President & Group Managing Director: Dr.Shelly Ahmed | Editor in Chief & Group CEO: M H Ahssan

Monday, July 11, 2005

OUTSOURCING: ARE MAGAZINES NEXT?

By M H AHSAN

"We move medical writing offshore. And for that, I apologize to all the freelance medical writers I have worked with in the past (and paid handsomely!) because now my company can do what they do, but for half the price," writes Lombardo, whose post-Whittle positions have included editor-in-chief at WebMD. "I won't be speaking at the American Medical Writers Association meetings anytime soon because I don't own a Kevlar vest."

Another American entrepreneur, Ted Fong, sends out letters to small publishers soliciting clients for his Manila-based company, Boma, offering "design, layout, content development and advertising telesales," at a price that's half of what it typically costs to have the work done in the U.S.

Meanwhile, Office Tiger, a New York-based publishing services company that does most of its work in Chennai, India, is building a design studio in India and bringing over a designer from the U.S. to run it. The firm hopes to attract more U.S. magazine clients for its full range of production work. "I think where publishers would most likely use us as a starting point would be design execution, where we are working with designs that have been established," says Michelle Breault, senior vice president of content and prepress services. She expects more publishers to turn to the firm for original work "as we migrate to that broader design capability."

It's an increasingly familiar picture: the transfer of work that was once done by full-time employees in the U.S. to overseas contractors for a fraction of the price. It's a fait accompli in customer service, direct marketing and information technology. Now, it's the magazine business's turn. Editorial, design, production and advertising functions are all being performed cheaper - and some contractors and publishers claim better - overseas.

The move abroad is just beginning, but experts believe the shift overseas is inevitable. For publishers that have already slashed staff, reduced editorial pages and shifted work onto freelancers in place of full-time staff, this represents the next frontier in cost-cutting. "I think the opportunity is that one can inherently make a new magazine start-up less expensive," says Atul Vashista, CEO of outsourcing consultancy firm NeoIT. "One can reduce the production costs of putting a magazine out."

Clearly, magazine production presents many of the same conditions that provided the offshore opportunity for other industries. Publishers are already accustomed to telecommuting sales reps, near-virtual editorial staff, outsourced art direction and design, outsourced Web programming, outsourced circulation fulfillment, etc. That can put magazine jobs into the great pool of the potentially offshored. According to a report published by the University of California, Berkeley last fall, as many as 14 million jobs could be shifted outside the U.S. by 2015. None of the research focused exclusively on the magazine business, but the report made clear just how vulnerable jobs in the industries that have the following characteristics are: "The lack of face-to-face customer service, work processes that enable telecommuting and Internet work, high wage differentials between countries, a high information content, low social networking requirements and low set-up costs."

That list applies to a number of jobs in an industry that is increasingly migrating online - especially for a freelance copy editor or proofreader working out of his home for editors he's never met. Copy editors and graphic designers are among the employees listed as being at moderate risk of losing their jobs to overseas competitors by job counseling Website careerplanner.com. "I was using a copywriter to write a couple of pages for me and I found she was farming some of it out," says Michael Robinson, founder and owner of careerplanner.com. "Her proofreader was local, but there was no reason she couldn't send it to India."

Threat or Opportunity?The current face of magazine offshoring can be glimpsed in the moist puppy dog eyes staring out from the cover of the latest issue of Fido Friendly Magazine, a quarterly for people who travel with their dogs. The magazine's co-founder and editor-in-chief, Nick Sveslovsky, who started the publication with his mother in 2001, answered a solicitation from Boma last year. He says that since the magazine was created, "I had been doing the design and production all myself, and we just didn't have the resources financially to outsource to someone in the U.S. where the prices are ridiculous." Sveslovsky estimates that by using Boma he pays about half what it would cost him to have the work done stateside. He sends Boma the raw material - including a photo of the next issue's "cover dog" - and designers in the Philippines do the rest. The arrangement frees him up to concentrate on editorial and increasing the magazine's frequency. "With Boma, it'll happen a lot sooner than I would have thought, hopefully pretty soon," Sveslovsky says.

