lack of In-House Expertise 3.61 Organisation Resistance 2.54 Sharing Risks 2.59 Too Expensive 2.38 0 1 2 3 4 5 0 1 2 3 4 5 Source: WAN Outsourcing Survey 2009 Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 © World Association of Newspapers 2008-2009 26
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED Cheaper labour costs stand out as the most POST-OUTSOURCING PERFORMANCE important reason for companies to outsource MEASUREMENT IT offshore. According to the survey, more than half of the companies that chose to outsource printing said DECISION MAKING FOR NOT efficiency has improved, while nearly 40 percent OUTSOURCING said quality has improved. However, about 10 For those choosing to not outsource IT percent said performance has deteriorated. functions, the biggest reasons include keeping adequate in-house expertise, as well as being afraid of losing control. Outsourcing Level: Printing Function Don't know/NA 3.39% Fully 2 outsourced Printing Function 25.42% 15 OUTSOURCING LEVEL No plans 32.20% 19 Printing is another popular function publishing companies outsource. According to the survey, one-quarter said they outsourced it fully, while another 30 percent did so partially. Only about three out of 10 chose not to outsource printing. Will be 4 18 outsourced 1 In Asia and Europe, companies are more likely in the future; Partially but no Will be outsourced to outsource the printing function – more than timeline yet outsourced 30.51% 50 percent did so either fully or partially. 6.78% within next two years 1.69% In America, however, about half of the Source: WAN Outsourcing Survey 2009 companies chose not to do so. © World Association of Newspapers 2008-2009 Outsourcing Level: Printing Function by Region Africa Asia Australasia Europe Latin America North America Fully outsourced count 1 1 1 10 1 1 % of all companies in the same region 33% 9% 50% 43% 17% 7% Partially outsourced count 1 5 1 6 1 4 % of all companies in the same region 33% 45% 50% 26% 17% 29% Will be outsourced within next two years count 0 1 0 0 0 0 % of all companies in the same region 0% 9% 0% 0% 0% 0% Will be outsourced in the future; but no timeline yet count 1 0 0 0 1 2 % of all companies in the same region 33% 0% 0% 0% 17% 14% No plans count 0 3 0 6 3 7 % of all companies in the same region 0% 27% 0% 26% 50% 50% Don't know/NA count 0 1 0 1 0 0 % of all companies in the same region 0% 9% 0% 4% 0% 0% Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 27
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER After outsourcing, Most Important Reasons has the performance for Outsourcing of the printing function in your the Printing Function company improved, deteriorated, (5-point scale, 1 means least important, or remained the same and 5 means most important) in terms of quality and efficiency? Cost Savings 4.16 % 60 Quality Efficiency Focus on Core 3.72 Competency 50 51.4 Quality 3.50 Improvement 40 40.0 Lack of In-House 37.1 3.12 30 Expertise 25.7 Sharing Risks 3.00 20 10 14.3 14.3 0 1 2 3 4 5 8.6 8.6 Source: WAN Outsourcing Survey 2009 0 © World Association of Newspapers 2008-2009 Deteriorated Remained Improved N/A the same Source: WAN Outsourcing Survey 2009 © World Association of Newspapers 2008-2009 Is the outsourcing of the printing function offshore? DECISION MAKING FOR OUTSOURCING Don’t know/ Yes, NA partially 2.50% offshore Printing and preparing printed products for 10.00% distribution is the most popular function companies outsource – with more than 95 percent of the outsourcing companies doing so. Another popular task is controlling, monitoring and maintaining printing machine and components – with more than seven out of 10 doing so, according to the survey. The most important reason to outsource No printing functions is to cut costs, followed by 87.50% focusing on core competencies. Source: WAN Outsourcing Survey 2009 OFFSHORE VS. ONSHORE/DOMESTIC © World Association of Newspapers 2008-2009 OUTSOURCING A majority of the companies (87.5 percent) Most Important Reasons that chose to outsource only did so for Not Outsourcing domestically, while one out of 10 chose to the Printing Function outsource it partially offshore. (5-point scale, 1 means least important, and 5 means most important) Popular destinations include India and China. Countries in Europe and America were also Adequate In-House 4.61 mentioned, such as the United Kingdom, Expertise Spain, France and Canada. Loss of Control 2.94 Cheaper labour costs are the main reason they Too Expensive 2.56 chose to offshore. Lack of Outsourcing 2.07 DECISION MAKING FOR NOT Experience OUTSOURCING Political Sensitivities 2.00 The most important reason companies chose Organisation 2.00 Resistance not to outsource the printing function is they 0 1 2 3 4 5 have adequate in-house expertise, according to Source: WAN Outsourcing Survey 2009 the survey. © World Association of Newspapers 2008-2009 28
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED 2. Why Newspapers Outsource Newspaper companies worldwide are opening behind their outsourcing practices. The doors to enterprise enhancements by following article recaps these respondents’ outsourcing a variety of departmental views on outsourcing, which were surprisingly functions, including administration, similar in nature, despite the respondents’ accounting, printing, information technology, different countries, continents and company human resources, and even advertising and sizes. editorial. For many companies, outsourcing Over and over, respondents cited focus on the represents a significant cost savings of 10, 20 core business as the main reason for or even 50 percent of operational costs. outsourcing non-core functions, with the But cost savings are not the only reason happy byproduct of saving sizable portions of newspaper companies are outsourcing their company’s operational costs. Outsourced functions of their companies. Outsourcing also departments frequently do not require payout allows for a greater focus on the company’s of governmental benefits or health care and core competencies of editorial excellence and pension plans, for example. And, outsourced advertising sales. Outsourcing promotes more departments are frequently seen as more focused and efficient departments, with focused and efficient than in-house operated controlled and therefore more predictable costs. departments, providing that the newspaper company can find the experience and skills necessary to complete the prescribed tasks. Survey Respondents Discuss “Outsourcing contributes to more efficient use Outsourcing Measures of resources, more transparent structure and Top executives at newspaper companies from internal relations,” one responding publisher around the world who took WAN’s 2009 said. Outsourcing Survey also agreed to be Perhaps the most important lesson learned for interviewed about the reasons and strategies newspaper companies entering into the 29
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER outsourcing arena is to clearly define the tasks hire the office space needed, borrow the in the outsourcers’ contracts. Hiring money and buy the equipment – but that would outsourcers requires creating contracts that give little flexibility and would have clearly define the scope of services and annual necessitated a much faster growth path than I outlay, and thereby drive cost controls, several was happy with in order to get the turnover to respondents reported. This is particularly pay for it all... Other people outside the important when departments are only partially company have the skills and equipment needed outsourced, and departmental functions need for many of the newspaper's functions, and to be contractually divided between their services can be brought in when required. outsourcers and company employees. By using them regularly it is relatively easy to Tertiary objectives for outsourcing include the ask them for a little more work at busy times important goals to improve quality, efficiency, and a little less when things are quieter. speed and know-how in the company. Accounting is a function common to almost all types of business, and it is a bit silly to use in- Respondents report an interesting outsourcing house staff with specialist newspaper theme: the domestic outsourcing of key knowledge to undertake a task which almost departments within the company to wholly- any other people could do,” said the publisher owned subsidiaries, designed to focus on of an Australasian publication. excellence in each competency, but with separate budgets and with contractual ties to QUALITY the mother ship. Subsidiaries that serve as Quality is a driving factor for all respondents, outsourcers are particularly common among regardless of location or size of publication. larger media companies and multi-national newspaper companies. Long term, the outsourcing strategy has helped us “improve in quality because of each Typical departments to outsource include non- company’s better focus. Then, it was the core departments of accounting, IT, printing, development of core competencies of each customer service, administration and business segment, better expertise, enhanced circulation. Less likely departments to innovation,” said a publisher from Scandinavia. outsource tend to be editorial and advertising, mostly because they are seen as core “We hope to gain focus on our core business of competencies of those companies, with the sales, editorial and business development management insisting upon complete control within media,” said the Scandinavian executive. over the editorial and advertising products. “We also want to sell services to other customers, such as printing, IT or financial “The primary reason for outsourcing our services. Through outsourcing, we also have activities was our company strategy with its the advantage of considerably lower costs.” focus on the core business. The other reasons were cost-related through better utilisation of The work being done through outsourcing has the (parent) Group resources, but also to improved compared to the quality of that work enable better focus for the outsourced when it was done in-house. This is simply due companies and development of core to the fact that managers of the respective competencies, further on – more transparent companies had to focus on the (at the first structure and internal relations,” said a phase) top quality of the processes transferred respondent from a 100,000 circulation and then (phase two) had to develop (based newspaper in Eastern Europe, which saves 20 upon long term contracts with us) market entry percent of its total costs on outsourcing six of strategy that had clearly defined target of its key departments to companies owned by its further cost reduction for the services provided parent company within its country’s borders. to us, he said. Two small newspaper companies, one in All respondents report that the quality of work Australasia and another in southern Europe, is either the same or better among outsourcers reported that outsourcing non-core functions than when the non-core functions were done makes it possible to survive, and keep a lid on in-house. unforeseen expenses. “The quality of work is at present almost the “We're a very small organisation – with few same for partially outsourced administration, staff. Yes, we could hire staff to do the tasks, accounting, printing, information technology, 30
