The Transformed Graphics Supply Chain - Pre Press

MEDIA & COMMUNICATIONS INDUSTRY THOUGHT LEADERSHIP

[email protected]

June 2009 (Rev/ July 2011)

Intermedia Global Powering b2b Marke�ng



Copyrights Intermedia Global, 2009

WHERE NEXT FOR INDIAN PRE-PRESS?

DHANANJAY BALODI

JUNE 2009

MEDIA & COMMUNICATIONS INDUSTRY THOUGHT LEADERSHIP

THE TRANSFORMED GRAPHICS SUPPLY CHAIN

The Transformed Graphics Supply Chain Where Next For Indian Pre-press?

MEDIA & COMMUNICATIONS INDUSTRY THOUGHT LEADERSHIP

THE TRANSFORMED GRAPHICS SUPPLY CHAIN

JUNE 2009

WHERE NEXT FOR INDIAN PRE-PRESS?

[email protected]

AUTHOR’S NOTE:

The Graphics Supply Chain includes all businesses involved in the creation, production and implementation of visual graphic communications in the print and electronic media as well as all ‘enabling’ businesses such as technology, consulting and logistics that help in the automation of processes and exchange of data across the supply chain. “The Transformed Graphics Supply Chain” series of though leadership articles aim to capture the sweeping changes across the media and communications industry. Further, they seek to analyze the viability of traditional business models in this changing industry landscape and propose new thinking. While these articles look at the Indian context, most trends and insights closely shadow what is happening in the global industry. “Where Next for Indian Pre-press” analyses one such traditional business in the supply chain - the pre-press tradeshop and seeks answers to questions like why the tradeshop is threatened with extinction. What strategies are Indian tradeshops applying to re-invent and survive? And do they stand a chance? Your opinions are welcome. DHANANJAY BALODI [email protected] T: +91 (0) 98923 23661 www.intermediaglobal.com

AUTHOR BIOGRAPHY: Dhananjay Balodi (DJ) is a Mumbai, India based consultant and entrepreneur with over a decade of experience in the media, publishing and graphic arts market. Over a 19 year career, DJ has successfully built two start-up BPO businesses in the graphic arts space, launched and edited a popular German magazine title in the Indian market, designed and launched b2b e-Commerce services at Satyam Webexchange (part of a Top 4 IT services major) and has led the design and development of a collaborative publishing workflow system.

DJ is Founder at Intermedia Global – a marketing and premedia KPO consulting firm and an Esko Artwork consulting partner. He is currently involved in the development & rollout of a new global media services strategy for Eastman Kodak Co. DJ has also been consulting for several premedia & marketing services businesses from the UK, Europe, Australia and North America interested in the India opportunity. Earlier, DJ was Managing Partner in a joint venture with India’s largest prepress company where he led the business’ efforts at transitioning into a premedia KPO supplier for the global packaging, marcoms and magazine publishing markets. In October 2008, DJ was invited to be panelist at the US FTAA’s (Flexographic Technical Trade Association) annual conference to speak on “Premedia Offshoring” for the packaging graphics market. DJ can be reached on email ([email protected]) or on cell phone at +91 98923 23661.

Cover photo sourced from photolibrary.com



MEDIA & COMMUNICATIONS INDUSTRY THOUGHT LEADERSHIP

[email protected]

New media and the impact of I.T have challenged the relevance and value of traditional print-centric service providers.

‘electronic/new media’ in the communications budgets of mass advertisers. This ‘new media’ emergence is both swift and telling. Swift because of the sheer nature of technology’s rapidly growing sophistication and telling because it is challenging popular notions of marketing, communications and brand building. More significantly, ‘new media’ is already questioning the traditional agency’s capabilities, thinking and influence over the marketer’s communications budgets.

Graphic Arts: An Industry in Transition

While the changing media landscape – print to electronic - is obvious because we see and experience it as consumers, there are other significant changes brewing in the background that have engineered far-reaching impacts to the graphics art and communications services supply chain.

New media and the impact of I.T have challenged the relevance and value of traditional print-centric service providers. Certain skills and industry constituents such as print pre-press – long held as a super specialization - have been ruthlessly marginalized and driven to irrelevance. PDF, Photoshop, CTP, digital proofing and the Internet along with a host of smart new applications for workflow and data management – digital asset management (DAM), marketing operations management (MOM) and rules-based artwork production - have put the power of producing ‘media-ready’ output directly into the hands of the designer, rendering downstream ‘pre-press processing’ stages needless in most cases. Some of the capabilities that were central to pre-press processing such as color retouching and file integrity checks have become non-dependent on specialist equipment or software due to the evolution of Adobe’s Photoshop and Acrobat platforms. Proofing which once needed high-end capital equipment and manual expertise (recall wet proofing?) is now almost a desktop capability (if not already, will very soon be). To top it all, the demise of the scanner and the film some years back with the advent of digital photography and CTP almost fore wrote

** India Media Forecast, Apr 2008 – GroupM



WHERE NEXT FOR INDIAN PRE-PRESS?

