Determining whether to shut down your internal print and mail operation and outsource to a print service provider, as opposed to keeping it in-house and potentially making a capital investment in new technology, can be a tough conversation. Those in favor of the latter option will cite concerns over sending customer data outside the organization and advocate that investing in new technology will improve operational workflows, enhance the customer experience, and increase brand recognition by adding color to documents, as well as potentially generate a better ROI for the organization. Proponents of outsourcing believe that print is not a core competency and argue that outsourcing to a service provider would be the less expensive alternative. While there may be a variety of reasons that cause an organization to consider closing up shop, there are a few factors that, when considered together, can create the perfect storm.
1. Decline in transactional print volumes
Electronic delivery of customer communications was a high priority for many organizations as a cost reduction strategy. While adoption rates may have varied, electronic delivery nonetheless caused transactional print volume to decline, even causing some enterprises to consolidate production into one site. Print volumes decline, unit costs go up, and outsourcing becomes more financially attractive.
2.Equipment has reached end of life or end of lease
Enterprises in need of a technology refresh may not be willing to make the investment or be able to justify the expense. New technology can speed production, streamline operations, enhance documents with color capability, and reduce risk; however, if priorities have changed and the CCM strategy has shifted toward enhancing the digital experience, convincing management to invest in print technology may be a tough hurdle to overcome.
3. Limited or no color capabilities
Some in-plants can only produce output in monochrome or have very limited color capability. With the demand for color increasing, internal lines of business may look to an outside vendor to meet their requirements for color, and corporate marketing may have already beat them to it. From a financial perspective, this is a double whammy. Outsourcing a subset of documents to a third-party provider decreases the volume for the in-plant facility and further exacerbates the impact on unit cost. In addition, outsourcing low volume to a third party can be costly for two reasons: higher unit costs from no economies of scale and additional conversion costs if the organization decides to consolidate all print volume with a single service provider in the future.
4.Increased regulatory pressures require full document integrity
Non-compliance with regulations such as Gramm Leach Bliley, SSAE 16 (formerly SAS 70), and HIPAA can be costly from a financial and reputational risk perspective. Production issues such as double stuffs or incorrect document breaks create privacy issues with personally identifiable information (PII). Organizations must take the appropriate measures to ensure that sensitive data is secure. Software that provides factory controls and tracking capabilities for each mail piece throughout the entire manufacturing process is critical to ensure correct and complete packages.
5.Single site operations must rely on third party providers for disaster recovery and business resumption services
If an enterprise operates one site, or has consolidated sites due to decreased volume, then disaster recovery and business continuity services must be contracted with a third party. Acquisition of facilities due to a corporate merger may not always provide the ability to transition print files from one site to the other if software, equipment and infrastructure differ. Worse yet, sometimes older equipment gained by acquisition must be kept due to machine-specific print jobs.
6.Change in management philosophy
Even without the previous five factors, sometimes a change in senior management philosophy might be the one driver for the decision to outsource. “C” level management may believe that print and mail is not a core competency of the overall business and thus should be outsourced to a service provider. While it makes sense to consider outsourcing if print volumes have been on the downward slope, there is no magic number or volume threshold that dictates the exact time to do so.
Understanding the benefits that can be obtained by outsourcing may help to reduce anxiety and clear up the stormy skies clouding the decision process. To start, no capital investment in new equipment is required. Unlike an in-plant operation, service providers have the ability to spread the cost of capital across multiple clients and have made the investment in color technology. Due to greater economies of scale, service providers have great buying power for consumables such as ink, paper, and envelopes. In addition, a reduction in postage expense could be realized if postal densities for five-digit and three-digit rates are met.
To remain compliant with certain regulations, service providers must have strict production controls and data security procedures to ensure that sensitive data is protected. File-based tracking tools ensure that files are received on time and that record counts are accurate, while piece-level or page-level tracking ensures that each mail package is correct and complete. Detailed production reports with key performance metrics (KPIs) are available via a dashboard that allows clients to log in, view production job status and SLAs, request document pulls or re-directs, and even create customized reports. To facilitate testing, quality reviews can be performed prior to releasing files into production via a review and release capability.
Once the decision to outsource has been made, it is time to set sail and begin the journey. Since price will most likely be a significant factor in vendor selection, here are a few tips that should be kept top of mind.
1. Create a complete inventory of all printed communications to be included in the Request for Proposal (RFP). Consolidating all print — what is produced internally or by external vendors — with a single provider is the best way to maximize volume pricing.
2. Understand what is included in transition costs, which can vary significantly by provider. To secure a contract award, some may include a certain number of free hours of development time as part of the transition cost.
3. Standardizing address location on documents eliminates the need for multiple types of envelopes, streamlines the manufacturing process, allows for jobs to be concatenated together, and helps to keep production costs down.
4. Review SLAs for all applications to determine if there is flexibility.
5. Contract duration will typically impact price; therefore, annual pricing quoted in a five-year contract will be less than a three-year contract.
Deciding whether or not to outsource print requires consideration of a variety of factors, but with a detailed analysis of the pros and cons of both options, an informed decision can be arrived at more easily. Many organizations fear losing control since the print shop is no longer within arm’s length, but the security, output quality, and efficient manufacturing controls implemented by top tier service providers should help to alleviate that fear. No transition is perfect – but the technology, processes, and depth of knowledge offered by a print service provider will ensure smooth sailing.
Gina Ferrara is senior analyst at Madison Advisors, an independent analyst firm which specializes in offering Fortune 1000 companies context-specific guidance for a range of content delivery strategies, particularly those addressing enterprise output technologies and customer communications. Ms. Ferrara brings more than 19 years of experience in the banking and financial services industry to Madison Advisors’ staff of industry experts. Visit Madison Advisors at www.madison-advisors.com.