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED human resources, circulation and customer Lastly, most respondents consider syndication service. We have achieved this by strict and news agencies as outsourcers, providing monitoring and the compensation to the reliable and compelling text, photo and video outsourcing agencies were reduced based on journalism in high quality, covering topics the number of errors and rework as this was inaccessible to local journalists, such as part of the contract with them,” said the international topics, sports, culture and publisher of an Indian daily with a circulation business, and a complement to their credible of more than 1.6 million. local reporting. However, some publishers said in retrospect “As a small company, we cannot pay a high- they would change a few things about calibre person, but with outsourcing, we can outsourcing strategies. use services from the best companies, and their “We are a relatively small company, and we employees are better compared with our studied outsourcing carefully. We decided that existing persons,” said a responding publisher if the function is not core to our activity, we from Indonesia. The publisher uses news from could outsource it. We decided that call centres Agence France Press, Reuters, and columns are core to our activity. I want to handle my from New York Times Syndicate, Universal inquiries, in my call centre – all inquiries. We Press Syndication, Atlantic Syndication and want to talk to our own people about our photos from Reuters, AFP and Photos.com. product. I need those people close to me NORTHWESTERN EUROPE because you need to feel the pulse of your reader and advertiser,” said a small newspaper Northwestern Europe is a traditionally tight, publisher from Portugal. competitive market, where publishers are increasingly looking to outsourcing and Several publishers reported learning lessons offshoring for cost cutting and flexibility. For about outsourcing they could not foresee when some newspapers, outsourcing has been part of they are planning the transition. A constant the picture for years. For others, it is still a theme from newspaper companies experienced matter of experimentation and time. in outsourcing is to create detailed plans about what needs to be outsourced, and the detailed When deciding to outsource a function, expectations from outsourcing company in a employee compensations costs are always an contract. issue, and in some cases can halt outsourcing initiatives, said one newspaper executive there. “There are always problems related to outsourcing. One key learning is that it is Companies have built up years of legacy impossible to outsource production or IT if operating systems, and as a result, it becomes you don’t have full control of your processes. extremely difficult to get things done. Your have to clearly define what to outsource Outsourcing, if done right, is a chance to and what should stay with us. The interface reshape internal departments, gain more between us and the service provider is control and reduce costs, another newspaper extremely important,” according to the executive said. Scandinavian publisher of almost 50 regional Outsourcing was chosen by one newspaper for titles, both dailies and weeklies. short-term benefits such as financial gains, One Eastern European publisher reported that flexibility, new products and can-do attitudes, he wished he would have treated HR as a and for long-term benefits of no longer having strategic function, and not a service within the to deal with redundancies and being able to company, which requires a direct board of scale up and scale down in a short time. For directors link. After the publisher’s epiphany, example, as the global economy began the function is now treated as a strategic recessing in 2008, companies around the world function, and they are now considering scaled back. If outsourcing functions need to outsourcing the human resources function, be scaled back on, there are no redundancy with its new focus, as well. costs incurred. Other publishers reported that they wished One newspaper there began outsourcing work they could have executed the outsourcing plan in the late 1990s, and most recently sent other more quickly because of its positive impact on functions, such as advertising and prepress, to the company. other companies in the past few years. In the 31
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER long term, the executive there said he hopes ValueNotes Research that through scaling back costs, maintaining quality at a lower cost base and trying to get a As the newspaper industry in much of the better product, the move will put the business world faces budgetary pressures from every back on a more reasonable long-term footing. angle, cost-cutting and looking for new revenue streams has become the norm, and “When we broke new ground, early on there outsourcing and offshoring, once thought of as were issues, but now it's more than meeting possibilities for the future, are increasingly expectation than when it was in-house. There's becoming reality. Research group ValueNotes a lot of hard work involved to make sure you is located in Pune, India, in the heart of don't go backwards on standards,” he said. offshoring, catalogued this growth in its A newspaper in the region that has outsourced August 2008 report, “Offshoring by US many functions said that even though the work Newspaper Publishers.” is being done under another roof, the Although offshoring seems to be seeping into newspaper is more responsible for its quality, business plans everywhere, by no means is not less responsible. growth about to slow down, the research firm “Effectively, it's not someone else's problem,” reports. The following are excerpts from the he said. “This is still your business and you are ValueNotes report: still responsible.” We estimate the current opportunity to provide One newspaper executive said it is important offshore services to the newspaper publishing for employees in-house to work with the industry in the U.S. and UK to be outsourcers as if they were internal. approximately US$3.5 billion. The current Indian offshore vendor revenues from this “They have to be in a frame of mind where segment are valued at $35 million; merely 1 they don't just hand it off and a culture of percent of the total opportunity. blame emerges. You have to work with your partner as if they're internal. Some people in organisations just can't get their heads around U.S. and UK Offshore it,” he said. Upper management, meanwhile, Opportunity “have to work much harder. You don't have Current India layers of people internally sheltering them revenues ≈$35m from issues anymore ... some individuals like Offshore opportunity their own empires. I was managing 200 (U.S. & UK) people, and now I'm managing 70. In a social $3.5b context, that could be seen as a negative. Some people see it as a reflection of their performance, and it isn't. Externally, you have to make sure (the outsourcing company) reaches a certain standard. Internally, you have to make sure the management has bought it.” Another publication in northwestern Europe has outsourced very little, and never entire Source: ValueNotes Research, 2008 functions, mainly for financial reasons, © World Association of Newspapers 2008-2009 especially relating to costs incurred by redundancies. One function the newspaper has There is tremendous scope for existing service outsourced is a section of its ad sales providers as well as for new entrants to address department, and another is part of its payroll the huge opportunity. department. The services currently offshored by the Currently the scale of outsourcing at that newspaper companies can be classified into newspaper is small enough that it is not yet three major groups – Production, Sales & financially practical to offshore. If the scale Marketing and Archival. While Production and grows, the newspaper will re-examine Sales and Marketing are cost heads for a financial benefits of offshoring, as opposed to publisher, Archival is an investment in creation outsourcing within the country. of a revenue stream. 32
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED Offshoreable Services Survival Strategies of Tier 1 Newspapers Ad production: Internet Ad design, layout, versions imaging, touch up Historical Production Editorial: archiving Pagination, copy Digitisation/ writing, proof-reading, Challenges database editorial layout creation Invest Acquisitions O of online F businesses F Subscription Drop in S management: Chat circulation H Offshoreable and e-mail support Newspaper Reduce Services Sales Industry page size O Advertisement R Cutback I sales: Call centre editions The Internet N Cut Lessen foreign G costs coverage Historical Dwindling Reduce digitisation: Archiving ad revenues manpower fluff Archival old newspapers Outsource printing Content Rising cost management Outsource of newsprint prepress Source: ValueNotes Research, 2008 Source: ValueNotes Research, 2008 World Association of Newspapers 2008-2009 World Association of Newspapers 2008-2009 Production and Sales and Marketing have costs by reducing news coverage, newspaper tremendous growth potential, while Archival size, editions etc. Several newspapers are services will hit a plateau in the next couple of outsourcing printing within the U.S. and many years. Within all major cost heads of a are experimenting with offshoring prepress newspaper publisher, most services are services. outsourceable. However, currently offshoring provides maximum leverage for ad production Some of the key trends in the newspaper services, since it’s easier to offshore and cost publishing outsourcing space are: savings are high. 1. The basic business model of U.S. newspaper Of the estimated $35 million Indian offshore publishers is set to transition from being revenues in 2008, an estimated $25 million is merely print advertisement-driven to one that contributed by ad production services. Of the is more Web-intensive and information-driven. total estimated 2,300 employees in 2008, This will lead to creation of more offshore approximately 61 percent service ad opportunities. While ad production will have production of newspapers. maximum offshore potential for India, areas like content aggregation and promotional RESPONSE TO RISING PRESSURES writing will emerge as significant As the pressure on the U.S. newspaper opportunities. industry is mounting, most players are 2. While currently Tier 1 newspaper adopting a two-pronged strategy to survival: companies offshore to India, the Tier 2 and Cost cutting and adding revenue streams. Tier 3 companies will also begin offshoring While several family-owned Tier 3 newspapers services by 2010. Offshoring will encompass are looking to exit the business by selling out all three tiers of newspaper publishers in the or shutting operations, the large publishers in United States by 2015. the Tier 1 and Tier 2 are focused on leveraging new opportunities in order to maintain 3. By 2012, Indian revenues from offshoring to margins. The exhibit below highlights some of the newspaper market will reach $120 million the survival strategies of the leading and the industry manpower will cross 5,500. newspapers: 4. Most offshore service providers are Most of the Tier 1 newspaper companies are expected to add manpower aggressively. Some experimenting with multiple imperatives to of the players aim to grow at 100 percent to control costs. There is limited potential to cut 150 percent in the next couple of years. We 33
