Craig Bauer has been with Houghton Mifflain Harcourt for the past four years, currently as Vice President of Strategic Sourcing, and prior to that as Vice President of Global Supply Chain (2005-2007).

Previously he spent close to six years at RR Donnelley as Director of its Digital Services Division (1999-2002), Director of its Graphics Management Division (2002-2004), and most recently as Director of Business Development & Planning (2004-2005).

Prior to RR Donnelley, Craig spent five years as Packaging Engineering Manager at Black & Decker.

Craig graduated with a BS from the University of Baltimore and an MBA in finance from DeSales University.

ValueNotes: The current economic downturn has impacted several businesses - how do you think it will impact the BPO industry?
Craig: Expect to see more functions being outsourced but also consolidation among the BPO firms. Overall declines in demand due to global recession will drive M&A, particularly in areas of higher fixed cost models.

ValueNotes: How do you think the downturn will impact the publishing industry?
Craig: Outsourcing has increased - not as an impact of the current global environment as much as strategic direction to outsource certain business processes.

Under the vertical of "publishing", there are many discrete segments that have strong structural drivers of demand where the business volume will eventually return to pre-recessionary levels.  Other segments will bounce back, but not to previous levels due to secular trends.

ValueNotes: Will this result in more publishers actually outsourcing?
Craig: It will certainly lead to further consolidation and possibly BPO growth, but each segment has unique business cycles, order flow, products and services. So I would expect to see some differences across them.

The percent of products produced will likely to remain flat, but I expect more service functions to move offshore - particularly financial, accounting and customer service functions.

ValueNotes: Is cost a determining factor while migrating to a new outsourcing partner?
Craig: It's always a factor but ultimately we are evaluating and awarding firms that have competencies and scalable resources that allow them as a partner to produce and transact more efficiently than ourselves. If that is not apparent during diligence, then you may not have the right partners proposing or they may not be able to improve upon those processes or your operations in a manner that's material to your company.

ValueNotes: What are the key factors that you would consider while choosing a service provider?
Craig: Scale, experience in servicing similar markets and products, financial health, technology.

ValueNotes: What are the challenges that you encounter while offshoring?
Craig: For production and manufacturing, the product development and fulfilment cycles are compressing more each year challenging the volume of work we can take offshore without incurring expedited freight costs that erode production savings. Quality and cultural has been overcome largely, in terms of cost, security, quality, cultural issues...

ValueNotes: What advice do you have for other publishers?
Craig: Evaluate each process discretely and properly mitigate risks.

ValueNotes: Do you expect the role of your service providers to change over the next few years?
Craig: Yes… there is a natural cycle to these as the implementation year is typically focused on the agreed processes and managing exceptions and issues. Once start-up items are behind you, firms can begin to partner in ways that create greater value, whether that's through best practices they observe with other clients, better visibility into forecasting demand, process improvements, etc.