Infosys (NASDAQ:INFY) and the TV18 group have recently started a joint venture called Source18 to provide outsourced services across the value chain to media and entertainment companies. The entity will provide digital archiving, reediting, transcoding, uplinking and inventory management, among other services.

Increasing action

Reuters was one of the pioneers in setting the media outsourcing trend in India, back in 2004. The Reuter’s center in Bangalore, which now employs over 1000 journalists, provides service support to Reuter’s offices worldwide at a fraction of the cost.

Now, the Indian BPO industry, led by some of the largest third party service providers, is gearing up to a huge opportunity in providing outsourced services to the media and entertainment industry, which is expected to grow to $2 trillion by 2008. Preceding the Infosys – TV18 tie-up was another big-ticket alliance announcement last year by Genpact (which has filed for an NYSE IPO) and NDTV, a leading media company in India. The venture NDTV Convergence is offering services such as editing, digitization and closed captioning.

While more Indian BPO providers are likely to enter the area in the near future, the dearth of specialized skills and domain knowledge is prompting partnerships among media houses and BPO providers. The media company provides the much needed know-how, while the BPO company provides the process excellence and the delivery capabilities that allow a comprehensive offering to the overseas client.

Compelling drivers

Some of the drivers favoring India over other destinations are obvious – a large English speaking workforce, lower salaries and a time zone advantage. However, there are other more dynamic issues. The global media industry is at a transformational stage, with technological change at its behest. This has brought in a huge one-off opportunity, in converting media records from analog to digital formats, archiving and making content more accessible for the future, especially for newer platforms like the Internet and mobile. The NDTV-Genpact alliance is targeting this opportunity to begin with, while the National Geographic Channel is likely to engage the newly formed Infosys – TV18 venture to re-purpose some of their existing content for the mobile platform.

Further, the pressure for rapid and expansive content creation is creating resource challenges for media companies. The Reuters center in Bangalore employs a cheaper workforce that researches companies, edits articles and enables round-the-clock services due to the time zone advantage. Moreover, the company has been able to expand the breadth as well as depth of service offerings as it frees up time of their key resources on account of outsourcing support services.

Cost remains the primary driver in most cases though. Boston Globe – a New York Times owned publication – recently decided to outsource 50 advertising and circulation jobs to Bangalore largely dictated by cost pressures, notwithstanding strong protests from labor unions. The Columbus Dispatch, an Ohio-based newspaper outsourced 90 graphic design jobs to a vendor in India. There is scope for much more cost-driven, non-core business to India and other low cost destinations in future, as improving efficiency seems to be topmost on media and entertainment company agendas.

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.

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