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER also believe there will be many new entrants. The previous list of newspapers belongs to the Opportunities exist for Indian newspaper Tier 1 and Tier 2 newspaper publishers in the companies and graphic designers as well as the United States. Going forward, the success of existing STM/Educational publishing BPOs. these “pilots” will lead to greater confidence in offshoring. 5. The traditional STM have good management, operations set up and strong OUTSOURCING DRIVERS editorial skills. Additionally, they have sound Cost control is the obvious primary driver for technology and processes essential for reliable offshoring. To understand cost saving delivery of services. However, they will need potential, we need to analyse the cost break- to tool themselves with some of the different down of a newspaper publisher and evaluate skill sets. offshore viability for each cost head. While CURRENT OUTSOURCING MOVES printing is easily outsourceable, it is not logistically and economically viable to Several leading newspaper publishers like offshore; however, production prepress is Gannett, McClatchy, EW Scripps, The New offshoreable since it involves non-physical York Times and Media Newsgroup have transfer of data. started outsourcing parts of their ad production and editorial processes to Indian vendors. The For a typical newspaper publishing operation, exhibit below provides a list of offshore the direct costs form approximately 81 percent service buyers in the U.S. Newspaper market: of the total costs. Amongst the direct cost heads, production constitutes 34 percent of the key cost components. The exhibit below Offshore Buyers provides the cost breakdown, offshoreability and cost saving potential across the key cost heads of Publishing Services of a newspaper publisher. Production prepress Newspaper Services offshored has significant offshore potential and provides Orange County Register Editorial the maximum cost saving to the publisher. Miami Herald San Diego Union Tribune SALARY COMPARISON: INDIA VS. U.S. (Copley Press) Media News Group NEWSPAPER JOBS The Dispatch Printing Company The Argus Significant wage arbitrage between the United Oakland Tribune Metro States and India-based employees coupled Timeout Weekend Ad Production Contra Costa Sun with availability of relevant skills in India are Tri Valley Herald building the case for offshoring. The table Berkeley Star Tribune below indicates the cost saving potential by Sacramento Bee a wage comparison across key offshoreable Fresno (Calif) Bee Commercial Appeal functions within U.S. cities and India. Sydney Gazette According to this research: The Argus The Courier Mail Archival New York Times • While there is significant difference in Washington Post salaries across Tier 1 and Tier 3 cities within Source: ValueNotes Research, 2008 the United States, offshoring to India still © World Association of Newspapers 2008-2009 provides a huge cost advantage. Cost Saving Potential by Function Function % Cost Outsourceable/Offshoreable Offshore Cost breakdown saving potential Within U.S. India/Philippines Newsprint and ink printing 47% Yes No NA Production (reporting & editorial) 28% Yes Yes 30-40% Production (ad production) 6% Yes Yes 40-60% Subscription/Sales 15% Yes Yes 30-40% Administrative cost 4% No No NA Source: ValueNotes Research, 2008 © World Association of Newspapers 2008-2009 34
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED Salary Comparison, U.S. vs. India Job profile Salary (US$)/Year U.S. Tier 1 City U.S. Tier 2 City U.S. Tier 3 City India Copy Editor 72,810 61,730 50,420 15,000 Ad Production 55,180 64,520 37,940 6,000-7,500 Subscription Management 18,000 15,000 12,000 3,600* * Salaries have been considered for Freshers Source: Bureau of Labour Statistics, ValueNotes Research, 2008 © World Association of Newspapers 2008-2009 • For an FTE-based contract, the U.S. expected to hit a plateau soon. Newspapers Newspaper companies have the potential to published prior to the early ‘90s are typical save approximately 70 percent to 86 percent of candidates for archival, as the digital their production costs by offshoring their technology had not evolved till then. The processes to India purely based on salary exhibit below provides a comparison between comparison. Even if we factor in the cost of archival and production services. managing the offshore contract for the newspaper publisher, the offshore advantage ESTIMATED BILLING RATES still lies anywhere between 40 to 60 percent The estimated billing rates for the Indian for the production process. vendors lie in the range of $5 to $30 per hour. While many service providers were reluctant A common challenge in offshoring is bridging to provide this information, we have the cultural divide – a key factor for the aggregated discrete data from varied sources, newspaper industry that thrives on its ability to triangulated this with additional data such as connect with the masses. The exhibit below rates in the U.S., savings from offshoring, etc. drills deeper into the sub-services offshored It is likely that individual vendors offer/accept currently, the future offshoreability and key rates that differ from those given here. Rates challenges in offshoring: also depend on contract size, duration and the While there is significant potential for complexity of the specific engagement. Higher outsourcing ad production services, archival quality standards/SLAs set by some customers services – especially historical digitisation is also serve to increase billing rates. Offshored Services in the Newspaper Industry Services Currently Offshore Key Challenge offshored potential Ad Production Ad Ideation No Low Ad Layout Yes High Understanding of cultural nuances Ad Design Yes Medium in ad designing and appropriate usage of colours Ad Imaging Yes High Ad Touchup Yes High Editorial Copy Editing Yes Low Copy Writing Yes Low Editorial Layout Yes Medium Cultural affinity, manpower skills availlability, quality and scalability, Proofreading Yes Medium adherence to turnaround time Pagination Yes High Content Aggregation Yes High Archival Historical Digitalisation Yes Medium Nearing saturation Content Management Yes High Significant potential Source: ValueNotes Research, 2008 © World Association of Newspapers 2008-2009 35
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER The exhibit below represents the estimated billing rates: Estimated Billing Rates Across Services, US$ $25-40/hr Ad ideation $15-$30/hr Ad design Copy editing $10-$15/hr Ad layout Proof-reading $8-$10/hr Ad imaging Editorial layout $5-$8/hr Archival, digitalisation service Source: ValueNotes Research, 2008 © World Association of Newspapers 2008-2009 While most vendors claim to provide a large range of services, we believe that the service mix is tilted towards the bottom of the pyramid. Billing rates in the archival services have been steadily declining and are estimated to have reached a range of $5 to $7 per hour in 2008. Historical archival was largely a one- time opportunity which has now matured. Offshore service opportunities provide both value and challenges, as ValueNotes details in its report, parts of which are excerpted above. An increasing number of publishers are turning to offshoring as part of their business plans for the future, but the Indian service provider space is still small. In each service area, “there is tremendous scope (for publishers) to move up the value chain,” while there is also opportunity for Indian newspaper publishers to provide offshore services, the report notes. The ValueNotes Outsourcing Practice, based in Pune, India, is one of the largest information providers on the outsourcing industry. ValueNotes tracks the outsourcing space in-depth through an analysis of news and events and continuous primary research and contact with the industry. 36
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED 3. How Newspapers Manage Outsourcing Whether completely outsourcing a function outsource, without taking into account the offshore, or outsourcing it partially within many variables for that function and the same parent company, newspapers must situation, will not lead to the needed make challenging transitions. In some cases, solution. transitions are relatively easily made, while A common theme from those interviewed for in other cases, it is discovered that there is a both ch. 2 and ch. 3 is that non-core steeper learning curve than expected, and the functions that are more skill-based, such as function remains in experimentation mode content management or pagination, are more over a longer period of time. Still in others, ripe for outsourcing than functions that the newspaper finds the function can not be require local knowledge and understanding outsourced at the time, or the cost reductions of cultural subtleties. Through the transition and benefits do not come out in favour of and experimentation process, newspapers outsourcing. around the globe are able to try out what works best for them, tailoring their There are many variables in the outsourcing outsourcing experiences to their specific equation, and publishers that take all needs. possibilities into account, while properly preparing both in-house staff and the outsourcers for experimentation and transition phases, as well as post-outsourcing The Miami Herald plans, are more likely to see success. In some The McClatchy Co.-owned Miami Herald cases, outsourcing, if done properly, may be has four ongoing projects with Mindworks the perfect solution. In other cases, it may Global Media Services: not be. However, as newspaper executives interviewed for this report would attest, 1. A contract to monitor article comments on staunchly opposing or supporting a move to the Herald's Web site, www.miamiherald.com. 37
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER different printing facilities in the Caribbean and Latin America. The daily edition is 24 pages, and the Sunday edition is 36 pages. Local Miami advertisers have little or no reason to appear, and stories in the International Edition are already edited for the Miami Herald, which means ads are limited and the paper is very formatted, Hirsch said. Mindworks employees in India now do the layout, design and headline writing for the International Edition. They send pages to an in-house editor who proofs finished pages. Once the pages are proofed in Miami, they are sent to printing partners in each country the paper is published in. Although still a work in progress, the international edition has been published this way for about five months. Even though it seems as though it would be the most difficult project to outsource, it has run pretty smoothly, following the initial learning curve, Hirsch said. Initially, there were two issues when making the transition to the Mindworks team: “One, getting the work done and making deadline, and the other is The Miami Herald's International Edition obviously quality of work, and there's been a is an English-language daily distributed learning curve on both,” he said. primarily in the Bahamas, Dominican Republic, Ecuador, Panama, St. Martin, 'THE MORE LOCAL THE CONTENT, THE St. Barts & Anguila and the eastern tip STEEPER THE LEARNING CURVE' of Mexico. Daily circulation is 25,000 The most difficult project of the four to and Sunday circulation is 15,000. outsource is data entry and extraction for events calendars, Hirsch said. 2. Text and photo archiving. 3. Layout and headline writing and design of Prior to offshoring the function to the Herald's international edition, which is Mindworks, the Herald had a central desk published in Latin America and the that took in events from the public and Caribbean. compiled them for the calendar. This 4. Data entry and extraction for events included everything from concerts and calendars. nightclub openings to community meetings and church clubs. The desk compiled all the Of the four projects, the calendar project has events in a database, and made those events proven to be the most challenging, said Rick searchable on the Herald's Web site, as well Hirsch, multimedia editor of the Herald. as served curated calendars for different print Following a brief learning curve, the article purposes. The transition for data entry, commenting project is running pretty categorisation and extraction under the smoothly, as it's not too complicated and guidance of a leader in Miami began in the everything is Web-based, which means middle of September in 2008. technology is not an issue, Hirsch said. The text and photo archiving project has also “That's been extremely challenging. It's still been pretty successful, he added. a work in progress, and although it's gotten better, it's still a real day-to-day problematic The international edition is a separate edition transition,” Hirsch said. “Going into it, I that is printed by publishing partners in would've thought International would've been 38
