In or Out

Outsourcing has been one of the most talked-about business topics in 2009. With the current recession, companies are continuing to reduce costs, eliminate overhead and streamline operations with an eye on the bottom line. As was the case in previous recessions, document outsourcing has become an increasingly prominent discussion point among executives across all industries. Nevertheless, seismic changes continue to shake an industry that was once known for stability and growth.

In its recent study, "The Document Outsourcing Evolution - A Vertical Market Analysis," in which 350 executives responsible for document outsourcing decisions were surveyed, InfoTrends analyzes the state of the document outsourcing sector. Document outsourcing is broadly defined as the delegation of the capture, imaging, conversion, creation, production, processing, printing, mailing, electronic transmission and/or fulfillment of any type of printed or electronic document to a service provider.

Outsourced document services are typically mission-critical or operationally necessary. These services range from marketing materials and direct mail to product documentation, as well as invoices, statements, purchase orders, confirmations, letters, customer-direct communications, policies and contracts.

Document outsourcing generally involves long-term (multi-year) contracts. Nevertheless, InfoTrends recognizes that there is a substantial amount of short-term, project-oriented work that is also outsourced to third-party companies. While considered part of the overall document services mix, InfoTrends does not generally consider this to be true outsourcing.

ONE WAY TO stabilize and improve key business metrics is by leveraging outsourcing relationships that can control costs and improve operations for internal and external print, mail, records management, business communications and other document-related areas.

Although there is a common perception that only large enterprises and those with intense document production requirements outsource document services, InfoTrends research reveals that the document outsourcing market opportunity is far broader. Document outsourcing is prevalent across most industries and is currently being implemented in companies of all sizes, from small firms to very large enterprises. Of the more than 350 organizations surveyed, 55% of them were actively engaged in outsourcing document services. Leading industries for document outsourcing were legal, insurance, financial services, health care and telecommunications.

Offsite printing services were by far the most commonly outsourced. About 46.6% of respondents indicated that they were currently utilizing offsite support, and another 19.7% were considering engaging an offsite provider for future work. Nevertheless, not all companies view document outsourcing as a panacea. In fact, almost 44% of all respondents reported that they do not currently outsource document services. About 62.1% of firms that do not outsource services from one or more document outsourcing segments cited privacy or security concerns as the top detractor, with unrealized cost savings following in a close second place (60.2%). Loss of control, low volume of work and inadequate service quality rounded out the top five reasons that companies chose not to outsource.

The "insource or outsource" decision is not a one-time event; it is cyclical. Organizations continue to balance cutting costs, growing revenue and delivering high-quality services. As executives face a set of evolving challenges, they will continue to look towards outsourcing solutions that not only efficiently provide document services, but also demonstrate their ability to deliver data security and privacy of information.

THE OUTSOURCING MARKETPLACE can be divided into four segments, namely onsite contracted services, transaction document services, offsite printing (and related) document services and document process outsourcing. However, for our primary purposes, the transaction document services segment will be our main focus.

Transaction document services have historically been defined as the design, production, printing/imaging, mailing and database management associated with bills, statements and other financial documents. These transaction documents are used to notify, invoice and summarize activities that occur in the organization and have been captured by the accounting system. The vast majority of them are printed with high-speed, black-and-white printers driven by mainframe computers or large, integrated networks, although the emergence of high-speed color technology at affordable rates is introducing new color applications. Security, speed and low cost are key factors in the production process. Examples of transaction documents include statements, invoices, evidence of coverage, contracts, proposals, trade confirmations, 401K or other retirement documents, brokerage account information and insurance policies.

In light of the technology advancements and a shrinking budget within this segment, there have been two recurring questions: "Is the printed statement dead?" and "Are statements going to shift to e-presentment in an effort to eliminate print costs?" There is no doubt there is heavy focus today on providing transaction documents electronically. In fact, some service providers even offer organizations incentives to shift the default delivery vehicle from printed documents to electronic presentment.

At the same time, research indicates the majority of consumers still prefer to receive printed statements in the mail, and some prefer to receive their statements in a printed and electronic format. A smaller, but growing, population opts to receive or view statements electronically. The key here is that while the printed statement is not dead, the electronic statement is here to stay. Equally important, the average consumer spends two to three minutes reviewing each statement - and 20% of consumers spend more than five minutes, according to the InfoTrends 2008 "Trans Meets Promo" study. This represents a tremendous marketing opportunity to leverage critical promotional, educational and informational communications to consumers.

Whether transaction documents are printed or electronic, the transaction volume is expected to rise in the coming year. In fact, 16.3% of the survey respondents indicated that printed transaction documents will increase by 10% or more over the next year, while nearly double the respondents (30.2%) indicated that electronic statements will increase by 10% or more. Overall, an impressive 67.4% of respondents indicated that electronic statements will increase over the next year, while 58.1% indicated printed statements will increase.

WHEN ORGANIZATIONS ARE weighing the decision to outsource, there are critical factors executives consider. While priorities vary by industry segment, privacy/security practices, quality control and price were ranked as the top three factors overall.

Data security was ranked highest, with 79% of respondents rating it "most important." This is a consistent theme across all segments of document outsourcing, which clearly demonstrates that security is of major concern to all companies. Organizations operating in the current business landscape cannot afford to compromise data security and, therefore, will choose the outsourcing solution that clearly demonstrates strong competencies in data privacy and security. This is more important than ever when it comes to transaction documents.

The remaining top five important factors were industry certifications and compliance (32.6%), job proofing, tracking and reporting (30.2%), e-presentment/e-payment capabilities (30.2%) and data transmission speed (25.6%).

High-volume statement processing requires optimized productivity and accuracy, regulated throughput and careful attention to USPS and Canada Post compliance. In many ways, the top three factors directly relate to each other and reflect the significant sensitivity to security, compliance, government regulation and laws surrounding transaction documents - particularly those in financial, insurance and health care markets.

DESPITE THE ECONOMY, many companies still plan to pursue outsourcing. Also, many other companies unable to cost-effectively sustain insourcing-only models will likely venture into document outsourcing. Executives, faced with a changing business environment, should take a proactive approach in finding the right sourcing solution. As author Robert Anthony once said, "Waiting is a trap. There will always be reasons to wait. The truth is, there are only two things in life - reasons and results• and reasons simply don't count."

Outsourcing has often been considered an "either/or" option, where an organization keeps the entire function in-house or engages a provider who can deliver value through hosted solutions, onsite managed services or offsite services. However, a third route known as "rightsourcing" combines the best of outsourcing and in-house services.

To win in today's market, transactional document producers should look for outsourcers that offer unparalleled flexibility when it comes to proposed solutions, contracts and service levels. Those solution providers who build strong relationships with those higher up in the organization will enhance and contribute to the enterprise's own corporate goals. Finally, research the outsourcers within your specific vertical market who can serve your unique needs.

Before choosing an outsource provider, organizations should ensure that all such risks are mitigated and all corporate goals are clearly defined. As the shift towards outsourcing continues to grow, companies should open the door to this evolving opportunity. With changing customers, communications and business landscape, companies must be innovative in their document strategies and investments.

MICHAEL O'LEARY [] is the director of InfoTrends' Document Outsourcing Consulting Services. For the full study, "The Document Outsourcing Evolution - A Vertical Market Analysis," email