Outsourcing Ads Up ? for India

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By: Jennifer Saba

The excess of newspaper staff-cut announcements in recent months has taken on an unsettling ring. While the loss of jobs is terrifying enough, an added element makes it even more stomach-churning: In some cases, jobs are not so much lost as going elsewhere ? often overseas.

Outsourcing is certainly not new to the industry. In almost every department, newspapers have been handing over critical pieces of the business to third parties for more than a century.

Newsrooms have leaned on the Associated Press, founded in 1846, for a great deal of content. Circulation departments turned to outside contractors and trucks to deliver papers to newsstands and homes. Representatives in Pennsylvania field customer service calls from newspaper subscribers in California. But the industry’s current revenue crunch ramps up the urgency to shrink costs. Even the outsourcers are feeling squeezed: consider the two groups of rankled newspaper editors’ recent protests against AP’s new rate structure and fees.

Now the outsourcing of advertising production is drawing wider attention. In the past year-and-a-half, several dailies have transferred that function to overseas outfits, mostly with offices in India.

There are several forces motivating newspapers to move their ad production work offshore. Foremost is the dire need for cost savings. The wiring of the globe for high-speed Internet access, coupled with the growing familiarity of letting foreigners do work once handled stateside, have come together in a common business strategy that has piqued the interest of publishers.

“India has always had brilliant, educated people,” Paul Saffo of the Institute for the Future told Business Week in a 2003 article on the rise of India and outsourcing. “Now Indians are taking the lead in colonizing cyberspace.”

Several companies have sprung up or leaped into action to go after ad production ? a department that creates ads for mostly local clients in categories like real estate, automotive, and retail. Outsourcing companies vying for a piece of that business include 2AdPro, Express KCS, Affinity Express, and CCI Sourcing.

Their advantage ? and emotional touch point ? is that they maintain artists and staff in far-flung Indian cities like Chennai, Bangalore, and Gurgaon, where there is a steady stream of high-quality, inexpensive workers. These companies maintain they can do the same work for much less, saving newspapers anywhere from 20% to 60% of ad production costs.

Since newspapers maintain different cost structures, the dollar amount saved varies wildly depending on several factors: the location and size of the newspaper, pay packages, head count, benefits, the state of equipment, the software used, and the volume of ads produced.

Even pinpointing the staffing size of an ad production department is difficult, says Mort Goldstrom, vice president of advertising at the Newspaper Association of America. Different papers include different functions in that department, he explains.

When asked, however, many sources agreed that a back-of-the-envelope calculation shows that metro newspapers can realize a savings of about $500,000 a year when ad production work is offshored.

Chains like the Sun-Times Media Group, which in February announced that it will outsource its ad production work for its 95 publications to Affinity Express, expects to save $3 million annually.

“What I like about this,” says Goldstrom, “is if they can do it more efficiently and advertisers are happy, that is a good thing.”

But the process of exporting any work to an outside source ? even within the U.S. ? needs to be monitored closely. Sure, a newspaper might be able to save by tapping cheap labor overseas, but there are several minefields to navigate in the process.

The Columbus (Ohio) Dispatch, for example, lost several hundred thousand dollars during the labored process of transitioning its ad work to Pune, India. That case, noted later in this story, serves as a cautionary tale. Many of the companies handling the outsourced work have just started doing so with news- papers, and there are many kinks that need to be smoothed out.

Gannett Vice President/Production Austin Ryan, who is overseeing the outsourcing of ad production work at several of the chain’s properties, says, “If you look at today’s business models, [newspapers] have been outsourcing for years. I think our industry is fully capable of doing this.” However, he adds, “I think we need to be selective in what we outsource.”

If you can’t beat ’em …
Todd Brownrout and Pervez Sikora saw all of this coming. They worked together at the Los Angeles Times, where Brownrout served as senior vice president of advertising. Sikora, who was the paper’s director of advertising technology, was charged with a mission in late 2005 to look into offshoring. He says they had to come up with a list of internal functions ? not just the “no-brainers” like IT, but other areas as well that could be sent abroad.

Sikora was no stranger to the concept; his background included work with a Bay Area firm that handled offshore call centers. But the level of sophistication surprised him when he and other Times executives went on a fact-finding trip to India.

“It was pretty eye-opening,” Sikora recalls. “I just had not realized the extent and the type of work happening in India.” The Times and its then-classified subsidiary, Recycler, signed to do a test run with Affinity Express, a company that specializes in ad production work with U.S. headquarters in Elgin, Ill., and offices in India.

Sikora and Brownrout left the paper in March 2006 before the project was in full swing and decided instead to start their own outsourcing company, 2AdPro.

Brownrout, who describes himself as a newspaper guy through and through, says he “sees the writing on the wall, with pressures on costs all the time.” Newspapers are expected to produce more ads than ever, not for just the daily but also its niche publications and online affiliates. “It’s an area where there is tremendous cost squeeze,” he adds, “and newspapers can’t walk away from it.”