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED the hardest (project), in part because “There's a savings there. It's not staggering, International is more production oriented and but it's not insignificant,” he said. content nuanced. In addition to the Miami QUALITY OF WORK Herald, it's geared toward an audience with interest in Latin America. Calendar stories, It is still too early to compare the quality of however, are more intensely local. The more work done in-house before outsourcing, and local the content, the steeper the learning the quality of work done through curve.” outsourcing, Hirsch said. In the meantime, work is being monitored, and the person in The difficulty resulting in outsourcing the charge of calendar in-house visited calendar is not about “the ability to do Mindworks' office in India and worked with perfunctory design and editing, but the editing that team for a few weeks, which has made a requires real local knowledge,” he said. difference. For example, when creating a list of concerts “There is a gap there – our goal is to try to in the area, when the person creating a close it, but I think it's too early to know,” he calendar for concerts lives in the area, he said. “If we were to say 'have we achieved understands that Venue A is more prestigious the success we hoped for?' On commenting than Venue B, even though the performance and archiving, yes. We're still working at Venue B sounds more important. These toward that on International and calendar.” nuances can only come from understanding demographics, or how a performer or event Currently, the newspaper is looking at may have a greater following in a specific outsourcing offshore in the short term, to area. That understanding and knowledge of a decide what works. “I think we know on culture cannot be taught, he said. some things it works, and on some things it “Errors get made because you don't may be able to be scaled ... there are understand the differences between religious significant challenges with doing work with groups or venue significance, or what is a company on the other side of the world – significant about an event,” Hirsch said. big files are hard to transmit, data is slow, “We're still not there yet. I would say it's still and when things go down, it's not an instant an experiment.” fix. Communication can be challenging when you don't see people, or are working via a WHY OUTSOURCE? makeshift connection.” Newspapers around the globe are looking to Hirsch said if working with Mindworks does find economies and achieve savings, all not work out, or if one or more of the while maintaining the same level of quality functions Mindworks is currently doing does content, and the Miami Herald is no not end up working, there is still the option exception. to try another company. “The key reporters and editors that create “It's a very dynamic time, and we're willing content are exclusive and unique to us, so we to try things that will help us deliver quality had to identify these areas where we thought information to people,” he said. “I think in we could achieve some savings that didn't the environment we're in, you really need to impact that more sophisticated news check out what possible alternatives are. gathering,” Hirsch said. Again, the goal is to make sure we can do The Herald was introduced to Mindworks investigative reporting and cover local news, through McClatchy, which asked the so if there are experiments you can do to newspaper to experiment with the offshoring bolster those resources and save costs company. Mindworks gave the Herald costs elsewhere, we want to try them.” for different disciplines, and the Herald tried to have an even exchange in the number of people. For example, if three people worked on a team in-house, the newspaper expected Mindworks to be able to do the same job with the same number of people. 39
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER Firsthand Account: Sub-Editor Prepares to Offshore Job In 2008, Leslie Winjum was a copy editor working in India was not going to print, but they asked at The Packer, a trade publication for the produce questions and discussed issues over the phone industry, headquartered in Lenexa, Kansas. and via instant messenger with the copy chief all Part of a four-person editing team, Winjum and day. On a deadline day, when the copy desk would another sub-editor worked below a copy chief put out the paper, if it was decided that a story and assistant copy chief, doing editing and layout would be moved to another page, or if a copy for the bi-weekly paper owned by Illinois-based editor caught an error or improved a story, the Vance Publishing Corp. team in India would make the same changes. In March 2008, a staff meeting was called in For example, Winjum said the day would start by which it was announced the company was editors divvying up pages. If she had A3, she considering offshoring its copy desk work to a would read everything in that queue, look at the company in India. The sub-editors would work photos, and then begin laying out the page. Once with the Indian company for a set amount of time everything was ready, the copy chief would instant as a test run, in which both desks would produce message the team in India, and tell them A3 was the same paper in tandem, until the company in ready to be worked on. As Winjum worked on that India was ready to take it on full time. page, if she decided there wasn't room on a page, or if a story needed to be cut, the copy chief would It was likely at least one person on the copy desk relay the message to the team in India. would need to stay on even after the work was offshored, to liaise with the company in India, and “Sometimes, it felt like we were just feeding them Winjum said she and the other copy editor what to do. At one point I said, 'why don't I just speculated they would be the ones to go, since print it out and fax it over to them, so they can they had the least experience. Meanwhile, the copy it?' We were doing our job, and helping copy chief and assistant copy chief believed them do our job, and making it easy for them to there was a good chance they would be made do what we were doing. It felt like we were redundant, because their salaries were higher, training ourselves out of a job,” Winjum said. she said. As a copy editor, Winjum said she thinks there is a After the announcement, her immediate bosses big difference between outsourcing something like made it clear the decision to outsource was not printing or advertisement creation versus the copy editors' fault, and that the decision was outsourcing copy editing, which requires familiarity not set in stone. For a couple of months, nothing and understanding of locales and specific else about the outsourcing was mentioned, and geographic areas, as well as understanding the employees tried to ignore it. subtleties that come with being a native speaker of the language in which one is editing. “We were kind of pretending it wasn't happening. We would ask (the managing editor) about it “Editing is different, and you want to have that every few weeks or so 'do you know what's dialogue with your reporter,” Winjum said. If the going on with the testing?' and he didn't seem to editor is 13 or so hours away from the reporter, know much either,” Winjum said. “It just turned that dialogue is harder and harder to have. everything into turmoil there – it made everyone On June 24, the copy desk found out their jobs nervous.” were not going to be outsourced after all. In about the last week of May, Winjum and her co- “The quality wasn't up to par with what we were workers began the testing phase with the doing, and when they said they weren't doing it, it offshoring company in India. Much of The Packer's was because we had done a much better job writing staff is spread across the country, from during the tests, and they hadn't done a good Florida to Texas to California, and many times the enough job to justify not having us there,” Winjum copy editors had to call the writers to double said. In addition, she said she and the other copy check facts, ask for more information, or discuss editor's salaries combined added up to no more ways to lengthen or shorten copy to make it fit than US$60,000 per year. Had those two jobs within sections, she said. Sometimes reaching a been eliminated, it was difficult to understand the writer could be difficult, and Winjum said she cost-benefit, she said. couldn't imagine how difficult it would be for a Although Winjum initially planned on staying at copy editor on the other side of the world, The Packer for longer, she left her job in August especially one less familiar with the produce and moved to another state, while the other copy industry who didn't have the benefit of learning editor left just a week later. When the outsourcing from experts under the same roof. talk began, copy editors and even employees in During the testing phase, the copy desk would put other departments felt their jobs were no longer the paper out, while also trying to help the group in stable, and she and the other copy editor felt very India put the same paper out. The version created much at risk, she said. 40
