With the publishing industry facing cost pressures, change in consumption patterns and struggling to sustain its revenues, it only seemed logical that the industry as a whole would outsource more. To truly understand how the industry value chain perceived outsourcing, we at ValueNotes Sourcing Practice decided to conduct a publishing survey.

To gain clarity on where the industry is heading, we needed to understand:

• whether more publishers are considering outsourcing
• what functional areas are publishers looking to outsource
• what are the primary drivers for outsourcing
• what are the cost savings publishers expect

We would like to thank all our respondents  (237 of them) – your inputs and insights has helped us gain better understanding of one of the most important questions, will publishers outsource?

Who took the survey?

We got 237 responses from across the industry value chain – buyers, industry trackers and sellers. The following illustration gives a snapshot of our survey demographics:

Source: ValueNotes

The responses so gathered are diverse in terms of:

• Geographical presence of the respondent and his/her company
• Size of the respondent company (from below 300 employees to more than 10,000)
• Segmental presence (newspaper, magazine, education, etc)

The diversity of responses has been instrumental in understanding how industry perceptions vary based on the attributes mentioned above.

Of all the insights we have got through the survey, none is as important as buyer expected cost savings and vendor projected cost savings. Cost savings is one of the key drivers of outsourcing and there still remains a significant misalignment between buyer side and seller  side savings.

What do buyers expect in terms of cost savings?

We asked buyers “what cost savings are you looking to achieve?” The responses are below:

Source: ValueNotes

Most responses indicate that savings of 15-25% is realistic and attainable. There also exists a portion of buyers that have achieved/looking to achieve 25-40% savings. These publishers represent shrewd buyers – ones that have nurtured their vendors.

However, seller projected savings indicates there is a misalignment.

Source: ValueNotes

While buyers expect 15-25% savings, sellers project 25-40% savings.

So, why is there a misalignment?

The misalignment exists because seller end savings are never the same as buyer’s actual savings. The diagram below illustrates this:

Source: ValueNotes

• Buyers do not account for overheads from their end – project management, in-house quality checks, etc.
• Sellers need to ensure that the buyer understands the difference between seller end cost savings and actual cost savings.
• Time. This is often overlooked as buyers 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 buyer while monitoring outsourced work and thereby reduce actual cost to the buyer.

Expectations and realizations are too far apart to result in a good experience while outsourcing. For their part, sellers need to include buyer costs in their savings projection. More stress needs to be put on when projected cost savings will emerge.

Some other insights from the survey:

• 75% of buyer responses indicate considerable improvement is required in terms of quality of outsourced work.
• Quality requires a drastic improvement.
• Outsourcing in the publishing industry is set to increase by 15-20%
• In addition to cost savings, value addition in current offerings is a strong challenge for publishers.
• Overcoming lack of in-house capabilities is also a strong driver for outsourcing.
• 64% of buyers will continue outsourcing.
• Demand from buyers lie more for content and production.
• India remains a favored publishing outsourcing destination followed by US, Philippines , China, UK.

Download the findings of the survey here.

Please do comment – would love to know what you think.