Fredrik kerman, managing director of the 370,000-circulation Bonnier Group daily, said the yearlong transition to outsourcing began at the start of 2000 - in response to a sharp drop in advertising revenue and rising competition from other media, including the newly created Metro free-circulation paper. DN’s financial analysts said there was no guarantee that ad revenues would rise, so the paper investigated ways to cut costs and make the pattern of expenses more responsive to the economy’s ups and downs.

"We decided in the autumn of 1999 that we would use outsourcing to contract out those parts of the business that could not be regarded as core activities," Mr. kerman said.

Those core activities included production of editorial content, advertising and subscription sales, purchasing and other staff functions such as human resources and marketing. Other activities, such as printing and distribution of the paper, customer service, advertising production, back-end accounting and information technology, were farmed out - either to existing vendors, to a subsidiary created within Bonnier, or to a joint venture created in cooperation with a partner or competitor.

About 170 DN employees, or 20 percent of the staff, were affected by the initiative. Most of them joined the companies that received outsourcing contracts, with 10 choosing to remain with DN. Mr. kerman said DN made sure that the workers who left for other companies received reasonable benefits and employment guarantees.

The result? Costs have declined by 1 to 2 percent - perhaps not as much as DN might have expected. DN found that in some areas, costs actually increased due to poor workflow between the paper and the contractors.

"I am of the opinion that there is potential for greater cost savings later on, when the suppliers’ contracts are renegotiated and when there is no requirement to take over staff," Mr. kerman said. "No contract runs for longer than three years."