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED RCS Quotidiani S.p.A. services to different providers, which can be both outsourced and in-house according to RCS Quotidiani S.p.A., a subsidiary of RCS the different situations. For example, the MediaGroup SpA, is the publisher of Corriere del Veneto uses an Italian services Corriere della Sera and Gazzetta dello Sport provider named Obelix, the Corriere del newspapers, as well as other magazines and Mezzogiorno is using internal resources, and books. Corriere Firenze and Corriere Bologna are RCS Quotidiani has outsourced prepress, IT serviced (by) RCS personnel directly.” and printing, all to achieve more stable costs Printing is done using existing plants already and flexibility, said Roberto Sardi, technical used to print Corriere della Sera. Because local director. All outsourcing is being done within titles are inserted into the main paper, it makes Italy. sense to print them all together, Sardi said. IT was outsourced to Atex to allow for a uniform working environment, so all local WHY OUTSOURCE? editions owned by the publisher adopt the “The main advantage of outsourcing for RCS same working model, Sardi said. is that there’s no need to create new in-house Prepress was outsourced to a local provider structures (i.e. IT and human resources) and to “achieve a stable cost baseline and at the same time it assures flexibility and introduce a greater scaleability in our project. limits expenses. This is both a short and long For some local initiatives, we also leveraged term benefit: the company can set up and existing resources, so in this particular case develop a project starting with a low capital we have a mixed model of outsourcing and expenditure and putting just operating co-sourcing with local partners,” he said. expenses in the business plans. This of course lowers the investment risks and “For Prepress, we have adopted a mixed improves the ROI of a new initiative,” Sardi model of outsourcing, by committing said. Tips from Newspapers on Outsourcing and Offshoring Don't allow in-house staff to pass off When the decision is made to work responsibility to the outsourcing outsource a function or experiment with company – your publication is still outsourcing, make sure employees are responsible for all output with the informed. No news is often seen as bad company brand. news, and can create discontent across departments. Work that requires an understanding of local culture will be much more difficult to Clearly define the tasks in the outsource. outsourcers’ contracts. Hiring outsourcers requires creating contracts Check out all possible alternatives. that clearly define the scope of services and annual outlay, and thereby drive cost Retain ownership of your project if you controls. This is particularly important want it to be successful. when departments are only partially outsourced, and departmental functions Work with your outsourcing partner as need to be contractually divided between if they are internal. outsourcers and company employees. Even though functions are being done Create detailed plans about what in another office, and perhaps on the needs to be outsourced, and the detailed other side of the world, ensure that your expectations from outsourcing company employees are in a frame of mind where in a contract. they don't just hand off work and a culture of blame emerges. 41
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER For RCS, outsourcing has not led to cutting any in-house employees, he said. The move to outsource has also led to equal or higher quality, with Atex's service quality equal to RCS's internal services. In pre-press, RCS has experienced even better quality in some cases. Sardi credits firm definitions and agreements with suppliers for outsourced projects' success. “Giving a part of your processes to service providers is not enough to assure the result you want – you need to retain ownership of your project if you want it to be successful,” he said. “Outsourcing can actually be a great benefit if the companies are able to keep and to manage the know-how of the work they’re committing to service providers. If a company loses the underpinning of the different levels of production, it will no longer be able to manage the workflow effectively and as a result it also loses its bargaining power with its partners.” Source: RCS Quotidiani S.p.A. 42
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED 4. Outsourcers Discuss Their Businesses Advertising, Design and Artwork The newspaper industry, which is being impacted by the economy, technology and the way people are advertising, is changing the Affinity Express way advertising budgets are spent, Swanson Interview with Ken Swanson, Chief Executive Officer said. “There has got to be an impetus in Headquarters Elgin, Illinois, United States business to consider outsourcing. Typically, Production centres Manila, Philippines and Pune, one of the reasons is to lower operating costs, India as well as get other advantages,” such as not Web site www.affinityexpress.com worrying about securing talent, production times or capital outlays. When an industry must reduce operating costs, the circumstances Advertising, creative and graphic outsourcing become ripe for outsourcing. services company Affinity Express provides print and online advertisement production, All industries that outsource functions keep the marketing communications designs, image most complex, core operations to themselves, editing, vector artwork and embroidery and outsource the replicable, easier functions, digitising to more than 6,000 clients globally he said. in the newspaper, direct mail, printing and “Outsourcing just from U.S. and UK promotional products industries. newspapers is a US$3.5 billion business, of Affinity's newspaper segment was launched in which only 1 percent is outsourced today,” he 2006, and as of January 2009, the group had said. “In the last two years (newspaper about 150 newspaper clients, all based in the outsourcing) went from experimentation, and United States, with the expectation of adding they kind of had a choice, to 'we have no clients from Canada and the United Kingdom choice. We have to do this, and do it right within the first quarter, said Ken Swanson, away. Forget experimentation, it's part of our CEO of Affinity. strategy.'” 43
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER Currently, the newspaper industry is at an Once the transition is made, the newspaper can “inflection point,” in which operating costs access advertisements on their computers. have to be cut drastically, and “everyone Workers at the newspaper can make changes to climbs on the band wagon,” Swanson said, the ads, which go back to the production which has led Affinity to experience platforms in India and the Phillippines to be “unprecedented interest in our business from fixed or changed. newspapers.” “It's not just about delivering technology to the HOW AFFINITY WORKS client, but teaching them how to use it... there are different levels of solutions depending on Affinity has nearly 900 people working from the circumstances,” Swanson said. “The two sites, both of which are expanding. One technology we use eliminates so much human office is in Pune, India, where 600 workers are intervention that there's tremendous savings.” located, and 250 people work from the company's office in Manila, Philippines. In some cases, clients want Affinity to work Affinity's headquarters are in Elgin, Illinois, with their existing processes, while others and 50 to 60 people are spread out across want the company to set up a site and drop the North America, working locally with ads in it, so they can pull ads out or drop them customers. back in. Workers are recruited from universities, COST recruiting firms and through direct recruiting. There are three ways to think of cost, Swanson After they are brought in, potential hires are said: tested on ad creation. Once they are hired, they are given “intense training” for about 30 days 1. Direct cost: Everything associated to until they are sent to work. However, Swanson creating the ad, from the person creating it, to points out, employees are continually given technology, software licences, the computer – refreshed training and are subject to quality anything that touches building that ad. control inspections. 2. Indirect cost: The building, utilities, human resources, etc. “We know what the average ad production 3. Activity: “What's the cost that's never time should be, based on the complexity of the counted? How many managers are there, or ad. We also know if Sally is doing five, six, how many times in a meeting do you have to eight, or nine ads. We also know how much re- talk about ad building? work is involved,” Swanson said. “We measure Depending on the situation of the newspaper, everyone individually, and look at their Affinity can save the customer between 25 weaknesses and strengths, and tailor additional percent to 50 percent, in direct costs, with a training to that person.” mean of 40 percent. Indirectly, the group saves There is a 12 week transition period when a customers between 5 percent to 20 percent, newspaper decides to outsource with Affinity. Swanson said. Because every newspaper operates differently, “If the newspaper was very manual, the “we basically prescribe the technology outsourcing eliminates all that. If you have 50 solutions; whatever solution fits the customer, people shuffling paper, that's all eliminated,” we implement. Just plugging in software he said. doesn't really do it,” he said. Affinity employees also teach new processes, and help with management and work development and conversion at the newspaper, to create a Express KCS smooth transition from work being done in- house, to being done around the world. Interview with Robert Berkeley, Chief Executive Officer Affinity uses publishing software that can be Headquarters San Jose, California, United States; customised as a service over the Web. London, United Kingdom; However, if a newspaper already has software Gurgaon, India they have invested in, Affinity will work with Production centres Gurgaon, India. Coming soon: Pune, India that current technology and processes, Web site www.expresskcs.com Swanson said. 44
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED Tips from Outsourcing and Offshoring Companies Create a thorough analysis of ad volumes, Understand the company's finances. Find category and complexity of work. Use this out who owns the company, and whether they analysis to identify what to outsource and are sustainable – this has been highlighted when to outsource. since the economic downturn of 2008. Even if they do great work, if their business collapses, There will be some new roles that will have it doesn't matter. “You want something that's to be created, such as packaging and bullet proof.” transmitting material, communicating frequently, giving feedback, receiving completed jobs, etc. Pick a partner who ensures a transparent, It takes a certain amount of time (one communicative relationship. company quoted 30 days) for the outsourcing company's creative team to get a good Select the right project manager to understanding of the creative requirements coordinate and manage the project, and make and preferences of a publisher. A publisher it clear who the project manager is. Selecting must review work and give constant and the right person will be critical to the success detailed feedback during this period to help of the initiative, and that person must be in with the transition process. touch with the project manager on the outsourcing side, to make sure the project Understand who you're choosing. Check goes well. The project manager also must be references, talk to other publishers who have given the authority to do everything the job used that company, and make sure the demands. decision is not based on “give me the cheapest service I can get.” Look for value, and decide Top management must buy into the what is of utmost importance to you. outsourcing concept, and support those who Look for a vendor with a good track record are carrying out the outsourcing strategy. and demonstrable process for transitioning. There must be clear benchmarks and a Choose the company with business broad agreement on how the project will continuity. Do they have data backup? Will scale up. At the end of a defined period, they still be able to operate and provide the everyone must know what must be service if a problem develops? Business developed in terms of quality and turnaround continuity is key for both data and geography, times. and it's insurance that the work will get done. Visit the facility. “You can tell the minute The process's service provider should have you walk in what you're going to get.” Not performance trackers, to be able to report on visiting is “like not visiting the person you're both service and frequency. going to marry – it's really serious.” Express KCS began providing reprographic services to multinational advertising agencies in India in the 1970s. Services now encompass ad design, artwork production and editorial services, as well as the traditional prepress/repro work. About 450 newspapers and magazines outsource work to Express KCS, a majority of which are located in the United States and United Kingdom, with some in Australia and Europe. Currently ad production is the most About 500 employees work for Express KCS commonly outsourced function, but editorial from its office in Gurgaon, India. Staffers are work is starting to pick up, all due to graduates or at diploma level, and some publications' need to cut costs, said Robert have prior experience in publishing. They are Berkeley, chief executive officer of Express also trained for eight to 12 weeks for specific KCS. client work. 45
