Mailroom Upgrades Delivering Savings
Once upon a time, an entry-level job in the mailroom of a large company might serve as the launching pad for a great career in corporate America.
But mailrooms -- nerve centers for big businesses -- are being reinvented and in some cases closed completely as companies look to cut costs through outsourcing and using new technology.
Big companies are cutting mailroom employees by adopting software that converts letters and faxes into electronic files and then automatically sorts them.
For example, American Express Co.’s financial advisory group, a customer of San Diego-based Captiva Software Inc., cut 50 employees -- more than half its mailroom staff -- and saved $1.5 million a year in salaries.
“We don’t need as many people, because the scanners we use can sort a lot of the documents, whereas before people had to manually sort them,” said Glenda Swinford, portfolio architect of American Express Financial Advisors.
According to the Department of Labor, there are about 152,000 U.S. mailroom jobs, with about 4,000 eliminated during the first nine months of this year. Analysts say many more are at risk.
The trend in automation of mailroom jobs compounds workforce reductions already being made as back-office operations are handed over to outsourcing firms.
“There is no question that mailrooms are being automated,” said John Challenger, chief executive of outplacement company Challenger, Gray & Christmas Inc.
“The technology today allows companies to not only handle backroom operations through fewer personnel, but it can also be outsourced much more easily.”
About 41% of mailroom work is sent to third parties for processing, up significantly from last year, according to industry publication Mailing Systems Technology.
Eastman Kodak Co., for example, uses Pitney Bowes Inc., the world’s largest postage meter producer, to manage its mailroom.
Pitney Bowes also is venturing into the digital mailroom market with software that helps create mailers and manages shipping. Irvine-based Kofax Image Products Inc. offers a similar product.
Companies are facing a soaring amount of information as the number of documents generated, electronically and on paper, will reach 20 trillion in 2005, according to Xerox Corp. Digital documentation promises to rein in the costs of dealing with all that paper.
“We are converting all that paper to a digital world,” said Captiva Chief Executive Reynolds Bish.
The company, whose shares have risen more than fivefold this year, expects its digital mailroom software to bring in $1.5 million in its first year. Captiva projects its 2003 revenue at $56 million.
Adding to the need for high-tech data storage are new corporate governance rules that require companies to retain more information.
“Companies are trying to get their hands around all the information,” said Steve Lidberg, an analyst at Pacific Crest Securities. “A lot of regulatory and compliance issues have been put in front of them ... and they have to become much more structured.”
Mailroom software is just the tip of the iceberg. Software companies also have their eye on selling content management programs, which allow companies to organize stored documents.
That market is growing at 11% a year, higher than the software industry’s average of 7%, according to consulting firm Bain & Co.
That growth makes companies in the digital documents business attractive takeover targets. Hardware maker EMC Corp. recently acquired software maker Documentum Inc., based in Pleasanton, Calif., at a premium to expand into the fast-growing market.
