Outsourcing is a cause celebre. Ink is angrily spilt and column inches mount as the press froths about the frightening rise of call centres in India.
But behind closed boardroom doors, where the sound and the fury of mid-market tabloids are shut out, what do B2B companies need to know about outsourcing? What should be considered when farming out marketing functions to external contractors, suppliers and consultants?
Call centres and IT have long been sourced out, almost to the point of saturation, but marketing has traditionally remained in house.
A survey conducted last year by recruitment agency ManPower estimates 68 per cent of UK businesses outsource some of their activities. Yet only 8 per cent place any marketing functions in the hand of agencies.
This survey was conducted among 2000 companies working in both B2C and B2B, but the report states few marked differences across sectors.
Encouragingly the report concluded that of all activities to be outsourced, marketing is set to grow by the greatest rate within the next two years.
Unlike many business activities, the decision to outsource or not is often based on nothing more scientific than the whim of the CEO.
Jeremy Clarke, MD and founder of PR and marketing consultancy LawsonClarke, illustrates the point. I was talking to the head of The AA not one of our clients! who said they are going through a process of decentralising. Meanwhile my son, who works for a multinational pharmaceutical company, is centralising marketing processes.
Clarke argues that this points to the great outsourcing conundrum: what drives a client to go one way or the other is often intangible.
The traditional view is that the decision to centralise is driven by the desire to rationalise, cut costs and gain greater control.
Clarke says that if one can determine any trend in outsourcing, it is that things always go back to cost saving. He says, whenever there is a recession, one suspects companies take the view that it’s time to make savings and axe their agencies.
Kerry Hallard, National Outsourcing Association (NOA) communications consultant and co-opted board member, agrees that economics are often at play. However, she claims it is a flawed logic that says savings will be realised by running marketing internally.
Far too often companies spend more by keeping functions in house than they would through outsourcing. Consider media relations work, or brochure design, she says. Most companies will not need to undertake such work on a daily basis. Therefore it’s much better to use someone as required.
Cost is not the only consideration when deciding to centralise. Bringing things in house affords an organisation a greater degree of control. Lines of communication are shorter and it is easier to manage and co-ordinate internal departments than external agencies.
By limiting the number of outsourced partners, or by eliminating them altogether, companies do get a greater level of co-ordination and control, says Clarke of Lawson Clarke. But as with supposed cost savings, he believes these benefits are countered by more insidious problems.
This model really puts a company in danger of dumbing down its marketing. Of course, by having its hands on everything, it can get perfect delivery of brand exposure. But what use is perfect delivery if the message is neither exciting nor effective?
The clear warning from Hallard and Clarke is that by trying to run everything internally, organisations are in danger of spreading their staff too thin.
It is much better to focus on your core skills and specialise on that, says Hallard. Outsource everything else to the experts. The golden rule really is to keep bodies that are key in house and contract everything else.
Outsourcing offers more than cost benefits and the potential to expand and contract your workforce with ease. One of the key benefits of a good partner is the ability to gain fresh perspective on your business.
Mike Walsh is MD of Blueberry Creative, a marketing agency specialising in professional services. He claims that a consultancy provides many benefits that simply cannot be realised when working with internal departments.
I don’t think there is a time when companies shouldn’t look to outsource at least some of their marketing function. The additional perspective an outsourced partner can provide, the potential to sharpen ideas and focus, means that outsourcing is something that companies should look to do regardless of any other consideration.
Walsh explains that consultants are not inured to the company culture. They provide the opportunity to hold a mirror up to the business and show the directors the true shape of their organisation.
A good consultant should question its client and make them think things through. Consultants are perfectly placed to give an alternative point of view and see things with a fresh pair of eyes.
The difference, according to Walsh, that an outside agency can bring is that between working in the business and working on the business. He states that a good consultant works on the business whereas those working internally are in the business.
Consultants do not get involved in the politics, they can see the wider picture and they don’t have to justify their opinion. Of course, Walsh speaks as someone who can gain from the proliferation of outsourcing contracts, but these are not hollow claims. Companies themselves report that outsourcing brings significant benefits.
Sixty eight per cent of companies responding to the ManPower survey found outsourcing saved time and money, 66 per cent claimed it enabled greater focus on core business, 48 per cent championed the increased quality and level of service and productivity and the same percentage cited greater efficiency.
Walsh gives an example of the role of a consultant in action. I worked with a Legal 100 law firm, helping with their marketing. They wanted to improve business in wills and probate and decided that the best way to ramp up business was telemarketing.
Walsh and Blueberry Creative were brought in to give the external, objective perspective. I sat with the board and saw 20 men aged 40-60. Intelligent men with law degrees, the full nine yards, he says, I explained that the key demographic for wills and probate was men aged 40-60. To target this group, they could purchase a list, but the names of the board would likely appear.