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER Express KCS have moved from a piece-rated percent, but those numbers really depend on business in which companies sent overspill to starting costs, Berkeley said. For example, if a a full-scale outsourcing of departments. large metro daily with large overhead costs outsource, they can see savings of 70 percent, “People know that this is a fact of life now and while smaller newspapers in rural areas with plan their business' future around it,” Berkeley non-union workers may only see 25 percent said. Outsourced work “is a production task – savings. it's not opinion, it's not selling to the local restaurant owner. It's just the transformation of “We tell (clients) what the costs will be, and data – there's no reason to not send it they can make their own conclusion about the elsewhere ... look at what makes you unique, savings,” he said. what brings value, and outsource the rest.” When a publisher is looking to outsource, As publishers increasingly focus on their core Berkeley recommends looking “for a vendor content businesses, which is what makes them with a really good track record and a unique, they will be prepared to outsource demonstrable process for transitioning. Then many of the processes that help them deliver listen to their advice – they've done this their products, he said. “This is a conversation before!” every publisher ought to be having with Some publishers choose a vendor based on service suppliers. It ought to at least be price only, and end up regretting it, he said. researched, and I think not everyone is doing Paying a little more for a service that works, that at this stage.” and receiving the right advice and right HOW EXPRESS KCS WORKS experience for your publication may end up in savings for the long run, and eliminate About 500 employees work for Express KCS headaches and frustration along the way. from its office in Gurgaon, on the outskirts of Delhi, and more will be added as the company opens another office in Pune, India. Staffers are graduates or at diploma level, and some 2AdPro have prior experience in publishing. They are Interview with Pervez Sikora, Chief Operating Officer and co-founder also trained for eight to 12 weeks for specific client work. Headquarters Bangalore, India and Woodland Hills, California, United States The company has a strict, three phase Production centres Bangalore and Chennai, India methodology when it begins working with a Web site www.2adpro.com publisher, Berkeley said: 1. Ready: Staff are assigned to the client, and a transfer of knowledge in which everything Advertising production, design and about the client is learned. The publisher and management services offshoring company Express KCS prepare to run parallel in this 2AdPro was formed in late 2006 by a group of phase. media and outsourcing industry veterans, who had previously worked at or for newspapers. 2. Set: Both sides begin running parallel, and As of February 2009, 2AdPro served nearly Express KCS workers measure themselves 100 newspapers in the United States and against the client's benchmarks. United Kingdom, building newspaper display 3. Go: The work is transferred to Express ads, magazine ads and online display ads. KCS. “Newspapers in the U.S. and UK have been Built-in safety nets help to eliminate risks under tremendous cost pressure for several along the way, such as benchmarks set to years and outsourcing advertising production compare and ensure quality, and employee can save high on-shore production costs while training to make sure they understand the providing increased capacity,” said Pervez publisher's specific needs, he said. Sikora, chief operating officer and co-founder of 2AdPro. COST Although the United States and then the Clients have reported operational cost United Kingdom were the company's initial reductions of between 25 percent to 70 markets, customers now also exist in South 46
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED Africa and the Gulf region, with Australia and After all basic information has been collected, New Zealand likely being next. a mutually agreed upon ramp-up plan is defined, which schedules what, how and when “We think it's going to be global,” Sikora said, a function is trained and then taken over by noting that Southeast Asia is beginning to feel 2AdPro. the same pressures the United States and United Kingdom are facing. “Clearly, “Every publisher approaches outsourcing outsourcing is going to be strategically differently. Some want more complex auto ads, imperative ... it exactly aligns itself with pain others want spec ads. We understand and points.” figure out what they want, the complexity of work, distribution, volume, etc., and Finances are always the driving force behind understand what type of work they feel outsourcing and offshoring, but once a comfortable outsourcing,” Sikora said. company has been doing it for six to eight months, they begin to see other advantages, Users are then set up within the system who such as online ad building, he said. can submit and retrieve work, and finally the HOW 2ADPRO WORKS publisher is assigned to a cell within 2AdPro's production team and train the team on the 2AdPro builds print and online advertisements publisher's specific requirements. for newspapers, radio and television companies, as well as working with “Once the publisher starts outsourcing their advertising agencies and advertisers. The work, we collaborate and communicate company also provides graphic design frequently to understand and address any start- services, such as logo design, illustrations, up issues,” he said. “It takes about 30 days for animated clips, image masking/cut-out and our creative team to get a good understanding presentations. of the creative requirements and preferences of a publisher. A publisher must review work and Traditionally, outsourcing models have been give constant and detailed feedback during this based on a high touch engagement FTE model, period to help with the transition process.” but 2AdPro has created a unique on-demand transaction-based model with low touch COST implementation, Sikora said. 2AdPro operates under a transaction-based “In the two years since we have founded pricing model. The charge per ad depends on 2adpro, this model has been validated and complexity, size and delivery schedule, and other suppliers are slowly migrating to this customers typically sign up for a minimum model,” he said. yearly volume. More than 350 people work in two studios, one Publishers can expect to save in the range of in Bangalore, and one in Chennai, where the 50 percent, Sikora said. main production studio is located. The average In the future, 2AdPro expects “an acceleration education level for 2AdPro employees is a and diversification in outsourcing business three-year technical degree or diploma in functions. Today, publishers are outsourcing graphic arts. When employees are hired, they functions such as information technology, receive two to four weeks of training, advertising production and call centres for depending on the level at which they are hired. subscriber support. We expect to see publishers When a publisher decides to offshore work to outsourcing other functions such as content 2AdPro, an implementation team takes over. creation and editing, back-office functions First, a production survey is used to gather such as finance, credit and (human resources). detailed information about the publisher's Also, as in other industries that have been current ad production operation, such as outsourcing business functions off-shore for volumes, category of advertising and technical years, media companies will figure out that information, such as folder structures, fonts, off-shore outsourcing is not just about saving and file types. The team also collects cost, but increasing capacity that is required to information the publisher might have that will help in transitioning their businesses from a aid in training 2AdPro workers, such as single media focus to an integrated media sample ads, style guides and tearsheets. company,” he said. 47
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER Editorial HOW MINDWORKS WORKS Mindworks has more than 100 copy editors and designers working at its two offices in Mindworks Global Media Services Delhi, and has recently launched its ad Interview with Tony Joseph, building services. Employees in Delhi working CEO and co-founder with offshore newspapers become an extension Headquarters Noida, outside Delhi, India of that newspaper's team, and works with Production centres Two sites in Delhi turnaround times of less than an hour, he said. Web site www.mindworksglobal.com There are two principles employees in Delhi work under, Joseph said: Mindworks Global Media Services was launched in 2004 offering editorial services, 1. Visibility and control: The client and has expanded to ad building and online newspaper's editors have as much visibility services. The company's clients include 15 into workflows as they had before Mindworks titles, located in the United States, United came into the picture, as Mindworks staff work Kingdom and Asia, with copy editing, design remotely within the client's content system, and layout constituting the bulk of the work. becoming part of the natural workflow, instead of an extra step. Because the Mindworks team In times of economic hardship, cost cutting works within the client's system, and becomes can go so far as to diminish the newspaper's part of the client's daily team, the client has core product, which is exactly what zero loss of control over the process. Mindworks is trying to prevent, said Tony Joseph, CEO and co-founder of Mindworks, 2. Training and tracking: Mindworks and former editor of Businessworld, India's employees must undergo intensive training and most popular business magazine. Joseph also documentation exercises, and are dedicated to has worked with the Business Standard and fully understanding the style guidelines and Economic Times. practices of the client. Regular tracking mechanisms are shared with the client on a Instead of making deep cuts into reporting daily and weekly basis, and Mindworks has staffs, page numbers and even switching to meetings with the client on a weekly and free models, Joseph said Mindworks believes monthly basis to track workflows and times. newspapers can look for efficiencies This ensures deadlines are met and the amount elsewhere, in a way that doesn't damage, and of time it takes to complete tasks are in fact strengthens, the core product. documented. It also gives the client as much “We believe all (cost-cutting) solutions, in information possible, which loops back into some places have diminished newspapers, in a them having as much visibility and control time when the core should be strengthened – over work processes as they had before and that core is compelling and unique local Mindworks came into the picture, and in some content. We believe we have a better cases, even more. alternative to newspapers reducing reporting Most of Mindwork's staff members have a staff,” Joseph said. Newspapers “should degree in English language or journalism, and instead look for efficiencies on the editorial have average experience levels of 15 years in back-editing side ... consolidation and newspapers or editing. One of the company's outsourcing helps increase efficiencies two project leaders is the former news editor significantly, so they can continue investing in of Indian Express, and the other was a deputy reporting.” news editor of CNBC. Ad building staffers Two years ago, clients were experimenting also come from design backgrounds, so they with outsourcing, and today engagement is on have also backgrounds in design. a much larger scale, with a strong trend on the Only one in every 30 applicants is hired, and copy editing side, he said. in addition to general training, employees are “Newspapers are beginning to see there is a given specific training for the project they are trade-off, and they need to protect their assigned to. Joseph said he recommends client investments and refocus on creating unique newspapers visit Mindworks' offices, in order and compelling content,” Joseph said. to meet the staff and see the work that is being 48
