| Publishing outsourcing – building capabilities |
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| Friday, 14 December 2007 | |
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Bowne & Co. (NYSE:BNE) recently awarded a $29 million outsourcing contract to Aptara, an Indian-owned publishing services company with a large offshore presence. RR Donnelley (NYSE: RRD), another large global vendor has opened a new center in Chennai, India and plans to service new clients from this center. Target: a hybrid model Aptara has recently also secured a contract from IOP Publishing to provide copy-editing and composition services for IOP’s journals. RR Donnelley too was recently awarded a multi-year contract by News America Marketing. Activity is rife in the publishing outsourcing industry as large vendors are trying to leverage the opportunity. New contracts, expansions and consolidation are signaling the growing maturity of the industry. At the same time, cost pressures are driving global vendors to expand their offshore presence. India has always been at the forefront, and has been utilized by companies like Macmillan and SPS Publishing for many years now. The cost arbitrage and large talent pool in India are generating huge cost savings in services such as composition, data conversion, XML solutions and content creation. Indian companies also in the race While the global vendors are adding offshore capacity, Indian publishing vendors who have gained scale over the last few years are also aiming at an integrated onshore-offshore model. The onsite presence works to build confidence among clients and provides marketing front-end. Indian companies are either setting up overseas offices, or simply acquiring companies abroad. The acquisitions serve a dual purpose of bringing in clientele and in most cases, higher end service capabilities. Leading Indian vendors like Infomedia and Integra have made acquisitions in the US and UK to gain onsite presence. Integra recently acquired Elm Street Publishing Services, which provides high-end project management services, complementing Integra’s own suite of services. Infomedia acquired Keyword Group and ITC. Aptara has bought over a US-based legal publishing company Whitmont, offering specialized services. Indian companies have in turn also been targets by the global vendors seeking to acquire an offshore back-end. The acquisitions of Office Tiger by RR Donnelley and SPi by PLDT have added huge offshore capacity to the acquirer’s business. As most of the Indian companies are not listed, they are also attractive options for investors and venture capitalists, given their future growth potential. American Capital Strategies has invested an additional equity of $23 million in Aptara, which it will use for funding future growth. Helion Ventures has invested $5.1m in Hurix Systems. Going forward With the overall acceptance of India’s strengths in publishing offshoring, more and more global business is likely to flow into India – either through offshore centers of global vendors, or directly to Indian vendors. A ValueNotes report published in April 2007 predicts the offshoring opportunity in publishing to be around $1.46 billion by 2010, with an estimated growth rate of around 35 percent per annum until 2010. As vendors gain more and more maturity, greater cross border acquisitions and collaborations can be expected. Newer niches like educational publishing, legal publishing, testing and assessment will gain maturity alongside scientific, technical and medical publishing, which is the dominating business segment currently. Creating a competitive differentiation will become increasingly important for survival and growth of publishing services companies going forward. ValueNotes Outsourcing Watch: Insights for Investors is a unique news and analysis service from the ValueNotes Outsourcing Practice, focused entirely on outsourcing; This weekly publication analyses events in outsourcing, outsourcing companies, trends in the sector, impact of global competition from offshoring to established US companies, and emerging investment opportunities. No responsibility is accepted for errors of fact or opinion. Neither the analyst nor ValueNotes has a position in the stocks covered above, or has received any payment in any form for this report. ValueNotes does not own or trade in the stocks of companies under coverage. ValueNotes does not provide investment banking services or investor relations' services to preserve the independence of its research. Neither ValueNotes nor the analyst incurs any liability arising out of use of the above information/ report. Reproduction in whole or in part without written permission is prohibited. ValueNotes Outsourcing Watch articles are distributed through FinancialWire, an independent, proprietary news service of Investrend Information, www.investrend.com |
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