In or out? Tackling the in-house versus outsourcing debate
Marketing suppliers: cost centre or asset for growth? Michelle Dunner reports on the ever-changing ‘outsource versus in-house’ debate.
The ideas are workshopped, the plans devised and budgets allocated. The C-suite is happy and the marketing pipeline looks pleasingly full. There’s just one question to be answered: who’s going to do all the work? It’s a rare marketer who hasn’t worked with an external agency or provider, whether for a discrete project or as part of an ongoing campaign. But managing marketing suppliers successfully pivots on one key point: what’s the strategy behind getting them involved in the first place?
Technology has obviated the need to outsource a great many marketing tasks – graphic design arguably being top of the list. Now, marketing team members whip up web pages and create collateral with a minimum of fuss, thanks to highly prescriptive brand guidelines, template documents and content management systems. Two days to change an eDM header? Not in this lifetime. Responsiveness and flexibility is the name of the game – and suppliers just can’t compete with that, right?
So, is the problem that marketers outsource too much, without getting sufficient value from the process, or are they not outsourcing the right things? Stretched and strained in-house teams welcome a fresh set of eyes or a new creative perspective yet, when the crunch comes, suppliers can often be the first resources to be jettisoned. Is that counterproductive or an acknowledgement that the money hasn’t been well spent?
Darren Woolley, global CEO of marketing management consultancy TrinityP3, says it comes down to accountability. “First comes a bit of graphic design; then it’s developing video capability. Next is social media monitoring. Before you know it, the in-house team can be huge,” he says.
“I know of one financial services organisation with its own in-house studio – it employs 70 people. It’s not surprising that CFOs, looking at their organisation of 600 people, start to wonder why the headcount on the marketing team is 150.
“Technology has certainly made in-house production a much more achievable option, but we challenge our clients to look at the actual resources devoted to it and determine whether the costs and the convenience are balanced.”
Growth Solutions Group managing director Graeme Chipp agrees: “What’s the point of the decision to develop resources in-house or outsource? Is it to access teams that can create and challenge the business to win the competitive environment, or is it seeking to deliver lower-cost, more timely material?
“Outsourcing creative communications has real merit; bringing in external and fresh perspectives is proven, but it also requires an effective client management team. It’s a partnership of minds working to market outcomes,” says Chipp.
“If this is in-sourced, it takes real confidence and some courage for those within the corporate walls to challenge conventional wisdom; their careers may be judged by corporate rules and processes that use different criteria for success.
“At the same time, if high volume production work is cheaper in-house and part of the business model of the organisation, this may make more sense. Are in-house teams an overhead cost to the business, or are they responsible for delivering ideas and campaigns that drive growth? Who on the in-house team has the responsibility for asking the question: is this getting us the best return?”
Rachael Lonergan, head of strategy at media agency Foundation, says she’s seeing a lot of touch points for change in the relationships between marketers and suppliers.
“While we’re a boutique agency and attract a similar type of client, I have worked with large agencies on accounts that may have 50 brand managers or junior managers attached. That creates an interesting situation internally that is obvious to see – it’s a culture that breeds inertia and fear. No one wants to be the person who steps outside the process, and marketing is a process in a lot of large organisations.
“Our role now is the complete opposite; we see ourselves as the people who will push the internal teams, although most of our clients don’t have large marketing departments. We demonstrate our value by looking for more challenging ways to get their brand out.”
Lonergan says both parties need ‘skin in the game’. “The best relationship is not ‘master and servant’. Yes, there’s money on the line, and reputation, but we find clients are using us as an extension of their marketing department, rather than someone who just buys media for them.
“Where the relationship doesn’t work is when everything is KPI driven. I firmly believe the goal of marketing is to help organisations sell things – not to achieve GRP (gross rating point) levels on TV or impressions online; they’re just tools.
“If you care about the outcome, you’ll take full advantage of the experience around you. A procurement person doesn’t understand the human intelligence and experience of creative agencies; they only look at doing it cheaper. It’s a commoditisation of what agencies provide and an erosion of the relationship.”
Media buying, particularly in the digital space, is an area that some corporates have taken in-house. Lonergan says programmatic buying online is also moving into television. “If a client is cost focused, they can get very enthusiastic about looking at how much audience they’ve bought and the cost per thousand, but they’re missing a very integral part. Getting the confluence of message and creative can’t be just a programmatic solution. You need understanding of the psychology of your customer, their journey, how they respond. Programmatic buying is functional – it’s not adding the emotional layer or the brand intelligence.
“I can see why procurement departments see this sort of buying as appealing. It was the same with the optimisers; they weren’t the Holy Grail. Clients kept complaining they saw their ads in a crummy environment. A decent buyer will always be able to beat an optimiser.”
Need a bit of SRM?
Of course, there’s an acronym in use in the quest to manage suppliers successfully – SRM. Supplier risk management has been coined by several major consultants, not the least of which is PricewaterhouseCoopers, which undertook its first Australian study into SRM in 2013.