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED done. Each time a client visits, they walk away Pagemasters Pty Ltd. with greater comfort in the idea of Interview with Bruce Davidson, outsourcing, he said. Managing Director When a publication decides to outsource to Headquarters East Melbourne, Australia Mindworks, there is a two month transition Web site www.pagemasters.com.au period in which Mindworks works closely with the publication's editors to transition to a “full alignment with the client,” Joseph said. By Brett Taylor “We have various measures and trackers that The Pacific Area Newspaper Publishers' ensure this alignment happens,” he said. For Association example, headlines are one measure of how Controversial editorial outsourcing group well Mindworks aligns itself to the client. Pagemasters has opened a new Sydney office During the transition period, the client tracks and boosted staff numbers to 140. It has also the changes made to headlines, as well as why won its first European client and is hiring those changes are made. In the first week, it is British-born editors in Sydney as it bids to typical for 30 percent of headlines to be expand its sub-editing and design services to changed. A graph of changes is maintained, Fleet Street. and by the end of the transition period, it is expected that no headlines will need to be As most regional newspapers and their digital changed. properties batten down in the grip of an advertising downturn, Pagemasters is enjoying COST lightning success – achieved without a sales Outsourcing with Mindworks typically saves force. clients between 35 percent to 50 percent, “People come to us,” said Pagemasters depending on the newspaper's existing cost Managing Director Bruce Davidson. “The shift base, Joseph said. has happened very quickly in that we’ve Mindworks works with six small community become more of an editorial production house newspapers, and has created a package rather than just listings.” specifically designed for small papers, as many Outsourcing is not new to the region. The have not updated content management Singapore Straits Times has outsourced its systems. By bringing in new systems, as well sub-editors to Australia for years but debate in as taking on copy editing and layout services, local markets has ignited as Pacific publishers which is a new service Mindworks will launch trim staff numbers, and commentators from soon, the overall cost savings is attractive, he other media and the union try to disparage the said. current quality of newspaper journalism. Joseph said as outsourcing trends continue, This has not stopped many major titles from cost savings may increase. investigating or hiring Pagemasters’ editorial services, including APN, publisher of the Dominion-Post, and Fairfax Media Ltd. APN puts more than 1,000 pages a week through the Pagemasters in New Zealand, where 56 staffers are employed. Pagemasters, a unit of the Australian Associated Press, has grown its business from its original role as a tabulator of TV and racing details and listings. Its new Sydney office has been established to handle work from Britain’s Daily Telegraph, a top-selling UK broadsheet. “I purposely hired English subs,” Davidson Editorial outsourcing Pagemasters, a unit of said. “It’s good to have somebody you can ask, the Australian Associated Press, has ‘do they say that in London?’ when you’re increased its staffing numbers to 140. writing a headline.” 49
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER News of the Daily Telegraph’s decision to saving necessarily, it’s about improving the offshore did not go down well among the product.” newspaper purists in Britain. Blogs However, cost-cutting is always a major responded that this was one more sign of factor, if not the major factor, when falling editorial standards. newspaper executives decide to outsource, Leading UK media commentator Jeff Jarvis Davidson said. said it “makes even more sense to do it in “By centralising production, you’re able to Australia because salaries are lower and the even workloads across days and weeks. It’s work there can be done on the cheaper day all about increasing the productivity. If a shift.” newspaper is getting good efficiency in their Pagemasters is yet to lose a client even production system now, maybe we can’t help though local journalists are skeptical of its them. Fairfax is on the record saying they editing skills, and even fearful for their own needed to improve their productivity. We jobs. delivered that.” Key editorial sections of Fairfax-owned newspapers The Sydney Morning Herald and The Age – Spectrum, DriveLife, Traveller, Metro and The Guide – are designed and sub-edited in Brisbane. Fairfax editors are flown to Pagemasters to satisfy themselves Outsourced Printing that staff skills and quality controls processes One of the most outsourced newspaper are in place. company functions is printing, and for good reasons. The high cost of owning and “This is where the growth is happening,” maintaining sophisticated technology is Davidson said. Using the UK Telegraph as an prohibitive for some newspaper companies. example, he continued: “It’s their content As an alternative to owning, many newspaper and their decision-making, but we do the companies outsource to high-tech contract rest. printers, and even outsource to their own “They give us strong direction as to what competitors. For a fraction of the investment, they want on page one, page three, page 23, newspapers can outsource printing to mega- and how they want those pages to look. We printing plants with up-to-date technologies lay out the content to their design and do the and no capital investment, and can achieve normal sub-editing process like fact- higher quality, and perhaps more colour checking and rewriting if necessary. capabilities. “Our creativity is in the design, the headline The 2009 WAN Outsourcing Survey showed writing, the captions; the nice parts of sub- that 56 percent of the respondents from editing. Then we ensure that technically the newspaper companies around the world have pages are good to go to press before we send either fully or partially outsourced their it back.” printing function, and with one-third responding they have “no plans” to outsource Smaller newspapers have also used printing. One-fourth of the respondents said Pagemasters’ capabilities, including the their newspaper companies fully outsource Victorian regional company, Shepparton their printing function, indicating the strongest News. single category for full outsourcing at Davidson said he expects to increase staff newspaper companies today. numbers as other publications move to cut Between 2005 and 2009, the percentage of costs. respondents who said their newspaper “It’s not just about cutting costs,” he added. companies either partially or fully outsourced “Regionals want to be the best local paper printing rose from 52 percent to 56 percent, they can be. They’re better off to get us to do while the percentage of those who said they a world news page, or an Australian Open have no plans dropped from 38 percent to 32 page. They move resources into the local percent, indicating a growing interest in an reporting. So it isn’t all just about cost- outsourced printing function. 50
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED “Outsourcing printing is an inevitable trend. Outsourced printing: Publishers need to focus first on relationships 2009 vs. 2005 on customers like readers and advertisers. WAN Outsourcing Surveys Experts like Transcontinental can meet higher quality standard and high flexibility standards 2009 2005 Response Response in printing. It’s a question of asset utilisation,” Fully outsourced 25.4% 25.8% said Markle. “It’s important that each company Partially outsourced 30.5% 26.7% focuses on its cores. We live, breath and eat press and prepress technology and are totally Will be outsourced 1.7% 0.84% within the next passionate about it.” two years Will be outsourced 6.8% 6.26% in the future; Newsprinters but no timeline yet The £650 million printing plant is the No plans 32.2% 38.2% largest in the world, opened one year ago Donít know/NA 3.4% 2.2% Source: WAN’s 2005 and 2009 Outsourcing surveys Locations: Broxbourne, England; plus two © World Association of Newspapers 2008-2009 smaller plants in Glasgow and Knowsley While some newspaper companies turn over Ownership: News International, part of News their printing to commercial printers like Corporation, owned by Rupert Murdoch Transcontinental in Canada, thus saving the Largest customer: News International titles, capital costs of buying, maintaining and including the Times, Sunday Times, The Sun, replacing presses, some are finding a new News of the World and thelondonpaper, plus revenue streams by investing in their own outsourced printing to the Telegraph Media commercial printing plants. The Stampen Group, London. Group in Sweden owns 70 percent of V-TAB in Sweden, while News International, a part of Size: The Broxbourne plant is large enough to Rupert Murdoch’s News Corporation, owns fit over twenty football stadiums inside of its Newsprinters. walls, and features 12 state-of-the-art, full- colour manroland Colorman XXL presses, each capable of producing 86,000 copies. Transcontinental Printing Eurocentral near Glasgow operates two Locations: 15 printing plants across Canada, manroland presses; the Knowsley plant, close from Vancouver, British Columbia to Halifax, to Liverpool, operates five manroland presses. Nova Scotia; and in Northern California, USA Volume: The largely automated plant at Ownership: Transcontinental Printing Broxbourne can produce 3.2 million newspapers each night, and 2.65 million on Largest newspaper customer: The Globe and Saturdays. The present volume is estimated at Mail, which has been a customer since 1990; 2.5 million per night for the Broxbourne plant. La Presse in Montreal; and soon, the San Francisco Examiner (Hearst) Managing Director, Brian McGee Size: Each of the 15 plants has one to three In addition to all News International titles, presses from manroland, KBA or Goss. Newsprinters’ three plants print The Telegraph Media Group’s 900,000 copies daily, and Volume: More than 100 weekly and daily 650,000 copies on Sunday. newspapers, and hundreds of thousands of tons of newsprint per year. Most of the UK national titles have purchased new presses in the past three to five years, Senior Vice President, Ted Markle showing a real value on quality and the future Markle believes that outsourcing printing by viability of their newspapers, McGee said. experts will lead the way to improved quality In the future, McGee expects regional and and reproduction. “It’s about redefining quality national newspapers to outsource their printing especially in North America. The quality to consolidated printing plants like standard is lagging behind in reproduction Newsprinters, instead of investing in new quality. Color quality needs to be taken to a presses themselves. “Virtually all are moving new level,” he said. toward printing with someone else,” he said. 51
