Outsourcing wins adherents in filling and making pages

NEW ORLEANS -- Outsourcing, that business term with the '90s cachet, first appeared back in 1982, according to the 10th edition of Merriam Webster's Collegiate Dictionary.

With the rise of the Internet, outsourcing is here to stay, expanding even -- along with the opportunities for newspapers to repurpose information and publish it in the all-electronic medium of cyberspace.

For readers who don't want to dig up that classic August '95 issue of The Cole Papers in which we previous discussed the topic, here's a brief history of the outsourcing trend.

First, let's note that the dictionary definition -- "the practice of subcontracting manufacturing work to outside and esp. foreign or nonunion companies" -- is a bit removed from the way newspapers conduct their outsourcing business.

Newspapers have always outsourced, long before the term wound up in Webster's. Newspaper delivery door-to-door was always outsourced, in the usual definition, and continues to be. The only difference is that in almost all metropolitan areas, the job has passed from youth carriers to adult carriers.

Outsourcing '90s-style means that a newspaper is turning over to an outside supplier some part of the business that had been done in-house. The biggest recent example is the Houston Chronicle, which delegated its entire pre-press color operation to American Color of Phoenix, Ariz.

When last reported, the agreement was less than two months old. It's now more than two years old, and according to executives on both sides, they're still like a pair of newlyweds -- so far, it's a win-win situation.

Chronicle President Gene McDavid gushes in publicity materials: "This is a vendor relationship that is really a partnership. With American Color, our goals are their goals."

Chronicle Vice President of Operations Jack Stanley enthuses: "American Color is able to provide us with virtually unlimited pre-press production capacity."

Well, this old production hoss figures if it's that good, then why isn't everyone doing it? According to Ray Dittrich, senior vice president of sales and marketing at American Color, additional large clients to be named later are seriously considering jumping on the facilities management bandwagon, or the digital asset management bandwagon.

These are services that American Color offers, although American Color's biggest claim to fame is in its name, which it advertises as "the color expert in digital pre-press." That's not to say it's alone in the field; other firms offer digital pre-press services and some high level of color expertise. American Color, though, has 15 U.S. locations linked together by a powerful digital transmission network exclusive to American Color, so it's a pretty big player.

In conversations at the American Color booth at NEXPO, Dittrich explained that the Houston Chronicle was getting so much out of this vendor-partner relationship because of the economies of scale that American Color brought to the Chronicle production process. You've heard of the virtual newsroom; thanks to high-speed modems and networks, welcome to the virtual backshop.

"Extra capacity is always there for special sections and busy advertising seasons," Dittrich said. With the Houston backshop now connected to other color facilities, extra people and machines are available to perform the necessary pre-press operations for any number of pages -- they're just a data line away.

The old back shop cry of "Hire a sub!" when things got a bit busy has been replaced by bursts of electrons to another American Color facility.

Outsourcing can only grow
Before moving on to visit with one of the smallest outsourcing firms at NEXPO, one fact gleaned over the Internet comes to mind: Newspapers are relative latecomers to the outsourcing boom of the 1990s.

This is a market that worldwide topped $76 billion in revenue in 1995, according to a report from International Data Corp. To this veteran (going on grizzled) newspaperman, this signals that outsourcing at newspapers is not going to taper off.

Fueled by new digital technology and the near-exponential growth of speedy desktop computer processors, as well as the increased competition for revenue from other information sources, newspapers want to focus on their "core competencies."

For those papers that haven't been on the cutting edge of rapid technological change but want to get into making money by content repurposing and adding content to make a more attractive web site, outsourcing certainly is attractive.

For those companies that have a handle (or think they do) on this brave new world, they may not want to outsource, but actually become outsourcers themselves. (More about such companies, like Tribune Media Services and Gannett Media Technologies International, a bit later.)

While American Color spans the nation with its shops, a small, one-person booth at NEXPO demonstrated a more personal side of outsourcing -- very personal, because it has to do with compensation.

The person behind Murphy Management & Compensation Consulting of San Antonio, Texas, is Kay Murphy, and what she does is unique, in the world of newspapers at least. With her, a publisher can go outside for help in determining proper compensation for every payroll position.

She proudly mentions that she has more than 20 newspaper clients, among them the Courier-Journal in Louisville, Ky., Los Angeles Times, San Jose Mercury News and Orange County Register in Santa Ana, Calif.

Murphy was candid about her background and what she does: Usually she determines management compensation levels. Any company-wide compensation surveys are usually done in a nonunion environment, since she has nothing to do with actual wage bargaining.

"Don't overpay nonessential, nonproductive workers," she counseled. "We design creative and motivational plans, give you information on what the competition is paying for talent and enhance pay equity."

As she has been doing the job for more than a decade, Murphy has at her disposal proven methods and statistical matrices specific to newspapers that other, less industry-specific consultants might not.