The same offer from Boma evoked a far different reaction when it arrived on the desk of Samuel Pennington, publisher of Maine Antique Digest. "I live in a small town and have employees who have been with me 25 years and longer," he says. "I just couldn't see downsizing." With employee pay and benefits making up more than one-third of his costs, he acknowledges that he probably could save money by outsourcing. But he considers such thinking shortsighted. "If everything is overseas, who's going to be able to buy anything?" asks Pennington, rhetorically. "Henry Ford shocked everyone by paying his employees a living wage, but he did it because he wanted people to be able to buy his cars."

Fido Friendly and Maine Antique Digest are typical of the publications Boma is targeting to build its magazine business (until now the company's main focus had been on preparing marketing materials), in that they have circulations under 40,000 and serve a strong niche market. "Right now we go after the smaller magazines because they're the ones who have the biggest needs and are the most cost-conscious," says Fong, who mailed a solicitation to 350 U.S. publishers in January and is preparing to send another.

Boma charges $50 per page for layout and design, a price that includes sending the pages electronically to clients three times for proofing. Fong can afford to keep the price low because he typically pays his employees a fraction of what they would earn for comparable work in the U.S. - about $12,000 a year on average for a job that might pay $60,000 in the states. So far, with only three magazine clients, Boma is tiny, but Fong says he's in discussions with others and has turned down some interested publishers whom he didn't consider financially viable. He also has begun offering advertising services to magazines, including design and telephone sales.
With Fido Friendly, he's using call centers to qualify leads by contacting hotels to find out details, such as whether they allow pets and what kind of accommodation they offer. From there, it's up to the two full-time telephone sales people Fong employs to close the deal. He admits his sales staff is on a learning curve, but claims he can dramatically cut the costs of bringing in advertising. "The kind of customers we're going after are not going to hire sales people and send them out on calls," says Fong. "The way of the future is to close business over the phone, especially for ads that are less than $4,000 or $5,000 a page."

Offshore Company Has Designs on U.S. MagsIf U.S. magazine workers only had to contend with Boma, there wouldn't be much to worry about. But there are bigger players moving into this field. Office Tiger, for example, has a staff of 1,650 in India, and offices in New York and London. It was founded in 1999 to provide research, analysis and production services for law firms and investment banks, among other companies. Tiger quickly moved into the production of annual reports and prospectuses. From there, it's not much of a leap to provide the same type of support for magazines and, in fact, the company has started to do so on a limited basis, says co-CEO and co-founder Joe Sigelman.

With its new design studio, the company will be able to perform many of the functions traditionally done in-house or outsourced to a domestic company, says Breault. That includes high-end creative work. She adds that the company expects to gain a publisher's confidence by starting out providing routine design and production work, which magazines have plenty of. "If you look at creating a directory, for example, what you do is very much take a style and develop scripts to lay that out and what you're doing is really merging data to a predefined layout," she says.

Boma and OfficeTiger reflect a pattern among companies building up a business in offshore magazine work. They have established themselves in other fields - marketing, advertising and financial analysis - that require skills that are transferable to magazine publishing, such as writing, researching, copyediting, layout and design. By the time these companies begin courting magazine publishers, they have not only built up a track record demonstrating those core skills, they have already set up their facilities and technology and their sales and customer services staff. Their ability to transfer their success from related fields into magazine publishing will likely encourage competitors to make the same jump.

But how much of it really translates to magazine work? Can a copy editor in India understand the nuances of style well enough to make the words flow smoothly in, say, a magazine for wine connoisseurs in California? Can a graphic designer in the Philippines create a pleasing look for an American hotel chain's custom publication? And what about the intangibles - the trust and communication that only comes from face-to-face contact.

"Most of the time, even among bigger accounts that we've gone after, you're really dealing with someone in a very personal one-on-one relationship," says Rob Sugar, president of Aurus Design in Silver Spring, Md. "So it matters to them that you're not that far away." Aurus designs and produces custom publications for organizations including the American Bus Association and the American Film Institute.

