Should brands insource or outsource to agencies?
In our industry, when a client decides to replace their agency with internal resources, it seems like a major loss to agency-land, and in some respect, it is. It’s not an easy decision for a company to stop outsourcing, and there are challenges faced on every step of the way. But everyone knows it will be challenging, so why do it?
Foxtel’s Justin Robinson, Director of Marketing Operations & Media, and Sam Smith, Managing Director at TubeMogul inc spoke this year at ad:tech about Foxtel’s 3 years journey from outsourcing their media planning trading, to bringing the function in-house. When Foxtel began that journey, many wished they would fail. However, with careful planning, a strong vision and focusing on what’s really important, the transition was bumpy, yet worth it.
Here are some of the reasons for insourcing, the way the guys from Foxtel articulated it:
Agencies have a notorious reputation for high staff-turnover. People at every level move around, and often. From a client’s perspective, it’s
- Hard to build relationships,
- The quality of work is inconsistent, and
- There is a constant need to bring new people up to speed, which is a time-consuming exercise (time=money).
In addition, agency campaign managers had little knowledge of Foxtel programmatic requirements, making it frustrating to communicate with them and gain mutual understanding.
Working with an external service provider requires time just as much (if not more) as managing an internal team, and every company has a different approach and various processes, which don’t always match the client’s. When bringing expertise in-house, you have better control over processes, and as a company, YOU are responsible for your team’s efficiency and output. Speed of service was also an issue, as requirements for speedy resolution following an issue or a problem had increased significantly in recent years.
In Foxtel’s example, their business case included significant cost savings, both in the short and long term.
Insights & transparency
One of the issues Foxtel had with their agency — and this quite common in an agency-client relationship — was the lack of control the client has over their reporting and insights. When Foxtel needed real-time insights, it wasn’t always available, a fact that increased their level of frustration.
Having an in-house resource also provides an enormous opportunity for knowledge and learning, and creating an internal IP and knowledge base. Outsourcing tasks prevent those opportunities.
Data plays a major part in the corporates decision-making process — consumer behaviour and customer data are two of the most valuable assets a company has, and having the data collection, storage and analysis function in-house makes perfect sense. From a strategic perspective, IP and 1st party data should sit within the brand, and not with the agency, as it is potentially sensitive information that needs ongoing protection.
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At the end of Foxtel’s journey, some functions were still outsourced, but the majority of control stayed with Foxtel, both from strategy and implementation perspectives.
What you should and shouldn’t outsource
The discussion isn’t about whether or not to outsource or in-source business functions. No business can do everything in-house, no matter how big and complex the business is. There’s always a need for specialists to perform certain duties and tasks. The real question is what should and shouldn’t be outsourced.
I really like the following decision making model by consulting firm ATKearney:
Considering what should and shouldn’t be outsourced, especially in the marketing/digital space, really depends on the following factors:
- Capability – does the business truly understand this area of expertise?
- Cost Benefit Analysis – does it make commercial sense to bring in house expertise?
- IP and Sensitive Information – Is the function responsible to creating or protecting the company’s competitive advantage?
- Continuity – Do we have enough work to justify an in-house resource on an ongoing basis?
Foxtel took a brave step and brought important functionality in-house, as illustrated in the table below. There aren’t any hard and fast rules that can be applied here, as every business and situation is different. There are only some considerations to guide us and help us make a decision.
Take a look at your business. What function do you outsource within the marketing department, and what’s important for you to have in-house?Back