With this track record, then, the natural question was, "Why come to NEXPO for the first time in 1997 if you have been in this business for a decade?" A friend encouraged her to come, she said, and since Murphy's is the only compensation firm that specializes in newspapers and broadcast media, she thought it was time to "come and see what happens."

It's fascinating to discover even important management decisions like salary levels are essentially being outsourced, although a strict definition would have to separate the gathering and analysis of information (consulting) from responsibility for making a compensation decision (budgeting).

L.A. papers outsource ads
So what else may or may not be outside the core competency of a 1990s newspaper? Two metro dailies have opted to farm out advertising production, both classified and retail.

In 1996, the Los Angeles Daily News ceded all ad production to AdOut of Van Nuys, Calif. In three months, virtually all composing room tasks were outsourced. Currently, AdOut produces more than 750 ads a week for the Daily News.

Under a new contract, AdOut will be producing 7000 Sau inches of automotive advertising a week for the Los Angeles Times.

AdOut also will be responsible for all new special section advertising design and production at the Times.

AdOut CEO Jeffery Turner is not shy about touting the virtues of ad production in a virtual back shop with artists connected by telephone working on PCs.

"It's our job," he said. "Unlike your own production departments, if we don't do it right, you won't use us."

Company publicity then touts AdOut for producing ads in the last measured quarter for the Daily News as being 99.85 percent error-free. (As always, we warn that your mileage may vary.)

Next candidate for outsourcing: How about those pesky accounts receivable?

The folks at Collectech Systems Inc. of Calabasas, Calif, have established a halfway house between struggling with in-house efforts to get those delinquent accounts to pay up and the finality of assigning bad accounts to a collection agency.

It's the Collectech system of customer retention. For a flat fee, Collectech combines written demands for payment with phone contacts -- and may resort to sending the debtor's name to three credit reporting bureaus.

Even in these boom times, there must be plenty of people who aren't paying on time, because Collectech claims its system is based on working with millions of debtors nationwide. Clearing these past-due accounts before they become seriously past due is the company's core competency.

Collectech lists among its customers the Hartford (Conn.) Courant and Press-Telegram in Long Beach, Calif.

Now, for those businesses that want to let someone else handle check and credit card payments, First USA Paymentech of Salem, N.H., is now the largest payment processor dedicated to the direct response industry.

Paymentech says it has the capacity to process any part of the credit card or check payments a newspaper would receive for subscriptions, for example.

Acquiring content via the Web
The vehicle that has propelled the greatest outburst of outsourcing for all newspapers has been the Internet. It has made delivery of those pages that led the outsourcing trend -- weather and comics -- much easier, smoothed the process of receiving TV logs from an outside provider to a snap, and opened a new avenue for repurposed content.

The World-Wide Web is the Home of the Endless Newshole, which raises the question, How can a publisher add fresh and compelling content to a newspaper web site without adding staff? Through outsourcing, there are content options aplenty.

First, a brief rundown of some changes in the weather.

Accu-Weather of State College, Pa., and WeatherData of Wichita, Kan., are still major players, both in print and for web pages, but they have new competition from WeatherPoint from Tribune Media Services of Chicago. TMS now owns Weather Central Inc., an early player in the newspaper weather-page game, so there's an in-house source for up-to-date weather data.

Like the others, WeatherPoint will provide complete, web-based weather coverage. Just add advertising, and a newspaper can have an instant web weather page from any of these providers, only a modem hookup away.

Tribune Media Services is one mega-company that can provide outsourcing services for a lot of smaller papers, since it has a large stake in the business of TV listings as well. The TMS entry is TV Week Interactive, which allows viewers who visit an electronic TV listings page to see listings that reflect their interests -- which should be a good thing, come the day of 500 channels.

American Color, which we've seen is heavily into handling color production, is in the content delivery business as well. Its entry, FunNe, has broadened its delivery methods so that now you can get your comics (FunNe Features) delivered weekly on a CD-ROM, or from FunNe Net via the Internet.

FunNe Lockups is a completely paginated comics page, including all of a client's syndicated comics. It's the equivalent of the weather page, ready to go to press, with space for any ads or features to be added. Or use FunNe Pager, a roll-your-own solution of templates for Quark XPress that combine with FunNe Features in case there's a reason to keep the layout task in house.

How far will outsourcing go as newspapers attempt to pare down to their core competency? It's too early to tell, but certainly outsourcing is a bigger part of the newspaper scene than ever before.

-- George Powell

AccuWeather Inc.,
(814) 237-0309,
e-mail: intemail@accuwx.com;
AdOut,
(818) 780-4700;
American Color,
(602) 275-4347,
e-mail: penny@amcolor.com;
Collectech Systems Inc.,
(818) 878-6900;
First USA Paymentech,
(214) 849-3545;
Murphy Management & Compensation Consulting,
(210) 822-2113;
Tribune Media Services,
(312) 222-4444;
WeatherData Inc.,
(316) 265-9127.

From THE COLE PAPERS, August 1997, Copyright © 1997, All Rights Reserved.