The Hindu Business Line : Having the last word

An acquisition every two months — this is the pace at which Indian e-publishing companies have been growing their operations in the last two-three years, going by the Black Book Survey 2007, which lists the top print and publishing BPO suppliers in the world. Of the 20 companies listed, 18 have large operations in India and have actively pursued inorganic growth.

An industry that dates back to the early 1970s, when Macmillan Publishers first outsourced some typesetting work to India, is now seeing consolidation with home-grown companies taking the lead.

eWorld explores the reasons behind this, the landscape post-consolidation, and the future of e-publishing.

Earlier, the Indian vendor landscape was fragmented, with many small players offering data conversion services and a few larger players providing end-to-end services, including project management, editorial services, design and composition services. Their clientele consisted of 10-15 large global publishing houses.

But with the publishers themselves undergoing consolidation and looking for “one vendor” to outsource all their work to, vendor consolidation was spurred and since 1995, 40-50 companies globally have merged to form three-four large conglomerates today, say industry watchers.

Readying for demand

Anticipating the huge demand for e-publishing outsourcing, vendors want to achieve economies of scale and deal with larger volumes of work. “Vendors are growing at least 50 per cent (year-on-year). Once they reach the $20-million revenue mark, it becomes difficult to grow with the same set of clients. Acquisitions are the best way forward,” says Thyagesh Baba, Director - Investment Banking, Spark Capital Advisors, a firm that has facilitated deals in this space.

Publishing relationships are long-term (10-15 years) and it is rare to find publishers doing business with a new vendor. A new vendor may work for a large client only through a subcontracting agreement with one of the trusted vendors.

In the last decade, due to cost pressures, many US-based vendors have subcontracted to Indian vendors. Over time, these relationships have culminated in mergers and acquisitions. This has given Indian vendors a direct presence in the client markets with an experienced marketing and distribution team (belonging to the acquired company).

Textech International is a case in point. The Chennai-based company, part of the $20-million Multivista Global group, acquired US-based Stratford Publishing Services 18 months ago to gain a strong sales and marketing presence in the US. “It helped us reach out to an established customer base and provide front-end services,” says A.V.R. Venkatesa, Chief Executive Officer of Textech. The company is now considering another acquisition focused on gaining some niche skills, he says.

Macmillan India bought two US companies, one of which — ICC — was bought for its local project management experience. ICC provides content processing services and the acquisition is expected to strengthen Macmillan India’s presence in North America. Six months ago, Macmillan’s subsidiary, MPS Technologies, too entered into a similar deal with European company Swets.

The Rs 40-crore company sold off the exclusive rights of its application ‘ScholarlyStats’ to Swets while retaining development and licensing. ScholarlyStats is a web-based application that eases the burden of collecting, consolidating and analysing e-journal usage statistics from multiple sources. “Swets had 10,000 libraries as clients while we had only 150. Plus they also had a 160-strong marketing team. So we chose to leverage their marketing and our development skills to sell the product,” explains Ravi Singh, Chief Executive Officer, MPS Technologies.

Publishers looking for fewer vendors is what prompted Pondicherry-based Integra Software Services to acquire Chicago–based Elm Street Publishing Services last year.

“We now have the advantage of handling complex project management and editorial work out of a single entity,” says Sriram Subramanya, Founder, Managing Director and Chief Executive Officer of the company. While the majority of work is done out of India, some high-complexity projects are carried out in the US.

Some acquisitions are also focused on entering a new business segment and thereby capture new clients. An example is PreMedia Global which acquired GGS Book Services (US). This is the company’s fourth acquisition in 18 months and announcing it a few months ago, Kapil Viswanathan, Co-Chief Executive Officer of the company, said PreMedia Global was now positioned as a major player in the education publishing services industry. “Now we will be able to provide services in design, development and product to each of the four big publishers — Thomson/Cengage, Pearson, McGraw-Hill and Houghton-Mifflin/Harcourt.” The company has plans to enter other segments such as magazines, yellow pages and corporate brochures through inorganic growth.

Better price, cost efficiency

Beyond gaining new clients and skills, consolidation also means vendors will now be able to negotiate better on price and improve cost efficiency. “I see deal pricing easing a little because vendors will have some might to negotiate with the publishers. Also, there is scope for cushioning operational risks,” says Kaustubh Dhavse, Program Manager, ICT Practice, Frost & Sullivan, South Asia & Middle East.

For instance, the US economic slowdown may force publishers to either maintain or reduce their outsourcing rates. For small vendors, who already face issues of wage inflation and escalating infrastructure costs, this may hit their margins. But upon integrating with another player, one can avoid a cost reduction intelligently (say through varying billing rates or movement of work to different geographies), Dhavse explains.

Consolidation may also see deal sizes increase — not just in value but also quantum and quality.

“Earlier, there used to be pointed (specific) short-term deals (a few months) averaging about $50,000. Deal sizes today vary between a few hundred thousand dollars up to $1 million. There is greater propensity to outsource the entire e-book creation to one vendor and also increase the deal period and quantity. We are also beginning to see companies outsource small portions of content creation (considered as high-end work),” says Robin A. Lloyd, Vice-President and General Manager, India, Lionbridge Technologies, which offers content, software and application development-cum-testing.

Ravi Singh of MPS Technologies says it is not unusual to get $5 million deals today. “In the past, if people made a deal to typeset and print 300 copies of a journal, today they may want fewer copies in print but opt for online linkages and multimedia support,” he says.

Multimedia will emerge as the future of e-publishing, the industry believes. “The ability to build multimedia linkages will help Indian vendors tap a large portion of the $5-$8 billion e-publishing market,” says Baba of Spark Capital. Currently estimated to be $500 million-$1 billion, it is growing at 35 per cent and likely to be worth $1.46 billion in 2010, according to a ValueNotes report.

A good chunk of this market may also lie with Indian publishers. A senior official from Navneet Publications estimates the Indian e-learning market (including the e-publishing) for schools and colleges alone to be to be about Rs 10,000 crore. Navneet has developed multimedia e-books based on Maharashtra and Gujarat State Board Syllabi in English and regional languages meant for class-room teaching.

Others like MPS Technologies are developing electronic interfaces and e-business models to help publishers sell their books online. It has also made tools to evaluate online usage of books and how libraries can accordingly structure their financial investments. “Earlier people would not buy such software from an Indian vendor, but now they are more open,” says Ravi Singh.

Lloyd of Lionbridge says content conversion/integration with existing physical books will not last long. “The future is to move into more multimedia creation process where elements of design, content and e-learning are brought together,” he says.

A snapshot of

e-publishing outsourcing

Started with UK publishers outsourcing low-end work such as formatting and editing. These were primarily of consumer-based books such as fiction and non-fiction that one usually finds in a retail book store.

The scientific/technical journals and academic books publishers saw the need for electronic books and vendors started offering digitisation work, popularly called form conversion, where a document is converted from physical to digital form or between digital forms (such as PDF to XML).

US publishers started a spate of outsourcing activity, mainly concerning educational books (school and university press).

Slowly value addition in the form of graphics, layout and design gained ground.

Today vendors are able to handle most areas of e-publishing that involve taking a manuscript in its basic form to delivering its final compiled version - both print and online.

Publishers in South Africa, Australia and non-English speaking Europe have started outsourcing to India.

archana@thehindu.co.in

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