He says it would be logistically possible to perform the functions Aurus does offshore (he has clients in other states that he rarely sees in person), but he doubts overseas workers would have the right cultural sensibility for the job. "Knowing [a client] in a more intimate way is something that's very important. I think there's no substitute for understanding what their needs are."
Boma's employees in the Philippines ran into a cultural barrier when they began producing Fido Friendly. The concept of traveling with dogs was alien to the designers. Fong, who was born and raised in California, says it's his job to explain such cultural differences to his staff.

Journal Work Migrating OverseasProfessional journals such as Molecular Cancer Research (from the American Association of Cancer Research) and the APG Bulletin) from the American Association of Petroleum Geologists) are already flocking to offshore vendors. Just ask Inera, a Massachusetts company that sells editorial and production software to publishers. "We have one competitor and it's not another software product. It's outsourcing," says Ken Carson, Inera's vice president. In the last year and a half, the company has lost several big potential deals because publishers found that instead of investing in software, they could outsource work to India or the Philippines and still save up to 80 percent off what it would cost to do the work in-house. Outmatched on price, Inera tries to compete on quality, appealing to publishers who insist on the control of keeping the work in-house, says Carson.


One of the companies giving Inera competition is SPI Publisher Services, which does prepress services such as layout and copyediting, as well as file conversion from print to electronic format for professional and scholarly journals in Manila. SPI's revenues have been growing 50 percent a year for the past two years and are on track to hit $15 million this year.

"The economy being what it is, the attractiveness of offshore vendors is growing," says Frank Stumpf, president and COO of the company, which has its U.S. headquarters in Ashland, Va. He maintains that offshore doesn't just mean cheaper; it can also mean better because overseas companies can afford to put more workers on a project to get a job done faster and with greater attention to detail. So far, the company has not expanded from journals to consumer or trade magazines, but Stumpf says SPI is eyeing such publications for future growth. "I think there's more and more opportunity," he says. "Copyediting is one of the more labor intensive parts of the magazine business, so it's a highly likely thing for people to consider moving offshore."
But Barbara Wallraff, a language columnist for the Atlantic Monthly and editor of the Copy Editor Newsletter, says copyediting is too sophisticated a function to be farmed out to someone in another country. "If it's quality that the companies care about for the great majority of copyediting applications, offshoring wouldn't be the way to go," she says. "So we need to do a good job of explaining why good, solid domestic editing does have value."

Wallraff may be right - certainly a top literary/current events magazine like The Atlantic is unlikely to trust the nuance of language of top writers to unseen contractors. But many magazines are looking for something far simpler: clear, error-free copy. For example, Dowden Health Media, a custom publisher of medical information for both professional and consumer audiences, says it is happy to hire doctors in India to fact check its consumer publications.
The doctors check the stories against the medical literature to make sure the articles are scientifically accurate. "There's an extra level of scrutiny, putting an extra brain on the case for each article," says Mark Dowden, senior vice president and publisher. "It's not so much a matter of keeping absolute errors from going through, as it is providing extra editorial input that can be used in final editing to confirm that everything in the article is just so from a scientific viewpoint." Dowden declined to say how much he pays for the service, but said it's less than what it would cost to hire a freelance fact checker, let alone an M.D., in the U.S.

Those doctors come by way of MD Writers, the company started by Lombardo. Lombardo says he has six Indian physicians under contract who write, research, copyedit and fact check material for consumer and professional audiences. MD Writers supplies content for Websites, ghost writes articles for peer-reviewed journals and prepares material for continuing education courses.

For one client, a Website for physicians, the doctors under contract with MD Writers review the professional journals each week and write summaries of their findings. Lombardo, who says the company has six clients including Dowden (but declined to name the others), says the only thing medical journalists do that the doctors he works with don't is call sources to report on a story.
To find doctors who could write, he advertised on two Websites: Monsterindia.com and Timesofindia.com. He got 120 responses. Doctors typically make $1,200 to $2,000 a month in India, so the moonlighting offers an attractive way to supplement their income, says Lombardo. He gave the applicants writing tests. "I thought it would take me 100 tests to find four good writers," he says. "After 70 tests I stopped. I had a pool of 15 writers."Granted, the Indian doctors wrote with a British accent, but Lombardo says it took him only three months to train them to write American-style copy. And he did it all by e-mail from his office in Atlanta. Lombardo has never been to India.
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