To add to print’s woes, the post dot com era of the mid 2000s has rapidly driven new wedges into the print-centric advertising pie garnering a growing foothold for

JUNE 2009

industry landscape. At a fundamental level, this change is in the form of what constitutes the definition of ‘media’. Print which had until the early 1990s stood its ground as media’s de-facto definition, gave way to television (electronic media) as the emerging medium for mass communications. The re-emergence of radio a little later, further altered the landscape shrinking print’s share of the communications pie. While Indian newspaper advertising continues to grow at a healthy 17% YoY since 2005 and still is the number one media of choice for advertisers, TV (16.75%) and Radio (39%) combined have emerged as a close second **.

THE TRANSFORMED GRAPHICS SUPPLY CHAIN

G argantuan changes are sweeping the media and communications

MEDIA & COMMUNICATIONS INDUSTRY THOUGHT LEADERSHIP

THE TRANSFORMED GRAPHICS SUPPLY CHAIN

JUNE 2009

WHERE NEXT FOR INDIAN PRE-PRESS?

[email protected]

pre-press’ obituary. To justify their continuing relevance, prepress tradeshops have made desperate attempts to promote concepts of color management. Understandably, this ploy has met with little success. While there exist pockets of specialization such as packaging repro for flexo and gravure printing or even highend color retouching, the trend is clear; pre-press tradeshops need fundamental changes to their business model driven by the market’s demand for a whole new set of capabilities. Some of these new capabilities will mean battling for footholds in traditional agency turf or downstream in the print services domain. Given their state of evolution and inability to attract or afford quality professionals across technology, operations and business development, this is too much of an ask for most tradeshops.

The Changing & The Changed

Pre-press tradeshops need fundamental changes to their business model driven by the market’s demand for a whole new set of capabilities.

Like most industries, pre-press has gone through constant upheavals over the last 3-4 decades. So the current changes aren’t a new phenomenon. Tradeshops have managed to survive previous upheavals largely because they have been around equipment or specific techniques. What’s different this time is the fact that the change is industry-wide and driven by fundamental shifts in both technology and supply chain relationships (refer graphic on next page). The nature of customers, markets, products and business relationships have undergone transformations. Moreover, the speed and magnitude of the change this time around, make it both disruptive and almost unmanageable.

Pre-press Industry Evolution: Different Times, Different Demands. TIME ERA

PRE-PRESS OFFERING

DRIVERS OF CAPABILITY (Over and above knowledge of print processes & media)

Pre 1980

1990

2000

2005

2009

> Lithography > Engraving > Typesetting > Block Making

> Postscript to Film > DTP > Scanning > Wet Proofs

> Color Retouching > Digital Proofing > PDF Creation

> Premedia (print & digital) > Digital Asset Mgmt. > Color Retouching

> Craftsmanship > Specialized Hardware

> DTP Systems & Computer Skills > Specialized Hardware > Vertical Specialization (Commercial/ Publishing/ Packaging)

> LAN/WAN > Specialized Software > Color Mgmt. > Vendor Relationships

> Comprehensive I.T & Workflow Integration > Process Excellence > Marketing > Branding Knowledge > Vendor Relationships > Program/ SLA Mgmt. > Data Mgmt.

PRE-PRESS ERA

The Emergence of Premedia Information technology’s relentless inroads into the graphics supply chain – at equipment, software, process and workflow levels has realigned skills, redefined service provider capabilities and more significantly, reconfigured industry



PREMEDIA AGE

MEDIA & COMMUNICATIONS INDUSTRY THOUGHT LEADERSHIP

[email protected]

Pre 2003 Era: The Agency-Controlled Graphics Supply Chain. MARKETER

SUPPLY CHAIN DRIVERS: > Production Quality > Brand Consistency

AGENCY > Brand strategy > Media cost management > Supplier choice > Studio production

PRE-PRESS SHOP PRINTER

> Print quality management

> Print production > Logistics & print fulfillment

JUNE 2009

2004 - 2009: The Marketer Begins To Take Control. The Premedia Agency Emerges. CREATIVE AGENCY

