Special Report: The Art of Outsourcing

While the pendulum swings back and forth between what is outsourced and what is produced in-house, corporate executives have long recognized the value of outsourcing activities not directly related to their core competencies. Although the printing industry has been taking advantage of this business

approach for years-using trade binderies, trade printers, and other resources-the term outsourcing has taken on a negative connotation, conjuring images of containers full of printed material making their way from China to the shores of the United States. While that is an aspect of outsourcing that may be unpalatable, it is certainly not the entire story.

According to The Outsourcing Institute's 2002 buyer survey, the primary reason companies outsource is to focus on core competencies. This represents a shift from cost, which has traditionally topped the reasons why companies outsource, and this shift can be attributed to the changing nature of business competition, which has resulted in companies being pulled in multiple directions with limited resources.

Outsourcing allows companies to focus more on their core competencies and not worry about staying ahead of the game in terms of technology and process expertise with their non-core processes. Nowhere does this reasoning apply more than in the printing industry, which has been undergoing a significant transition from an analog business and production model, to a digital model, and the need to expand into value-added services to offset declining revenues. Along with this goes the need to invest in people, process, and technology to support new equipment and software. That is where outsourcing comes in.

Build, Buy, or Partner

To successfully transition to the digital world or to add new products and services, it is not necessary to build everything from scratch, or buy everything you need. Some of the best success stories come from printers who entered the business by partnering-or outsourcing-choosing not to make investments until they had achieved adequate business volume. This conservative approach could mean acting as a broker for digital print work, forging an alliance with a marketing firm or mail house, or partnering with a fulfillment company or a database house.

For the printer, a critical advantage of outsourcing non-core services is the ability to retain account control. As part of cost containment initiatives, corporations are working to reduce their supplier base, and the more services that can be offered under one roof, the more likely it is that a printer will be able to retain its customers.

One printer I spoke with recently commented, "When someone wants to print and mail, most printers don't do both. Once you send that client down the street, you lose control over the client and they don't return because the mailing house will send them to their preferred affiliated printers." In this case, the printer chose to implement a blended print/mail service, but could just as easily have chosen to outsource, becoming a preferred affiliate of a mail house and opening the door to more print work.

When considering adding new services or streamlining existing ones, it is important to have discussions with your best customers. You may determine that although they have a need and are willing to work with you to meet that need, you are unable to secure firm contracts. Alternatively, you may have a customer who needs a given service, such as mailing, but does not constitute enough volume to justify the investment. Either way, you must make a financial decision based on the type of relationship you have with your customers; the likelihood of your actually acquiring sufficient business volume over time; and the potential for other volume once you have the infrastructure in place.

One complex area that lends itself well to outsourcing is variable-data printing and the accompanying database management services. In one case of this, Yoffi Digital Press, a commercial printer, and Trekk Cross-Media, a marketing and communications agency, both based in Rochelle, 111., established a partnership to drive clients to new marketing approaches.

Trekk has been working with variable-data and Web-to-print technologies for nine years and has gained experience in applying technology to solve business problems. The Trekk programmers work with an agency's or client's designers to merge database information with traditionally generated graphics and messaging. The result is a direct-marketing piece that is highly personalized and relevant. Yoffi provides the production and distribution of the pieces. Together, they offer a unique infrastructure that merges data and design, delivering an integrated solution where the partners each do what they do best, while at the same time, providing a single face to the customer.

In another angle, Bob Metzger, executive vice president of franchisor ICED, said, "When we talk about outsourcing, it is not just a four-color project to a wholesale printer, but developing relationships with marketing and PR firms that our people can engage to work with them to provide complete turnkey services to the client."

Moreover, outsourcing does not need to be limited to advanced services. Honsa-Binder Printing in St. Paul, Minn., has a state-of-the-art print shop with four-color offset and CTP, but has also been the beneficiary of outsourcing by other printers using older technology. CEO Kay Owens said, "We are still actively using a 1920s letterpress that is terrific for specialty work, including carbonless forms, and we have developed quite a trade business with that press since there aren't many in operation these days."

The Bottom Line

On the flip side of the coin, by investing in and maintaining advanced or unique services, printers can build their businesses by accepting outsourced work from other firms. York, Pa.'s NeFra Communication Center has done just that. Subsequent to its acquisition of a DirectPress 5334 DI press, the firm leveraged its short-run color capabilities into a trade business that now represents 15-20 percent of its revenues.

Outsourcing is a viable, proven business strategy that printers should embrace as they look to transition into the future and become a trusted, full-service business partner for their customers that can deliver significantly more than ink on paper.