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER “Our strengths are long-term security, an SMALL NEWSPAPERS immense capacity, the most modern technology,” he said. “We’ll be around for a Small newspapers in particular can benefit long time. Our quality is the highest in the from outsourced printing, by buying space and business. Given that cocktail of security, time on either competitor’s or a commercial quality and technology, we add a reasonable printer’s presses. Three small newspaper price also.” owners were interviewed for this report, and agree about the cost benefits and satisfactory quality afforded them from commercial V-TAB printers. Commercial newspaper printer, Backa, “Our biggest outsourcing provider is Guardian Sweden Print – the printing division of a small daily newspaper about 100km from our circulation Ownership: 70 percent owned by the Stampen area. Delivery of newspapers is done by a Group, publisher of Gothenburg Post and range of specialist delivery contractors,” said many other newspapers Michael de Hamel, editor and publisher of The Largest outsourcing customer: Aftonbladet, Akaroa Mail, New Zealand. “The previous the most circulated newspaper in Sweden owners had printed in-house (sheet-fed letterpress), and by outsourcing to web offset Size: Nine printing plants in southern Sweden, there was a marked improvement in quality. with 14 printing presses including manroland, Nowadays we're using four-colour throughout, KBA and Goss and there is just no comparison with what we Volume: 41 million copies per week, might have been able to do in house.” including Gothenburg Post, Aftonbladet, Svenska Dagbladet, Expressen and Metro LOGISTICS For nationally and internationally distributed Customers: 400 newspaper, magazine, insert newspapers, satellite technologies offer the and direct mail customers in Sweden, handling ability to beam newspaper pages almost from prepress to delivery dock anywhere in the world to outsourced printing CEO, Peder Schumacher plants. Among the many newspapers that transmit pages through a secure satellite “The newspapers leave the printing to systems include Schibsted newspapers across someone else. The printing costs will be Scandinavia, and The New York Times across much lower per day or per year. There is a the United States in 24 commercial printing big difference, compared with owning your plants, most of them owned by local own presses,” said V-TAB CEO Peder newspapers. Schumacher. Because of the proximity to readers, the distribution is more efficient, he The Newsprinters plant receives files from said. publishers through wideband links through an Agfa-managed prepress outsourced service. Newspaper publisher derives benefits such as Then, plates are made, the newspapers are higher quality and more efficiency from printed, and the bundles of newspapers are outsourced printing companies. “Especially loaded on palates and then onto distributors’ V-TAB has been very successful as a printer and agents’ trucks, taken to wholesale also for other companies and V-TAB is today distribution points, and then the points of sale. the largest subsidiary to Stampen,” said Gunnar Springfeldt, development director of the Stampen Group. Stampen owns 25 traditional newspaper titles and 30 free weeklies. “(Overall with outsourcing), we gain price, quality, speed,” Springfeldt said. “It allows us to focus on core business (sales, editorial, business development within media), and to sell services to other customers (printing, IT or financial services).” 52
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED Conclusion When done right, outsourcing helps when departments are only partially newspapers cut costs and strengthen their core outsourced, and departmental functions need businesses, freeing in-house employees to both to be contractually divided between concentrate on what brings value to the outsourcers and company employees. business – unique content – and what else can • Create detailed plans about what needs to be be done to support that content – creating new outsourced, and the detailed expectations from revenue streams. outsourcing company in a contract. But how do newspaper companies ensure they • Work with your outsourcing partner as if they are integrating outsourcing correctly into their are internal. business processes? What are measures they can take to make success more likely? Several top executives at newspaper companies who took WAN's 2009 Outsourcing Survey In ch. 3, newspapers offered some lessons on also agreed to be interviewed. Although what they have learned from their outsourcing coming from different parts of the world, and and offshoring efforts, including: from different company sizes, most gave the • When the decision is made to outsource a same reasons for outsourcing: being able to function or experiment with outsourcing, make focus on the core business, all while saving on sure employees are informed. No news is often operating costs. seen as bad news, and can create discontent Another common theme from several of those across departments. interviewed was a lesson learned by going • Clearly define the tasks in the outsourcers’ through the initial outsourcing processes: contracts. Hiring outsourcers requires creating When hiring a company to outsource work to, contracts that clearly define the scope of a contract that clearly defines both depth of services and annual outlay, and thereby drive services and yearly expenses must be created. cost controls. This is particularly important Additionally, when functions are only partially 53
    • MARCH 2009 SHAPING THE FUTURE OF THE NEWSPAPER outsourced, this becomes more important, as selling to the local restaurant owner. It's just duties should be divided contractually between the transformation of data – there's no reason in-house employees and the outsourcing to not send it elsewhere ... look at what makes company, some respondents said. you unique, what brings value, and outsource the rest.” “There are always problems related to outsourcing. One key learning is that it is Pervez Sikora, chief operating officer and co- impossible to outsource production or IT if founder of 2AdPro said it is important for you don’t have full control of your processes. publishers to stay engaged and constantly Your have to clearly define what to outsource monitoring the transition process after an and what should stay with us. The interface outsourcer has been hired. between us and the service provider is “It takes about 30 days for our creative team to extremely important,” a Scandinavian get a good understanding of the creative publisher told WAN. requirements and preferences of a publisher. A For many, outsourcing brings to mind call publisher must review work and give constant centres in other parts of the world, but at large and detailed feedback during this period to media companies and multi-national help with the transition process,” he said. newspaper companies, outsourcing is commonly done within the company to In the end, if outsourcing is not strengthening subsidiaries. Therefore, each function is done the core product, something isn't right. If by experts in that field, but under separate efficiencies are found by damaging the core, budgets, and all under the same corporate they're not really efficiencies at all, even umbrella. though they may make the bottom line look good in the short-term, Tony Joseph, CEO and In Chapter 4, executives from outsourcing and co-founder of Mindworks Global Media offshoring companies also offered tips they Services, pointed out. believe pave the road to success for newspapers: RCS Quotidiani S.p.A., which publishes Corriere della Sera and Gazetta dello Sport • Create an analysis of ad volumes, category newspapers, has outsourced IT, prepress and and complexity of work. Use this analysis to printing within Italy, to attain lower costs and identify what to outsource and when to become more flexible, said Roberto Sardi, outsource. technical director. • Specify clear benchmarks and a broad “The main advantage of outsourcing for RCS agreement on how the project will scale up. At is that there’s no need to create new in-house the end of a defined period, everyone must structures (i.e. IT and human resources) and at know what must be developed in terms of the same time it assures flexibility and limits quality and turnaround times. expenses. This is both a short and long term • Choose the company with business benefit: the company can set up and develop a continuity. Do they have data backup? Will project starting with a low capital expenditure they still be able to operate and provide the and putting just operating expenses in the service if a problem develops? Business business plans. This of course lowers the continuity is key for both data and geography, investment risks and improves the ROI of a and it's insurance that the work will get done. new initiative,” Sardi said. • Understand who you're choosing. Check However, turning functions over to an references, talk to other publishers who have outsourcer is not enough to ensure success, used that company, and make sure the decision he said. “Outsourcing can actually be a great is not based on “give me the cheapest service I benefit if the companies are able to keep can get.” Look for value, and decide what is of and to manage the know-how of the work utmost importance to you. they’re committing to service providers. If a company loses the underpinning of the Express KCS CEO Robert Berkeley said it is different levels of production, it will no longer of utmost importance to check out a vendor's be able to manage the workflow effectively track record and process for transitioning, and and as a result it also loses its bargaining then listen to their advice. Outsourced work “is power with its partners.” a production task – it's not Opinion, it's not 54
    • VOLUME 8 REPORT N° 3 OUTSOURCING REVISITED THE PUBLISHER World Association of Newspapers 7 rue Geoffroy St-Hilaire 75005 Paris, France Tel.: +33 1 47 42 85 00 Fax: +33 1 47 42 49 48 E-mail: contact_us@wan.asso.fr WAN CEO Timothy Balding SFN DIRECTOR Martha L Stone mstone@wan.asso.fr + 1 847 778 9806 SFN EDITORIAL MANAGER Leah McBride Mensching SFN BUSINESS ANALYST Erina Lin PAGE AND GRAPHICS DESIGNER Marianne Audouard GUEST CONTRIBUTORS Pacific Area Newspaper Publishers' Association CEO Mark Hollands Editorial coordinator Brett Taylor Ultimo, Australia brett.taylor@panpa.org.au ValueNotes CEO Arun Jethmalani Pune, India For more information on the report, “Offshoring by US Newspaper Publishers,” visit www.sourcingnotes.com or write to bporesearch@valuenotes.biz World Association of Newspapers © WAN March 2009 The contents of this report may be used in whole or part by publi- shers in the execution of their business. Use of any part of the content or intellectual property herein for the purpose of representa- tion or consulting requires prior written consent of the author. Any reproduction requires prior consent of WAN. 55
    • STRATEGY REPORT Shaping the Future of the Newspaper Volume 8 N°3 MARCH 2009 © WAN ANALYSING STRATEGIC DEVELOPMENTS AND OPPORTUNITIES IN THE PRESS INDUSTRY A World Association of Newspapers project supported by four strategic business partners