| Publishing outsourcing industry gains traction with multi dimensional deals |
| Wednesday, 03 August 2011 | |
As per ValueNotes research findings the following are some key publisher concerns:
Globally, publishing companies are facing immense cost pressures. They are in the process of adapting technological changes to cater to rising demand of e-books and digital print content. Outsourcing has emerged as one of the many measures to meet challenges these challenges. In July 2011 alone, there have been a series of events that indicate strategies being adopted by industry players to stay ahead in the game. Growth in investment in publishing outsourcing Franklin Templeton Private Equity Strategy (managed by Franklin Templeton Asset Management; Aureos South Asia Fund and ePlanet Capital) bought a majority stake in Newgen Knowledge Works. The 65% stake was purchased from Carlyle Group. Balaji Srinivas, managing director, Aureos (India) expressed confidence in the growth of the e-publishing industry, “We are convinced about the opportunity in the outsourced publishing space, specifically in the opportunity that presents itself in the digitization of books.” This indicates the growing confidence of private equity investors in the publishing outsourcing. Publishing outsourcing providers have indicated that they can help publishers meet the challenge to address the shift in user preferences from print to digital media format and control costs. Understanding the importance domain knowledge Publishers expressed reluctance to work with service providers lacking domain knowledge and prior experience in publishing. According to Akshay Pathak, President and CEO of Frankfurt Book Fair, Juergen Boos and director of German Book Office, New Delhi chapter, "There are three main challenges - (for the publishing industry) lack of education or training for community members is one. Secondly, there is lack of information - people learn once they join the sector. And finally, infrastructure and distribution of books is a real challenge even though retail is picking up." In addition to hiring industry experts or recruiting experienced teams with prior experience the vendors can now look to getting trained professionals from the Indian Institute of Management, Ahmedabad (IIMA). The institute has recently announced the start of a course in publishing covering in-depth aspects. We believe that industry stakeholders will follow the success of this initiative and its impact on the publishing outsourcing industry with great interest. Expanding client base from captives to third party Publishing group Macmillan is looking to entirely divest its majority (61%) stake in publishing BPO arm, MPS. According to media sources, printing firm and books exporter Repro India has expressed interest. The divestment will help MPS scale up operations and attain third party businesses which was slow due to its association with a rival publisher, Macmillan. This move indicates a growing demand for outsourcing that MPS wants to capitalize on. Outsourcing to attain cost and operational efficiencies UK based publisher Mecom announced a €90 million outsourcing deal with HCL. Mecom is outsourcing what it calls a ‘significant’ proportion of its IT operations to HCL with an expected positive impact of €12 million on profits. In a press release CEO Keith Allen said that the deal was expected to contribute in transformation of Mecom from a printed newspaper publisher to a multi-platform consumer content business. HCL has a strong publishing service division with four of the top five global publishing companies as its clients. These industry movements across multiple dimensions point to the churn that the publishing outsourcing industry is experiencing. As digital technology, e-books, mobile and device applications progress, further traction is likely in the space in terms of consolidations, mergers, buy outs and deals. The adverse impact of the economic recession on the publishing industry especially in the US and Europe resulted in major changes. The current trends are a welcome indication that the industry, is slowly but surely overcoming its challenges. Outsourcing providers can help publishers meet some of their challenges and provide holistic solutions to tackle technology changes and innovate faster and cheaper solutions to keep abreast with growing consumer demands and industry trends. Some of the changes are further proof that vendors have taken it upon themselves to contribute not as mere ‘service providers, but more as stakeholders in the industry. - Runa Mookerjee, Analyst, ValueNotes Sourcing Practice Related Items: |
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