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Service Bureau Basics

White Paper By Ari Buchwald 2004

For those who have watched the NASDAQ and tech stocks plummet faster than some Chicago sports teams, I offer two suggestions –


     1) Diversify


     2) Perform a cost/benefit on keeping money in the NASDAQ vs. under the mattress


What does the NASDAQ have to do with Service Bureaus? Consolidation and Re-branding. Two words often heard when talking about NASDAQ companies. Service Bureaus have been successfully dealing with similar battles in providing value and service in exchange for profitability and growth.


In trying to define Service Bureaus, I am reminded of a childhood joke which starts with the question, “Why are fire engines red?” the long and winding answer involves newspapers, a ship, the ocean, and finally resolves with the statement that they are always Russian (rushing).


What is a Service Bureau?


The textbook type definition is a company that offers services or access to equipment and software for a fee in order to supplement or replace infrastructure capabilities.


It seems the term Service Bureau has also gone south quicker than those Midwest based sports teams. Only a few years ago, I could go to my local direct mail vendor directory and find a listing of specialized Service Bureaus tailored to my needs.


Originally, the term Service Bureau referred to pre-press bureaus that prepare artwork, printing and eventually personalization services. The term grew to include lettershops, the folks who turn stacks of paper into finished, trayed or bagged mail.


Lettershops were plentiful in the early nineties, offering complex inserting and personalization services. Since much of their work was initiated by data processing and hygiene, many lettershops either evolved or consolidated with data processing facilities. Not many companies specialize in just one service anymore.


Database and software providers also caught on to business models with acronyms like ASP (Application Service Providers) and CRM (Customer Relationship Management). Their offerings may now include services, software or access, including strategy, creative, analysis, processing and production.


These facilities deemed but no longer termed Service Bureaus, now offer turnkey services, software and full direct marketing support. In addition, the survival of these bureaus is turning more and more towards the Internet, with multi-channel, personalized one to one communications such as email and telemarketing.


Where may one look to find listings of lettershops, print shops, and database or data processing facilities? Those that have not re-branded or consolidated offer suites of vertically integrated services.


Different flavors of Bureaus include:


Prepress Service Bureau - offers a variety of services, including image setting, scanning and desktop publishing


Database Vendor – sells services such as data warehousing, processing, analysis and reporting and list services


Lettershop – provides imaging and personalization services, data processing and mailing services


ISP – Internet Service Provider Connects individuals and businesses to the Internet for a fee or in exchange for accepting delivery of targeted advertising messages


ASP – Application Service Provider Allows access and use of software (and data storage) for a fee


Other services that may be included in the Service Bureau umbrella are:

  • Creative Agency
  • Data Entry
  • Email Processing
  • Email Address Correction
  • Imaging & Printing
  • Streaming Media
  • Telemarketing
  • Temporary Staffing
  • Web Conferencing


What are the benefits of using a Service Bureau? Companies can lower costs through reduced staff and equipment. Staying ahead of the technology curve is not as difficult, since a Bureau will offer best of breed tools and experience.


Higher quality, expert staff, dedicated project management and higher confidence in the end product are given when dealing with outsourcing to a Service Bureau. Companies may also test services before considering implementation of in-sourcing commitments in a try it before you buy it scenario.


How much do services cost?


Outsourcing to Service Bureaus can be tricky when it comes to negotiating pricing. Always do some homework and compare to the industry norms. Often charges take the form of periodic, per project, per process or one-time minimums with per thousand / per inch / per process charges. Volume discounts may be negotiated, as well as milestone payments, rate locks and opt-outs for term contracts.


When reviewing software or access, consider CPU / parallel processing charges as well as whether costs cover simultaneous or concurrent users. And always look at run charges and project management costs as potential for hidden costs.


Who does this stuff?


Big players include Acxiom, Polk and Experian. Lettershops include Creative Automation, Tribune Direct and Dickenson Direct. Informix, BeNow and Group1 are leading charges into hygiene and the Internet.


So if you are always rushing, look to Service Bureaus as a way to get the job done.