Publishing Outsourcing: Blood on the Floor 2016
Apr 5, 2016
by Jim Hill
Publishing Outsourcing Consulting
Publishing outsourcing is seeing a lot of blood on the floor early in 2016.
And, I suspect, that there will be even more blood flowing by the end of the year.
You almost get the sense that offshore providers need to arrange for ambulance services, tourniquets, and large supplies of blood transfusion equipment. And, for those few that remain standing, at least knee high rubber, wading boots might be a healthy choice. Surgical gloves, too.
If you have not seen the HfS report on outsourcing in general relative to "the race to the bottom" and their market analysis, you may want to check it here: http://www.horsesforsources.com/race-to-bottom_122415. I find this report a very objective, transparent, and objective view of outsourcing challenges in 2016.
I have taken some time off the last six months to do a thorough review of the publishing outsourcing market. Insightful to stand back and see the playing field unfold from a distance. During that time I have published a number of articles on LinkedIn about general market conditions, and some of the critical challenges not only for providers, but for publishers as well. This article provides more detail to my previous article "Publishing Outsourcing: Is Your Offshore Provider in Trouble?"
Unfortunately, I continue to see the same challenges and issues with providers that I noted almost twelve months ago, although general market conditions seem to have worsened considerably for many providers over the last six months. The market continues to consolidate and mature, and more providers are for sale, but, unfortunately, few if any buyers.
One very recent market observation:
Senior, talented sales people leaving the industry.
One particular, negative market condition that has accelerated in frequency recently is the departure of some of the most senior level sales people in the industry. They are not just leaving a provider: they are leaving the industry, which is very telling. And, most that I have personally spoken with have breathed a sigh of relief that they got out. Sorry for the analogy, but speaking with these sales people is almost like talking with someone in Brussels or in Paris who narrowly missed an Isis terror attack by five minutes. I will not mention specific providers, but have seen this trend now with about 20+ key sales people with large, medium, and small providers, all of which have well over 15 years of sales experience, often with very strong sales records with previous providers. Another telling part of this sales issue is that these sales people often do not list their most recent provider-employer on their LinkedIn profile. As if they never worked there. It is almost as if the sales person wants to publicly hide the fact that they worked for a particular offshore provider. This strikes me as very ugly.
What is the critical takeaway from this market condition?
My personal view from here is that the lack of top line sales is not a sales person issue at all in 95% of the cases, but much more about thoughtful and strategic preparation by the provider in a mature and highly consolidated market that simply has far too many providers for the size of the industry.
What follows are some of the key issues that I have noted before about challenges in this industry.
However, I have provided some additional detail and insight that might be of help to providers, publishers, and especially sales people for implementing more innovative and strategic change management to improve performance.
Many USA sales people do not trust their offshore provider-employer. Painfully sad, but profoundly true.
When I speak privately to many sales people in the USA who work for an offshore provider, the most noticeable issue is that they just do not have much trust in their provider to use sound business judgment. Clearly, many providers have a long way to go to learn how to work collaboratively with US sales people.
Equally important, the churn rate with sales people with some providers is very high, and often unpredictable. My take from here, that I have witnessed many times myself, is that providers just do not want to listen to constructive criticism unless you are telling them exactly what they want to hear. A candid, personal experience: I told a senior VP for over six months that our conversion service was at high risk with our number one account. He never listened. After six months, the publisher cut revenue with us by almost $1M US a year. Ouch. Also, I know another key sales person in the USA with a large provider who landed a major account with over $10M in sales, but was never paid the bonus for his effort. Probably a loss of more than $200,000 US. The truth does not get any more bloody than this. Political correctness on this sales issue is a nuclear disaster. Consequently, providers need to wake up from a delusional stupor and learn how to work in an adult, collaborative relationship with their sales people if they expect positive results.
With US sales people, word travels, and it travels fast, long, and wide.
If there are a series of rapes in your neighborhood over an extended period of time, most people anywhere become acutely aware of the frightening risk. Obviously, word travels very quickly. Same with offshore providers who seem to take advantage of sales people with very tactical, short term approaches to the sales function. This is a very small industry, and such issues are as viral as ebola.
C- level executives with multiple graduate degrees who have no clue that market conditions have changed dramatically.
This is like showing up in Afghanistan with a slingshot when you are facing a highly trained and armed Isis military with automatic weapons and IEDs. High double digit sales growth has largely gone by the wayside, but I continue to see providers hire new sales people with a sales forecast of $1-2M in the first year. I personally interviewed with one provider recently who had a forecast of $5M US in two years. This is way beyond just being delusional. Most MBA graduates have heard of the sales cycle, and that in mature and consolidating markets, the cycle lengthens--a lot. It does not shrink. This is an emotional intelligence issue, not business. The need for immediate results appears as an act of emotional desperation. And, this is not astrophysics.
Lack of effective marketing.
Many providers still seem to be very confused with the rudimentary differences in “features” and “benefits” with marketing collateral as a sales support tool. Often, little or no compelling testimonials about current clients, no case studies, and no innovative differentiation statements with current services. I have spoken with at least 40 providers in the last 8 months, and I always ask them: “tell me what differentiates your services from other providers?” 99% of the time, they simply pause . . . and there is a long stutter--with no answer. If a provider can not articulate a company positioning statement in 60 seconds, that is a pulsating red, neon sign.