When a paper contracts with 2AdPro, the company’s staff produces the ads that come in over the transom. “You want to send us 50 ads a month? Fine. You want to send us 500 a month? Fine,” says Sikora, who points outs that newspapers pay by the volume of ads, not for dedicated employees.

It works like this: A newspaper salesperson or production coordinator logs on 2AdPro’s custom site, which syncs up with the newspaper’s ad management system (it can also work without an ad management system) and inputs the order for the ad, specifying images, text, sizes, and other data. Half a world away, 2AdPro staffers in Bangalore and Chennai pick up the request, reproduce the ad, and deliver it to the paper electronically the next morning.

2AdPro divides its 150 or so staffers into teams, each with an expertise in such advertising categories as real estate, automotive, and the like. “In the initial stage,” explains Sikora, “we capture everything we can about the customer. We study the newspaper to understand what it currently looks like ? all that is brought in.”

Gannett outsources with 2AdPro, and Ryan says he is “elated” with the process. He admits there are learning curves ?”Some of the ads they do for us are not so good,” he says ? but that is to be expected. He does like the ability of getting anywhere from 35 to 100 spec ads over a handful of days. “No newspaper is capable of that, because we don’t staff that way,” Ryan adds.

The big hand-off
When European advertising agencies started exploring ad sourcing, the Danish-owned Stibo (the parent of content management systems company CCI Europe) and the Indian daily newspaper The Hindu jointly founded CCI Sourcing in 2006. “We wanted to make sure we had the quality level to satisfy ad agencies, and then go to newspapers,” says Jeff Rogers, the Atlanta-based vice president of North American sales. Rogers, who worked at The Dallas Morning News for 11 years, notes, “We are in no way a newcomer to newspapers.”

CCI Sourcing treads gingerly when considering the type of newspaper ad work it will do. “We firmly believe in not taking over departments,” Rogers says. “We believe there is a measured process. It doesn’t make sense to outsource the entire advertising department.”

It’s a slightly different take than, say, one outsourcer that does business with MediaNews Group and other newspaper companies like McClatchy.

Five years ago, Robert Berkeley founded Express KCS, an offshoot of the 35-year old Indian outsourcing company KCS, when he started hearing rumblings among newspaper and magazine publishers in the UK and the U.S. about offshoring possibilities.

“Our clients are looking to make savings first,” Berkeley says during a phone call from London. “We take what they have today and contractually commit to achieving [that] with the same number of staff, which is really hard because these guys in India have never heard of Miami or Minneapolis.”

Berkeley dismisses any concerns of language and translations. To prevent cultural cross-wire, Express KCS replicates the ad production department in India as if it was airlifted directly out say, San Jose. “We get a dedicated staff” for each newspaper client, he says. “There’s an office with a door on it that says, ‘San Jose Mercury News.'” The Indian staffers visit the newspapers and cities so they can gain a better grasp of cultural differences. “So they understand when you say ‘football,’ you mean the oblong thing, not the round thing.”

Stretching the global limits
Technology holds the promise that it can flatten the world, to use Tom Friedman’s turn of phrase, that it can make communication seamless. As long as a someone has access to a high-speed Internet line, where does it matter where they work?

Unless technology goes haywire.

A bizarre incident that occurred early this year off the coast of Egypt affected Internet access throughout the Middle East and Asia: At the end of January, two undersea Internet broadband cables were cut. The disruption slowed or halted Internet activity in a whole swath of countries, including India, Pakistan, Egypt, Qatar, Saudi Arabia, the United Emirates, and Bahrain.

“The biggest impact to the rest of the world could come from outages across India, where many U.S. companies outsource customer-service call centers and other back-office operations,” an AP report warned.

Affinity Express cited that breakdown as the reason it keeps a team of staffers not only in India but also in Manila, Philippines. The 14-year old company, which also has more than 800 employees, manages ad production for the likes of The Charlotte (N.C.) Observer and The News & Observer in Raleigh.

“Our message is different than most,” says David McTarnaghan, Affinity’s president of media services. “It’s not just about saving money, but it’s helping business grow. Yes, we want to make ad production more efficient, and your salespeople to be more efficient. We are going to give you training and tools.”

Other vendors and newspaper reps interviewed for this story claimed there was no disruption caused by the January line cut.

Communication breakdown
While technology meltdowns can disrupt the outsourcing process, the real monster problems happen when there are misunderstandings about how newspapers operate. No matter the location, if the third party does not grasp deadlines or ad sizes, it can cause incredible setbacks.

What’s more, there is a loss of institutional knowledge when staffers are laid off ? even if the job stays within the U.S.

“There’s a lot to be said for having a dedicated employee with some loyalty to the company,” says Anthony Napoli, a local representative with the Newspaper Guild of New York, who has seen jobs outsourced by The New York Times and its sister publication The Boston Globe. “That is how the company stays viable.”

More than a decade ago, the Los Angeles Daily News decided to outsource its ad production work to a Blue Bell, Pa., division of Volt Information Sciences. But after two years, the Daily News pulled the work from Volt and outsourced it to TSA Design Group, a graphic design firm in Van Nuys, Calif. John Webb, then the Daily News’ production director, cited in a 1996 letter to E&P Volt’s “lack of newspaper knowledge.”