MARKETER

> Brand strategy & design > Media buying

PREMEDIA AGENCY

SUPPLY CHAIN DRIVERS: > Production Quality > Brand Consistency > Cost Efficiencies > Speed of Implementation > Workflow Integration

PRINTER

> Studio production & premedia services > Print output quality > Digital asset management



> Print production & output quality > Logistics & print fulfillment

The most significant trends as far as industry structure and power equations go has been triggered by the agency’s diminishing hold on the marketer’s spending decisions and the emergence of a new class of service provider - ‘the premedia business’. Agencies having painted themselves as the ‘intellectual’ and ‘creative’ business in the supply chain, have always been loath to do run-of-the-mill studio production work. Besides, their exorbitant fees and lack of focus on service levels has begun to put off marketers who do not always need a ‘creative’ approach to design but are instead, looking for templatized execution, rapid turnarounds and lower costs. Typical of such work includes design adaptations and artwork building for below-the-line (BTL) marketing communications especially in situations where the branding rules and artwork creation guidelines have already been defined. As a result of the agency’s inability to heed this need of the marketer, such work started moving to stand-alone production agencies as well as to the few pre-press tradeshops and print providers that were willing to extend their capability.



WHERE NEXT FOR INDIAN PRE-PRESS?

The most significant trends as far as industry structure and power equations go has been triggered by the agency’s diminishing hold on the marketer’s spending decisions and the emergence of a new class of service provider -the premedia business.

THE TRANSFORMED GRAPHICS SUPPLY CHAIN

structures. Traditional, linear relationships have given way to newer structures over the last decade.

MEDIA & COMMUNICATIONS INDUSTRY THOUGHT LEADERSHIP

THE TRANSFORMED GRAPHICS SUPPLY CHAIN

JUNE 2009

WHERE NEXT FOR INDIAN PRE-PRESS?

[email protected]

Consequently, pre-press tradeshops largely dependent on the agency business saw a huge shift in their customer profile as corporate brand managers began soliciting their services directly. While this brought for pre-press tradeshops the golden opportunity to evolve into premedia services, most have struggled to come to terms with the new set of challenges.

Survival Strategies for Indian Pre-press

With waning demand for traditional pre-press services, tradeshops have been forced to transition their business models for survival. These transitions have been along one or more of the following lines:

Pre-press to Print

Most pre-press tradeshops have found in print services a natural extension of capabilities particularly via the digital print route - large format outdoor, indoor signage and short-run digital print services. However, none have managed to translate technical familiarity with print processes into big business or grasp the complex commercial and operational challenges of the print market. Competing in print services also meant making capital investments and risk-taking of an order much larger than tradeshops know or can afford. With disruptive change being the need of the hour, incremental investments by tradeshops in print capability has done nothing to alter the status quo. To complicate matters, in-house pre-press operations at print shops - often, much larger and more sophisticated than stand-alone tradeshops - are now in direct competition with specialist tradeshops. Considering printers determine output on far larger budgets, they have greater leverage of client relationships (especially in publishing and packaging). In majority of cases printers have simply offered prepress as a free value-add to their print orders. As a result, stand-alone tradeshops are no longer in demand for pre-press expertise like in the past nor have they fully been able to transition into mainstream print businesses.

Pre-press to Premedia

The second attempt at a transition has been through the upstream migration into a space between design (the intellectual, creative domains) and pre-press (the hardcore technical end) called ‘premedia’. This transition however, is the result of market forces rather than any strategic, pre-determined response from tradeshops to explore upstream competencies. Globally, most of the larger, better managed tradeshops have made this transition into the premedia space quite effectively. However, in the Indian context, tradeshops have discovered how woefully short they are on the capabilities front to play this game (Refer graphic on Pg. 4 again). Instead, the premedia space is being occupied by a new breed of technology and market savvy players who have better understood the drivers of premedia capability i.e focus on IT-enabled services, delivery excellence, program management and strong capabilities on the digital media front.



The inability of pre-press tradeshops to understand the premedia game has created a vacuum that is quickly being filled in by better equipped players upstream and downstream of the supply chain.

MEDIA & COMMUNICATIONS INDUSTRY THOUGHT LEADERSHIP

[email protected]

Local Markets to Offshore Services

A Chasm Too Wide

Because of their non-professional management (most are family run businesses with revenues in the under $5 mln. bracket), lack of brand image and often, poor business vision, tradeshops have been unable to put in place many of the key drivers needed to make the transition. Some of these include: Inability to attract quality talent: Tradeshops are still considered a blue-collar organization making them distinctively unattractive to knowledge workers as an employment and career option. Further, as closely held family businesses many are loath to sharing management control with professionals or getting outside funding for fear of losing their hold on business.

