The state of Smart Sourcing

Could it finally be time for the new generation of print management to emerge from the shadows?

Companies have talked for several years about the future of the discipline being in the provision of cost transparency alongside value-added services. The days of outsourcing print jobs and then attaching seemingly arbitrary mark-ups were supposed to be over long ago. Now, though, the recession might force the hand of print management.

The relative paucity of new contracts in the past 12 months, compared with previous years, is probably symptomatic both of the desire of buyers to take direct control over their costs and of their reduced overall print budgets. So even if clients are still willing to pay for the print management service, the low volume of work on offer may itself require different business models.

Mike Newman, proprietor of NSquared consulting, which offers support to clients on the on auditing, benchmarking and tendering of print management contracts, says: “The question is being asked, ‘Why should I pay a print manager to do it when I can do it myself? Expertise is online and technology is cheap. Software-as-a-service allows me to pay for what I use.’

“I think print managers who embrace this concept and provide low-cost or free basic services will then be able to generate revenue by offering additional value services.”

He warns, too, that in the past year he has spoken to several large financial institutions with print management contracts who “are seriously considering in-sourcing part of their spend”. As marketing and communications budgets are likely to remain tight this year, clients will surely expect print management and other kinds of business process outsourcing (BPO) to be able to demonstrate what value they add.

Neil Smith, partner at Blue Buffalo Consulting, agrees with Newman on the provision of low-cost basic services, but with a caveat. “The only way low-cost or free services come about is by creating a degree of commoditisation or using technology to improve processes, but underlying this is the essential need to provide cast-iron visibility to the client to understand that they are buying the right product at the best price and that improvement is taking place.

“Having audited many clients, print managers and manufacturers we consistently hear clients express a paranoia that the print manager is making additional margin beyond what is agreed.”

It still sounds like movement towards the sort of transparency that has been promised by ‘Print Management 2.0’ is progressing slowly. Most print management and BPO firms would claim now to have strong technology offerings, but Smith suggests that these are often developed with the wrong priorities in mind, giving the client insufficient information on cost. Similarly, he says industry expertise – another major selling point of the print management service – is often less effective than it should be because it operates in silos.

Technology within a print management or BPO firm needs to be organised so as to give “deep-level and granular analysis of spend rather than the focus on just workflow or integration of other tools”, Smith argues. It was this that drove the development of his own firm’s self-built procurement software.

Another company known for its print management software is Webmart. It retrieves market prices from suppliers in real time, while the company’s sourcing expertise is aimed at providing the most appropriate materials to achieve the client’s brief. As key accounts director Craig Robertson tells PMM elsewhere in this issue : “We are getting good forward visibility on what marketing is planning. They expect us as their supply partner to understand the latest materials and techniques. It is far removed from placing an order for 1,000 posters.”

Value-added services encompassing data and design have been part of Etrinsic’s BPO offering for around 10 years, according to managing director Matt Bird. He argues that print management needs to alter the “flawed approach” of attracting customers “purely by offering savings on print of typically 10% to 20% in the first year of a contract, with little else of value being offered thereafter aside from basic operational delivery”.

In some cases, he continues, focusing on providing value to clients will mean placing lower volumes of print: “The true print management model is about providing best advice to clients to maximise their revenue. If this model is practised properly then clients should absolutely be advised not to print either the range or the volume of materials seen in previous years, with alternative media providing greater immediacy and often a vastly reduced cost of client acquisition.”

An extension of this is increasing integration of campaigns across different media, targeted at a specific audience. Even if it may not be the immediate priority for print management and BPO firms to develop this kind of full-service offering, it is likely to become more common eventually – and many companies are already taking steps in this direction.

NSquared’s Newman comments: “Howard Hunt City, Lateral Group and Communisis have established data arms, while Dsicmm, MBA, Communisis and GI have invested heavily in digital variable data output. If the clients are ready for events-based multi-channel marketing the suppliers are ready to deliver it. What clients will need are experts to help them establish the process and means of delivery of these multi-channel campaigns.

“In addition I think there is a market for re-coupling creative design and production, delivered across any media (press, print, online, SMS, email, TV) and language. With the market dominated by creative agencies and one or two large production houses there is room for low-cost-base, client-focused, technology-driven boutique production houses to take a slice of the existing market and deliver start-to-finish design and production for clients.”

Newman’s suggestion should not come as a surprise. Many companies whose traditional business has been in print are already demonstrating an awareness that they must evolve to offer services in other media. Blue Buffalo’s Smith notes that this movement will inevitably bring BPO firms up against creative and production agencies.

“Because print management companies have been so successful in taking print spend from agencies it is not unreasonable to assume that this can be extended, but to do so a much higher degree of trust and sharing of business metrics would be necessary,” Smith says. He adds that the market is also seeing an increase in the number of agencies who “want to push back against the print manager’s invasion of their space” with leaner and more competitive offerings.

At present, the larger print management companies still clearly see a role for themselves in what could be called traditional print management. Furthermore, Newman for one does not expect the BPO market to be wholly transformed in the ways described within the coming year. The “merry-go-round” of contract moves will continue for a while longer yet, he predicts.

However, few companies now provide print management alone without at least token efforts in the direction of value-added services. As audiences in all media fragment and marketing spend gets spread around further, there will also be a growing need for marketers to take a multi-channel approach – and a need for BPO firms to respond accordingly.

Looking ahead, Newman says: “This decade will create an opportunity for the niches; companies who are exceptional in their specialist sector or companies that specialise in targeted data-driven communications. Smart data analytics that generate campaigns which deliver improved response or footfall will put the control of output with those who manage the data and assets.”

Etrinsic’s Bird, emphasises, however, that BPO companies with expertise that straddles data and multimedia campaigns should come to be seen as the rule, rather than the exception: “In my view, what we have created and are continuing to refine should not be considered as either a specialism or an additional service to generate revenue and offset the decline in print volume.

“Logic dictates that best advice in a multimedia environment can only ever be provided via a detailed understanding of all media.”