Can IT Save RD?

Magazines used to be an integral part of the intellectual diet and one of the
most popular. Numerous pleasurable hours were spent going through regulars like
Laughter the Best Medicine, Humor in Uniform or Drama in Real Life. Its a pity
that in todays Internet-driven world those days seem to be lost forever.
Children pick up much more lurid and visually explicit details from umpteen
sites and much more corny jokes now do the email rounds. A glance at some of the
recent issues convince you that RD has lost not just its innocent exuberance but
might just have traded off its very essence in trying to cope with changing
times and perceptions.

While one would not like to sit and be judgmental on RDs fall from grace,
some statistics do show that a vast amount of erstwhile readers around the world
do share my sentiments. The company, Readers Digest Association (RDA) that
publishes a host of other magazines and books besides the eponymous magazine,
reported a loss of $34.1 mn on revenues of $642 mn in its fiscal second quarter
ended December 31, 2008. Subsequently, in January, it announced plans to fire 8%
of its staff citing a drop in consumer spending and magazine advertising.

A Big Deal

In light of these pecuniary problems staring at RDs face compounded by
recessionary woes, its decision to ink a $350 mn, seven-year IT outsourcing
agreement with Indias HCL Technologies assumes special significance. Neither of
the two protagonists deny the cost-cutting oriented nature of the deal; in fact,
Albert L Perruzza, Readers Digest Associations senior VP for global
operations, IT and Business Redesign, boasts that the deal with HCL Technologies
would yield significant savings besides bolstering the companys IT
capabilities. We expect to see dramatic reductions in our total IT costs, he
asserted.

Agrees R Srikrishna, senior vice president, North America, HCLT ISD, Though
everyone would admit that recession is always a difficult time, the fact is it
is also one of the reasons this deal has happened. Competition is always more
intense during slowdown; and RDA had an opportunity to evaluate providers
worldwide before closing in on us to facilitate adequate cost cutting. With
figures proving that over the years the magazine has just not lost its way but
its cachet as well, it would be a triumph for total IT outsourcing if this deal
could halt the financial downslide of RDA.

How could the deal ensure the perceived cost benefits for RDA? Primarily,
through the three pillars of a widening scope of support provided, the global
delivery model using low cost delivery hubs and transferring manpower assets to
its own rolls. And scheduling a tight deadline and then sticking to that time
frame; according to Srikrishna, the time schedule would involve a two-phase
transition, one in Americas by May and rest of the world by July. Moving the
data center would be complete by the early part of 2010. Overall, in the next
12-18 months, the first phase of the project would involve transition and
stabilization followed in the next phase by transformation.

We would complete the transition in Americas by May and rest of the world by July R Srikrishna, senior VP, North America, HCL Tech ISD

The first cost benefit would accrue from the fact that the agreement is
supposed to cover RDAs entire IT landscape, spanning the gamut from
infrastructure to applications. This would include support across Oracle
Universe, open technologies and mainframe; and infrastructure support for
network, security, storage, end-user computing, Wintel and Unix server
management. HCL Tech will update IT legacy assets, rebuild and migrate RDAs
mainframe environment in its Pleasentville, New Jersey data center and implement
a new tools framework to provide business-aligned, unified, real-time visibility
into the health of the IT environment.

Further, reaffirming the global nature of the deal, HCLT will provide IT
support to RDA across forty-five countries and fourteen languages (Portuguese,
French, Russian, Czech, Spanish, Polish, Finnish, German, Hungarian, Bulgarian,
Chinese, Romanian, Slovak and Turkish) across North America, Latin America, East
and West Europe and Asia. Besides, there will be an integrated helpdesk in
fourteen global languages. These will be supported across forty-five countries
through HCLs global delivery locations in low cost locations like Kracow in
Poland, Noida in India besides in NJ, US supported by a worldwide onsite support
network.

Last but not the least, manpower transfer would ensure the resulting IT
service will be staffed by a combination of HCL Technologies on-site staff and
remote support, current Readers Digest Association IT employees and its IT
personnel who are joining HCL. Srikrishna is however unwilling to disclose the
number of employees to be hired from RDA. A source close to the situation
however revealed that some of the new hires will continue to work at Readers
Digest sites, providing on-site services.

With RDA operating in forty-five countries mostly through franchisee models
(in India it operates under the Living Media or India Today group) there is a
possibility of HCLT having to deal with disparate IT teams across geographies.
Srikrishna, however, refutes the possibility since RDA operates under regional
governance councils which in turn reports to a central governance body. HCLT
will be interfacing with these regional bodies only, and not deal wit individual
IT staff, reveals Srikrishna.

Besides, offering some succor to a beleaguered RDA, this deal is significant
in a few other ways as well. For one, it is the first integrated IT-services
deal in the media, publishing and entertainment entrusted to an Indian service
provider; while content publishing till now involved offshoring only niche
back-end work to India, this could lead to the media houses opening up a new
total IT outsourcing wave. And with most media houses including RDA shifting
more towards online, there could very well be a new paradigm soon defined in the
IT outsourcing landscape.

Next, in these tough recessionary times, this is the largest deal by size
signed in the offshoring world during Q1 2009. No wonder, therefore, that
Nasscom President Som Mittal has publicly congratulated HCLT for this landmark
engagement. The Indian IT-BPO industry is increasingly focused on expanding
into less penetrated verticals through innovative business models, he adds.

Rajneesh De

rajneeshd@cybermedia.co.in