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Distribution & e-Commerce: A Different Threat

India’s Growing Competition to Creative and Communication Professionals

By Steve Aranoff & Robert FitzPatrick

The North American printing industry is gradually awakening to the imminent threat that China poses. Yet, for those on the creative input and shorter run digital output sides of printing, India is a more relevant competitive threat.

Labor Force
Most Digital Output readers are rooted in the creative and communication elements of printing, not print manufacturing. These sectors are largely protected from Chinese labor competition that is based on low price and mass scale.

The role that India will play, however, reveals a different face to outsourcing and importing that should be more of a direct concern. Everyday experience with technical support of major software providers or customer service departments of many service industries indicates where India will affect North American creative and communication professionals involved in digital output services.

With English as a native language and a huge number of highly educated and technically proficient young people, India is far better suited to displace Americans in the technical service and creative stages of printing. As with China, there is sparse data available to make hard and fast analysis. However, some concrete indicators are showing up.

In October 2004, NPES, the association of North American printing technology manufacturers, received a grant of $180,000 from the U.S. Department of Commerce to promote U.S. exports and the benefits of American technology in India.

The Indian printing industry includes 130,000 businesses employing 1.3 million people and with sales over $10 billion in 2002–2003. Indian purchases of graphic arts equipment in 2002–2003 totaled $185.6 million, including $115 million in imports. The director of NPES says U.S. exports to India have been growing, and he predicts that the grant could help U.S. manufacturers increase their export sales to the region.

Our trip to the region, however, revealed the obvious. NPES’ efforts to help India’s printing industry will not likely result in replicating the kind of export levels that China is generating. It will assist India in more selective areas of export that are based on knowledge and technical skills, not mass scale and low price.

In India, those who labor at intensive tasks like hand sewn/embroidered textiles and block printing, earn somewhere between $30 and $60 per month, we are told. In contrast, the future competitors to America’s creative and communication specialists—the new customer service and IT support workers handling telephone customer service or support—earn about $300 a month. These are highly educated, skilled people, with earnings that allow them to live well above the mean standards of their country.

Offshore Growth
In August 2005, Bowne & Co., Inc., a leader in financial printing, digital printing, and electronic delivery of personalized communications, acknowledged that it currently outsources 15 to 20 percent of its work to India. The company adds that it, "will work to continue to optimize what and how much business it sends offshore."

In October 2005, Affinity Express Inc., a provider of outsourced graphic services for printing, embroidery, and promotional products, announced new capital funding for tripling the size of the company’s operations center in Pune, India.

In November 2005, Cadmus Communications noted in a press release that it has Content Services Operations in Chennai, India as part of networked facilities that process annually over one million pages of journal and book content.

While India is clearly shaping up as a competitor to North America’s creative sector of the printing industry, we believe that India is so full of inexpensive labor and lacking in infrastructure that it is not easily going to enter the industrial revolution the way China is. There are many good silk screen companies in India, but they are really using wooden blocks to print complex patterns onto cloth with inexpensive and long wearing vegetable inks. When was the last time we saw artists in the U.S. using manual technology like serigraphy, when they can now use digital Giclée, or even offset technology to accomplish similar results with less effort?

Technology Developments
There is printing machinery being mass-produced in India. Mostly this is electromechanical in nature, where cheap labor adds significantly to the ability to produce cheaply, along with the availability of low cost metal parts. Products like material transport systems for paper and plates are readily manufactured India in small to moderate quantities. In its most recent report to shareholders, Euro-press manufacturer KBA noted that is has, "now been joined in the marketplace by new competitors from emerging economies like China and India, who are using price to boost sales of technologically less sophisticated products."

When we get into technology-based products, such as large format digital printers, China seems to have the edge and the infrastructure to handle such products more efficiently, although India certainly has the intellectual ability to do the same, if they could provide the infrastructure support.

Studies that have appeared concerning the impact of offshore suppliers to the North American publishers and corporate print buyers tend to focus on volumes of printed material. The export of creative and communication services represents a specialized sector of the printing industry and is more difficult to measure than gross output of pages and dollars of imported print material.

The challenges facing domestic offset and web printers in competing with China’s low price and huge scale often require a focus on ways to deliver specialized services that are not easily duplicated or where language or relationship are more important than just price. Places where the domestic printers can find niches are where many Digital Output readers already reside, such as short-run print, specialty graphics, and interconnected communication programs. This may foretell intensified competition domestically as a consequence of new offshore competitors.

On the creative and communication side, effective responses to the Indian competition must be even more sophisticated and focused on specialized customer needs. Wherever creative and communication services can be replicated or commoditized, domestic supplies may be out-competed.

Jan2006, Digital Output

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