While more aligned to supply chain matters, where internal risk officers need to factor their level of exposure if a supplier can’t fulfil a brief, SRM is recognised as a way organisations can reduce overall costs and expand quickly into new markets and services.
Essentially, the ability to keep a workforce focused on core business while outsourcing non-core activities (particularly those where an organisation can demonstrate no internal competitive advantage) is at the heart of SRM.
PwC’s report identified what it called “concerning gaps” in the way organisations managed suppliers. It found: “Many respondents were simply not gaining some of the basic yet vital benefits they had hoped to achieve from their sourcing arrangements, including greater efficiency and risk mitigation.”
Graham Plant, the CEO of Effective Measure, which specialises in digital audience, brand and advertising effectiveness measurement, says there’s a lot to be said for achieving the right partnership model with marketing suppliers.
“This is particularly true in emerging markets where you’re looking to develop capabilities; you need complementary skills. Business these days can come from anywhere, but you can’t be everywhere. Developing a really good network of partners to service demand is the way to go.”
Plant says the bottom line in choosing any potential partner is asking the right questions and ensuring there’s appropriate evaluation. “There’s a growing recognition that some of the larger players first look at suppliers as partners, but with a view to potentially acquiring them. So the questions need to be asked: do we work well together? Do they add value? Do they bring skills we don’t have?
“Really large organisations can have very diverse client bases and they need channel partners equipped to deal with specific vertical markets. A really good example is the IBM global entrepreneur program that provides an ecosystem for start-ups. Five years ago people would have asked why they’d bother with start-ups, but it’s their way of embracing different partners and processes.
“Tools and tech are driving a lot of the forced partnerships you see out there, because the reality is that, if you come up with an idea, by the time you can implement it, the chances are it will be out of date. It’s very hard for a lot of organisations to keep pace and remain relevant and those companies don’t have the appetite or capacity to generate that sort of growth themselves – so they lean on partners.”
Plant also wonders about the importance of culture in choosing to work with suppliers. “Every company puts a different emphasis on cultural fit. Some hold the same values in pretty high regard; if they’ve got that synergy, it can be easier to work through problems and issues. The process of managing channel partners can be a challenge.
When everything’s going well, everyone’s high-fiving each other, but when they don’t meet your timelines or there are other problems, the relationship can get quite acrimonious, until you can learn to navigate to a satisfactory outcome.
“I just came back from a start-up conference in Singapore. In the marketing space, innovators that can manage the intersection of big data and structured data to create actual insights seemed to be the biggest demand. We hear a lot about making marketing analytics simple, but not a lot of people are able to turn it into something tangible,” continues Plant.
“The evolution of mobile continues to lead the charge; we’re looking for people who can go directly to the customer base and pull together the tools that will resonate with customers. In the ad tech space, we hear about programmatic space and real time buying – but at what point does the customer get desensitised?”
Plant says scientific evaluation needs to be applied in a much more fragmented media space, so that customer messages need to be both cost-effective and time-efficient.
David Jackson, executive director at incentive company Solterbeck, says there’s a definite shift away from outsourcing a lot of marketing communications work. “Clients are now adopting a ‘pick and choose’ mentality in terms of what they’d hand over to an agency to fulfil. I’m very comfortable with that because, as an agency, we need to be flexible enough and pragmatic enough to work in our clients’ interests and focus on the areas that add value.
“But it’s not just a cost-driven equation. It’s true to say I often remind clients that there is value to be had from our creative input and expertise. I would hate to see things just becoming a race to the bottom.”
Jackson says there are risks for organisations that turn marketing coordinators or junior managers into collateral producers.
“A major risk is that the in-house team doesn’t end up doing the job they’re paid for. Your coordinators have days filled with design work; they’re not able to think about strategy, planning or evolution.
“I think it’s important for an agency to be seen as a partner in the journey rather than a defender of old models. To have the established relationship of trust with a client and to be an enabler rather than a barrier is the way to go now,” concludes Jackson.
Creativity or commodity?
Growth Solutions Group managing director Graeme Chipp says marketers need to address several issues within the planning phase.
“Organisations are under continuing pressure to manage costs, and outsourcing can create flexibility there – you move an overhead to a variable cost. But it needs to be managed. Clients are demanding more accountability from every engagement and I think generally there are differing levels of competency and mindset in how outsourced talent is managed.
“There will always be people within an organisation who don’t value external creativity or expertise and think of it as a commodity, through to those who actively seek this sort of input as an important way of driving competitive advantage. In our business, we actively choose clients who are in the second camp, as much as they choose us. It might be more difficult initially but, in the longer-term, ensures mutual success.”
Five questions to ask yourself
- What is the importance of the strategic issue being addressed and the need to get the best team on it?
- What is the existing capacity internally and the opportunity/time pressures to deliver an outcome? Are the resources available in-house or not?
- The expertise gap – does the business need a deliberate injection of capabilities?
- How would these capabilities contribute to an ongoing strategic advantage in an area such as data analytics, sales skills, brand management? Is the role of an outsourced provider to ‘equip’ the organisation with heightened skills?
- Is there a need for fresh/external input?