STM publishers far from satisfied

Pune, India, 16 February 2010

According to the survey, publishers’ satisfaction levels have still not peaked in the STM/Academic segment despite the fact that the segment has been outsourcing for the last two decades
Publishers indicated that a saving of 15-25% through outsourcing was realistic and attainable
On the other hand, service providers claimed that outsourcing could save publishers 25-40% of their cost

The STM (Scientific, Technical & Medical) publishing industry has changed dramatically over the last two years. The global economic slowdown has hit the industry’s revenues hard. Moreover, with rapid technological advancements, publishers were in for a rude awakening – their business models were no longer adequate. In an era of cost pressures, changing consumption patterns and the struggle to sustain revenues, it only seems logical that the industry will outsource more.

The context of an industry in turmoil and looking for answers to rein in costs prompted us to ask the publishing industry, “What are your future plans for outsourcing?” A comprehensive survey provided us with tremendous inputs about the publishing industry, particularly STM publishers.

A long way to go to reach optimum satisfaction levels

Satisfaction levels are a true indicator of the state of outsourcing. The higher the satisfaction levels, the higher the adoption rate. The STM/Academic publishers have been the avant-garde of outsourcing in the publishing industry. The segment has been outsourcing and offshoring for the last two decades. It is for this reason that the segment represents a mature outsourcing market. However, our survey responses suggested otherwise. The exhibit below demonstrates the satisfaction levels of publishers outsourcing in the STM/Academic segment:

The satisfaction levels have still not peaked in the STM/Academic segment. According to Aradhana Kolhatkar, lead analyst Publishing Services, ValueNotes, “Considering that outsourcing has long been associated with the STM/Academic segment, it is surprising to note that the industry is still aspiring for higher buyer satisfaction. This is probably an indication of higher expectations versus unsatisfactory delivery by the industry as a whole.” Lower satisfaction levels also stem from publishers using smaller or fly-by-night vendors.

Publisher-provider misalignment on cost savings

Cost savings is one of the key drivers of outsourcing and there still remains a significant misalignment of the quantum of saving claimed by the publisher and the service provider. Most of the publishers that we surveyed indicated that a saving of 15-25% was realistic and attainable. On the other hand, service providers claimed that outsourcing could save publishers 25-40% of their costs.

So, why is there a misalignment?

The misalignment exists because seller end savings are never the same as publisher’s actual savings.

Publishers do not account for overheads from their end – project management, in-house quality checks, etc.
Sellers need to ensure that the publisher understands the difference between seller end cost savings and actual cost savings.
Time. This is often overlooked as publishers expect immediate cost savings and sellers do little to dispel the myth. Transition requires time, and costs tend to go down once productivity and efficiency kicks in. This in turn will require lesser effort by the publisher while monitoring outsourced work and thereby reduce actual cost to the publisher.

According to Vivek Shenoy, analyst Publishing Services at ValueNotes, “Expectations and realizations are too far apart to result in a good experience while outsourcing. For their part, sellers need to include publisher costs in their savings projection. More stress needs to be made on when projected cost savings will emerge.”

While 75% of the publishers we surveyed indicated that the quality of outsourced work had to improve considerably, almost 64% said they would continue to outsource. Echoing the sentiments of the industry as a whole, the STM segment is also set to increase outsourcing by 15-20%, and India remains a favored publishing outsourcing destination.

The ValueNotes report - What do STM/Academic publishers think about outsourcing? - analyses the expectations and opinions of publishers in the segment. It also provides an insight for providers to understand various aspects of the buyers’ experiences while outsourcing.

About ValueNotes

ValueNotes is a leading provider of business intelligence and research, with expertise across industries, particularly in financial services, media, engineering, healthcare, IT and the outsourcing industry. We have built strong capabilities in the collection, interpretation and analysis of data - both qualitative and quantitative.

The ValueNotes Sourcing Practice is one of the largest information providers on the outsourcing industry. The Practice uses a comprehensive, analytical framework providing fresh insights into the fast emerging and yet, complex outsourcing space. We extensively track the space through regular analysis of news and events, continuous primary research and contact with the industry. Additional information is available at www.SourcingNotes.com

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