The Columbus Dispatch had a similar experience when it decided to offshore its ad production work to India.

The Dispatch learned that the Los Angeles Times was doing a trial run offshoring its ad production work, and decided it might be worth a try. “We were looking at it really as cost savings and efficiency improvement,” says VP/CIO Joe Gallo. “We had a department that had grown fairly significantly. We knew it was larger than it should be” ? at the time, he notes, 90 people staffed the ad services department ? “and we had a lot of process issues.”

Gallo started conversations with Affinity, the Los Angeles Times’ test vendor, in October 2006. After a trip to India and further vetting, the Dispatch signed a contract with Affinity in November 2006. The paper announced it was outsourcing, and offered buyouts to ad production employees by December. “We wanted to be out front and get out there to the department, and the advertising community,” Gallo says.

At that time, representatives with Affinity told the Dispatch it could “go live” in April 2007. The paper had started the buyout process so that it would be completed by then.

As the switch was under way, “it came to light [Affinity] really had no solid understanding of the work they had been contracted to do,” Gallo recalls. “It was a very, very difficult transition” ? one that lasted until mid-summer of 2007. “They knew how to build an ad, but they didn’t know what it meant to have multiple deadlines and multiple products,” he says. “They didn’t understand that what we were asking was standard for the industry. There was a total lack of industry understanding and experience.”

Affinity has handled work for promotional product companies, retail printers, and direct mail for more than a decade. But at that time, newspapers were uncharted territory.

After the test run, the Los Angeles Times eventually decided against Affinity. But Recycler, its sister publication at the time, signed on. According to Affinity’s McTarnaghan, the Times was the company’s first newspaper client ? and the paper wanted to continue using its old legacy workflow systems.

“It wasn’t just the systems,” he says, “it was primarily the business model we tried to start. It didn’t position us or them well.” It served as a learning experience, he adds, and Affinity has since tweaked its model.

As for the Dispatch, McTarnaghan explains, the paper was going to be Affinity’s first client to try out an integrated workflow system ? but the catch is that the Dispatch wanted to host it. “We acknowledged the ramp-up was difficult until the new workflow system was online. Since then we have taken a different approach and created a service bureau,” he says, adding that the systems are now tested and hosted by Affinity before a project goes live.

Further complicating matters, the Dispatch was way behind the curve in advertising technology for its ad services, confirms Dispatch VP/Sales Abby Clark. The staff couldn’t proof electronic tears, for example, until the Affinity project. One of the benefits to going with Affinity was the technology upgrade.

The hurdles were steep. “It was a little bit of everything,” Clark says. “Some people’s ads didn’t run. We left out ads. Some people put the wrong ads in, or others that ran were incorrect. When you think about the ad process, there are a lot of places where things can go wrong.”

Clark says that they kept all their ad accounts; some dropped out during the changeover, but eventually came back.

Now, the Dispatch is sticking with Affinity. “They have gone out and hired people with industry experience,” Gallo says. “They also had a problem in India ? the management over there had been replaced. They corrected onshore and offshore issues. We are now getting the performance we used to get from our team and we hope to get even better performance going forward.”

Gallo declined to give hard numbers as to how much his paper is saving by making the move, but notes the Dispatch is shaving roughly 30% off its ad production costs.

“In hindsight,” Gallo reflects, “it was very aggressive to give them a systems implementation. Their strength is just building ads. We are pleased now with how they build ads and how the process works.”

Affinity has acquired 140 newspaper publications as customers since October 2006.

Testing the waters
Lynn Dickerson, McClatchy’s vice president of operations, says that several of the chain’s newspapers are in the process of testing with Express KCS and Affinity: “We are looking for them to do work both better and cheaper.”

Kim Parks, digital operations manager at the Gannett-owned Rochester (N.Y.) Democrat and Chronicle, says any new relationship takes time to smooth out: “It’s bumpy in the beginning any time you go live, no matter how much testing” you do. Many of Gannett’s papers, including the Democrat and Chronicle and The Des Moines (Iowa) Register, have outsourced with 2AdPro.

Parks says the outsourcing works for them. The sales reps have to be “very specific” with layouts, she points out ? though sometimes, depending upon the client, they sometimes give the artists more leeway. The advantage, she notes, is the quick turnaround: Prior to offshoring, it would take anywhere between 24 and 48 hours to receive an ad. Now, as long as the ad is inputted by 8 p.m. EST, the paper receives it by 8 the next morning.

One executive at a major metro, who wishes to remain anonymous, says things went as planned with its Express KCS implementation ? but there were a few hiccups. For example, when it came time to update a St. Patrick’s Day ad with Easter specials for one client, the ads came back with eggs and shamrocks.

The executive adds that for outsourcing to work it takes commitment from everyone from the C-level suite to the sales team ? because it’s not just about outsourcing, but the impact of institutional change: “Sometimes I think people underestimate that. But the rewards are worth it.”

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