Lack of market and customer knowledge: Most tradeshops lack the ability to understand the marketer’s needs and develop suitable solutions around those needs. From dealing with the agency’s account servicing, creative and production staff on technical issues to managing business and commercial expectations of corporate marketing and procurement experts has been too wide a chasm to bridge in terms of business approach and market making ability.



WHERE NEXT FOR INDIAN PRE-PRESS?

In the publishing domain especially in journal publishing and to some extent magazine prepress, there has been strong success primarily due to the far superior capabilities of service providers who have essentially come from the IT-enabled/ software services domain. There have also been large print businesses that have made successful forays into the offshore publishing services space.

JUNE 2009

With historical technical expertise no longer the sole criteria for buying offshore services, tradeshops that presumed superiority in prepress knowledge was enough to crack deals are learning hard lessons.

In response to falling rates and sharp margin erosion in the domestic market, a few Indian tradeshops jumped into the offshore bandwagon. Again, this move has been attempted without first addressing fundamentals - ability to engage in large-volume, multi-year contracts and the capability to deliver (people, process, technology). With historical technical expertise no longer the sole criteria for buying offshore services, tradeshops that presumed superiority in pre-press knowledge was enough to crack deals are learning hard lessons. Growing buyer maturity has also led to the realization that offshoring is more about managing risk at multiple levels than merely managing delivery of print-ready output. Along with technical evaluation comes the assessment of several critical vendor capabilities such as scalability, quality of service (QoS), track record for contract and SLA adherence, project management, ability to attract and retain professional talent, business continuity measures and overall business maturity. To compound matters for tradeshops, the new breed of professionally managed offshore service providers has begun to capture the imagination of global buyers for premedia services.

THE TRANSFORMED GRAPHICS SUPPLY CHAIN

In the next part of this thoughtpaper series titled “The Indian Premedia Market: Top 5 Suppliers” the relative strengths and capabilities of this emerging breed will be analyzed.

MEDIA & COMMUNICATIONS INDUSTRY THOUGHT LEADERSHIP

THE TRANSFORMED GRAPHICS SUPPLY CHAIN

JUNE 2009

WHERE NEXT FOR INDIAN PRE-PRESS?

[email protected]

Smarter new competitors: A third factor is a new breed of smarter competitors – production agencies run by ex-advertising professionals, new-media agencies and a whole host of technology-savvy service providers that have moved into the graphics production services space particularly through offshore outsourcing. The pricing shock: During their heydays (until the late ‘90s) Indian tradeshops charged and got rates at between $45-$60/hour** for services such as scanning, retouching and such activity simply because they offered a specialization or had equipment that others didn’t. With the dilution of expertise brought about by technological changes, typical rates came down to between $30 -$45/hour in the early 2000s. Today, similar work is being done for between $20 - $30/hour by a plethora of production studios and small agencies and for volume-based work such as in offshore outsourcing engagements, rates today, range between $8 $18/hour depending on type of work, service level expectations and volumes. This new rate expectation from commercially savvy clients for services such as image manipulation is a huge cultural shock that tradeshops have found impossible to

come to terms with. Lack of project management infrastructure & skills: The organizational capability to handle large work volumes in a process-driven production environment that leverage I.T and workflow systems simply does not exist.

Conclusion

Global trends clearly point to a growing demand for technology-centric premedia services. With traditional tradeshops ill-equipped to move up the technology curve or professionalize fast enough, the premedia landscape is seeing the emergence of a new breed of professionally managed service providers with strong I.T and marketing expertise. And with India’s growing local market and strategic location as a low-cost, English-speaking production base, global majors such as Schawk, R R Donnelly, Watt Gilchrist (now Sun Branding), Stibo Systems and Fresh Media Group have been quick to establish their presence in the Indian market.

A fundamental problem Indian tradeshops have is in their approach to business which is still transactional rather than partnership focused. Tradeshops need to clear the cobwebs in their mind and professionalize at all levels if they have to make an attempt at a successful transition. But professionalizing means letting go of personal control over business and the shopfloor as well as making fundamental changes in the approach to managing business - corporate governance, business ethics, legal compliances, IPR track record and H.R policies - thoughts too culturally alien and radical for the small, family-run tradeshops. Clearly, the turf is ripe for a new generation of premedia players in the Indian market. For the traditional tradeshop still living in the past, the alternatives are clear: sell out before its too late or be driven to irrelevance. Copyrights Intermedia Global, 2009

** 1 US $ taken at current conversion rate of Rs. 48 approx. Rates vary depending on task complexity.



Clearly, the turf is ripe for a new generation of premedia players in the Indian market.