Over reliance on very primitive email as a primary sales lead generator.
Using email exclusively as a lead generation tool is like waking up every morning, being hungry, and no food, and no restaurants or grocery stores. You have to go out and hunt for food with your bare hands every day in order to eat. It can work, but it sure is difficult, and if you do not catch anything: you go hungry. Does it get any more primitive than this? No compelling marketing content about current services in the email. I see dozens of these emails a week from offshore providers. “We do it cheaper, better and faster, and have the best price. Don’t you want to buy some from us?” Argh. This strikes me as a quick path to starvation.
Lack of thought leadership and use of social media.
I highlighted this in another article in great detail, but, again, I see many providers who have little or no social media presence, especially LinkedIn, other than an occasional press release or blatant sales oriented content once a month that shouts in the first sentence: “please buy this now.” Most of this type of content is lucky to get 50 views in a month. Another critical issue is that I see key sales people, and especially C level executives and CEOs, who have little or no compelling LinkedIn profiles. One CEO, who will remain anonymous, has the title of "Chief Energy Officer." What in God's name does that mean? Publishing services is not the oil and gas industry. Also, the profiles often read like resumes from the 1980’s with an exclusive focus on job descriptions, and no quantification of accomplishments. And, no personal branding. Social media and content marketing are not cutting edge anymore. Time to ease into the 21st century. Now, do not go too fast on this.
Over reliance on highly commoditized services.
This is especially true with ebook services, general conversion, and composition. They were great once, but the greatness ended about five years ago, if not longer. The competition for these services now is absolutely overwhelming, and most publishers cannot differentiate one provider from another. Also, per page price declines for these services has to be close to 50% in the last five years. Almost like buying automobile tires or white rice.
Introducing new services.
Most providers continue to stick with what worked yesterday assuming that the past is a logical extension of the future. Nicolas Taleb in The Black Swan has called this illogical reasoning a “narrative fallacy.” The past rarely resembles the future in business, although at times in history and politics. Classic examples are the Blackberry RIM in the cell phone market before smart phones, and CPM as an operating system until MS DOS was introduced. Worked great yesterday, but not in the future. Thinking strategically is very difficult for most people. We all often have a deep-seated emotional need to cling to the past even when it stops working. It is very comforting, and seems predictable. New services allow providers to show publishers they are innovative and adding value, and thinking strategically, and that often builds respect and admiration. Henry Ford once said: “if I asked customers what they wanted, they would say a faster horse.” Faster horses can not compete with automobiles.
Six Sigma and process improvement. Really?
I am totally bewildered by these concepts in outsourcing. Both of these terms seem to require sound, critical thinking skills based on quantifiable facts. “We did this today and yesterday, but we can make this better if we do that tomorrow.” Candidly, I see very little of this in action beyond technical, XML workflow processes, especially with the sales and marketing function in the USA. Just the same old, very tired approach day in and day out, year after year, with declining results. One gets the sense that providers are so trapped in a deep, wide hole, they just cannot figure out who to climb out of the darkness.
Editorial quality in customer facing content.
The fact that you can review many providers’ web sites and sales collateral in 2016 and see profuse subject verb agreement, bewildering punctuation, awkward sentence construction, ugly pronoun references, grossly misspelled words, and, often, a mind numbing lack of meaning remains a profound mystery to me. Quality editorial is more than just editorial: quality editorial is a reflection of quality thinking. I just saw a post on LinkedIn a week ago from a publishing consultant, and the title had the word “publocations.” I was thinking: is this a computer game to find where publishers are located? No, he meant to say “publications.” Providers are often selling to highly educated publishers, not construction workers with a high school degree. Proofreading is not complicated. And, it is very cheap. Why run the risk of making a very negative first impression with a potential, new client? And, then, providers complain why it is so difficult to land a new client with large, first year sales? This sounds like a Franz Kafka short story. The adjective is called “kafkaesque” which means that it is a surreal nightmare. Educated professionals cannot possibly figure this shit out without drugs and alcohol.
Communication skills - again, and again, and again.
How many outsourcing sales people have been on conference calls and demos in person with new clients with a highly technical person offshore as the presenter? And you have absolutely no idea what the presenter is presenting? And worse, yet, when in person, you look at the client and they are shaking their head and rolling their eyes in utter confusion? For me, probably several thousand times. Candidly, a heartbreaking, personal experience: a highly technical woman with a doctorate in biochemistry is doing a presentation about genetics research. But, the presentation? Could not understand 5% of what she said due to her ineffective English and an extraordinarily heavy accent. Providers should be absolutely certain that they have technical presenters doing presentations to new clients who understand English very well, and can articulate clearly and concisely.
Disruptive change is often a painful process.
This seems especially true when we work very hard, build a profitable business over an extended period, but then the market dynamics change rapidly and negatively, and we find ourselves lost and wondering what direction to take. Albert Einstein seemed to understand this very well with his famous quote: "Insanity: doing the same thing over and over again and expecting different results."