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Tuesday, June 14, 2005

The Media, Outsourcing & Strategic Value

Outsourcing is all around us, from database management to dry cleaning. BBC recently began outsourcing its IT functions encompassing the corporation's broadcasting technology, channel streams, programme archives and hardware components. Reuters is on an expanding spree in India. Outsourcing changes will not only take place in back-office areas, such as IT, but at ground level too. Business 2.0, conducted an experiment to determine the effectiveness of outsourcing by offshoring a section of the publication to India. The project cut costs by 50%.
The New York Times, has outsourced a variety of elements to a software company, which contracts its work to India. Add IT and back-office processing at the major cable networks and it is hard to identify a medium not outsourcing at some tactical level. It has even been suggested that press office functions such as research and drafting press releases are open to offshoring, while the strategic client relationships are better supported onshore. This blending of resourcing aligns business imperatives with cost-cutting. BBC is expected to save between £20m and £30m a year, allowing the corporation to relocate resources to key areas such as new programming. The traditional business models of the media industry are under severe pressure: revenues are being squeezed by a rising cost base, increased competition and changing advertising models.
The convergence of broadcast and IT technology and the addition of supplementary channels such as mobile increases the scope and reach of outsourcing. As broadcasters move towards greater digital output, more and more companies are realising the strategic benefits of outsourcing. Some outsourcing companies have extensive experience in IP technology convergence, content distribution and archive digitisation and the decision to outsource becomes even more logical. More value will be added if we sort of unbundle the corporation and understand the process interplay theron, assessment on what can be outsourced and how much value maximization can be achieved over a period of time becomes more rigorous. That’s when business advantages begin to differentiate and begin to genuinely contribute to organization revenues.

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