According to Walsh the penny dropped that none of the board members would appreciate being telephoned at home, after a long day in the office, being sold wills and probate. The plan was immediately dropped.
This is a classic example of the function an outsourced partner can provide, explains Walsh. The board hadn’t connected their marketing and business desires to the real world. They were too close to see the bigger picture. This happens all the time and these people are not idiots.
Naturally not all outsourcing works. There are often reports of contracts turning sour, relationships faltering and legal wrangling.
Hallard of NOA is in no doubt as to the central reason for outsourcing disaster. To put it bluntly: never outsource a problem. This is the main reason that such projects go wrong. She argues that often companies will farm out those things they do not like, are not well versed in, or are struggling to manage.
If you have bad processes, bad reputation, a bad market perception and simply outsource hoping things will improve, you’re heading for trouble. Companies cannot just wash their hands of problematic functions and expect agencies to turn things around.
Other risks also exist. For SMEs there is the danger that an outsourced partner will misunderstand and fail to grasp the company culture that makes the client special. For larger organisations, there is great potential for conflict with internal departments who feel power is being taken away. The only way to plan against such problems is to build a level of trust. Something that sounds like plain common sense, but that Hallard, Clarke and Walsh all say often fails to materialise.
There has to be trust and integrity between the two individuals heading up the respective companies, says Clarke of Lawson Clarke. If that is in place, good relationships should follow.
Clarke explains that in a previous good working relationship, the CEO was committed to a long term partnership and realised this would sometimes mean sharing information that would not be shared among fellow directors. Where this kind of relationship doesn’t exist, and we’ve simply been treated as if we were a supplier of any kind of raw material, the relationship hasn’t worked nearly as well, he says.
Walsh however is adamant that it is not good enough for an agency to take that stand. I don’t accept consultants who say the partnership could have been better but the relationship was badly managed. That’s rubbish. It’s an easy way out, he says. There is a big risk that the outsourcing partner is passive, that’s a weakness.
Walsh says that both parties have to understand they are engaged in a relationship and this means both sides talking and keeping the lines of communication open.
Hallard of NOA agrees but says that much like marriages, the best will in the world sometimes isn’t enough. It amazes me how often we see total breakdown of communication. You should be entering into a long term relationship yet neither party knows what the other is expecting, she says.
Negotiating the contract is of prime importance, the boundaries need to be drawn and responsibilities clearly set out. But this is also the time when both parties need to discuss how the relationship will end.
Yet again this seems common sense but it is amazing how many contract negotiations fail to tackle the thorny issues of termination. Companies view such discussions as akin to Hollywood stars’ prenuptials: gauche enterprises in carving out liability ahead of the inevitable costly divorce.
Knowing how a relationship with an external agency will end can help the process immensely. It can also lead to new business and a continuing of relations further on.
Walsh of Blueberry Creative is a realist not a romantic and can see the benefit of talking through the end of a contract. Every relationship ends, this has to be part of the consideration from the very start. The end shouldn’t be like an axe falling. If a business picks a good consultant and can do business with them, that consultant should be at the end of the phone no matter what.
Walsh explains that the knowledge a good consultant picks up about a business should ensure the relationship can start again very easily.
Hallard offers a cautionary tale of what can happen at the end of a contract if that dialogue hasn’t remained constant and clear.
Despite all the advice, what often happens is that people outsource and leave the supplier to get on with it. Initially it all goes well. Everyone’s happy and the client focuses on other things. Then something goes wrong. Suddenly the client wants to become more closely involved. But because they took their eye off the ball they don’t really understand what’s going on. The culture is alien, they don’t recognise the database and have no idea about the customer base. Trying to bring all of that back in house can get really messy.
Outsourcing is a business function with rules that apply regardless of company size, business sector or potential audience. The benefits are clear: increased efficiency, the ability to focus on core skills, fresh perspective and objectivity. Yet so are the risks: conflict, mistrust, lack of communication and lack of ownership.
Minimising the risks may hinge on nothing more than sound common sense demarcation of responsibilities, clear communication, trust between client and agency, buying into and trusting their expertise and a preparedness to hear you may be wrong but as the boardroom full of lawyers illustrates, common sense and business are sometimes strange bedfellows.
1. Never outsource a problem.
2. Avoid internal conflict by fully explaining why a certain task has been outsourced.
3. Honesty is pre-requisite on the client side for a satisfactory outcome.
4. Treat the relationship as a partnership rather than client-supplier.
5. From the outset discuss when the relationship will end.
6. Let the outsourcers be candid, they are not inured to company culture and can bring fresh perspective.
7. Ensure the outsourcers understand your business culture.
8. Loosen the reigns, maintaining constant control over what’s been outsourced is unhelpful.
9. Use the free time to focus on core business.
10. Like any relationship, common sense and constant communication are the linchpins.
