THOUGHT LEADERSHIP | Article

Insourcing Versus Outsourcing: Making It Work.

March 24, 2020

Insourcing vs Outsourcing

To be or not to be? When it comes to insourcing, that is still the question.

 

In our continuing exploration of ever-evolving client/agency relationships, and given discussions we’ve had with clients both current and prospective about the nature of their own marketing initiatives, it was only natural that we weigh in on the topic of  “in-house” agencies.

 

According to the most recent Association of National Advertisers survey of its members, 78% reported having some semblance of an in-house agency in 2018, a 20% increase over its 2013 survey. When it comes to content marketing specifically, roughly half of all marketers – both B2B and B2C – focus their efforts in-house.

 

It’s a subject that seems to wax and wane in cycles as clients and agencies alike explore costs, emerging technologies and marketing platforms. Other factors like operating efficiencies and the impact they have on the quality and effectiveness of the marketing efforts as well as ROI also factor in. In general, larger companies seem to have more success with bringing their marketing in-house given the dynamics and expense involved. Other factors, such as availability of talent, the ability to stay current with available technologies and best practices and the implications with collaborative relationships all have some impact, as well.

 

Anecdotally however, the chief mitigating factor seems to be client size and the notion that, when it comes to making an in-house arrangement work, bigger seems to be better.

 

Size Matters.

The largest advertising agencies in the world are actually “in-house” agencies for companies like Accenture Consulting (Accenture Interactive, over $4 billion), PricewaterhouseCoopers (PcW Digital Services, more than $3 billion), IBM (IBMx, over $3 billion) and Deloitte Consulting (Deloitte Digital, over $3 billion).

 

Client-side, Walmart moved the bulk of its advertising in-house, away from the WPP network in 2019. Unilever’s U-Studio is said to be creating brand content faster and up to 30% cheaper than its external agency partners.  IBM, of course, has already made the shift with its IBMx unit while other companies – companies like Coca-Cola, Sprint, Best Buy, Netflix, L’Oreal and Clorox (the In-House Agency Forum 2019 In-House Agency of the Year) – are also making it work.

 

These successes, from our perspective, seem to lie in the fact that all of these companies have a unified, clearly defined vision for their marketing plans and executing on them. They also have a company size and culture that enables them to coordinate their marketing efforts internally based on that vision, the resources it takes to hire the right people and the willingness and ability to invest in ever-changing technologies and infrastructure. One specialized area is programmatic advertising.

 

“A lot of  marketers are looking into taking their programmatic ad spending in house,” says Basement CEO Brian Phillips of another recent in-house marketing shift. “I see why and agree with some agency pundits who think it’s because a lot of agencies don’t get programmatic buying, an area in which we excel.”

 

A recent World Federation of Advertisers study reflects this, showing that more than 70% of marketers surveyed think that conventional agencies are “struggling” with programmatic buying.

 

Still, the shift in-house remains a two-edged sword.

 

 

The Ins.

The party line on the benefits of moving to an in-house model generally puts cost right up there in the first sentence. Like we just did. Unilever, as we mentioned earlier, purportedly saved 30% by creating its own in-house agency.

 

There are cost and efficiency benefits to be gained, for sure. Another major factor mentioned in article after article is “control.” Advertisers feel they can better apply their own processes, narratives and systems to their marketing efforts which allows them to focus their resources in a unified manner on the task at hand.  Speed and “volume” also factor in – that time-honored desire to get more work, faster, cheaper.

 

According to Deloitte Consulting’s Christine Cutten, “Many marketers are looking to spend their money more efficiently, get campaigns out the door faster and engage customers with highly personalized experiences. Bringing capabilities in-house can enable them to do that.”

 

We actually agree with this and have been able to establish collaborative relationships with companies such as Allegion that don’t focus on if a company should have in-house marketing, but rather what should be outsourced and how we can best accommodate it effectively and efficiently.

 

Of course, cost is just the beginning and some of the larger in-house agencies, especially those tied to a consulting firm, profit from work for a number of different clients.

 

Other key reasons that marketers are moving in house include directly being able to manage personnel and turnover, managing and resolving issues if and when they arise and the perception that having a dedicated, specialized team can improve the quality of the work itself.  More and more, these factors along with the issues like closely holding and controlling IP and first-party data, make in-house advertising an attractive option for many marketers.

 

“Our job is to be a collaborative partner, however our clients wish to work,” says Todd Bolster, The Basement’s VP of Client Services. “This works for us since collaboration is such a core element of our agency culture. As an agency, we have to be prepared to adapt to the swinging pendulum of market needs. If this is working as an AOR and outsource partner or as a collaborative resource partner to an in-house team, we feel we’re uniquely prepared to do so.”

 

 

The Outs.

Good, fast, cheap. Pick two. This favorite saying of ours is reflective of the main obstacles faced by companies looking to bring their marketing in house. Curiously, some of the reasons for bringing marketing in-house also serve as reasons not to.

 

The quality, veracity and the intelligence of the work itself isn’t necessarily guaranteed by having a dedicated in-house team focused on it. In-house teams very often can get too close to the work, which by its very nature often precludes innovation.

 

“As an independent resource, we are constantly exploring new strategies, technologies and opportunities, putting us in a position to tap into a world of new ideas that might not open themselves to marketers who are focused exclusively on their own brand,” says Basement Executive Creative Director Noah Sarff. “An outside agency can serve as an innovation engine and provide the fresh perspective of people who work in a broader range of disciplines than an in-house agency can reasonably expect to employ.”

 

Being able to adequately staff – and afford – an in-house agency is another of those “other side of the coin” obstacles we talked about. According to a recent Gartner spend survey, there is a growing need for marketing technologists, paid media specialists, SEO specialists, email specialists and professionals in general who can find and leverage the host of  new models, channels and technologies that are now available. The Gartner survey asks the question: can most companies staff all of that internally? And afford it?

 

According to a recent LinkedIn report, marketing needs are outpacing the availability of marketing talent. A problem more easily and affordably managed by outsourcing to an agency.

 

The ability of agencies to provide specialised services such as digital marketing, the time it takes to build and maintain an in-house agency, the balance of quality and efficiencies we talked about at the outset and the sheer cost of building an in-house agency are all factors in larger companies being the most capable of doing so.  Salaries alone required to build an in-house shop can approach a million dollars and this doesn’t include the capital costs nor the need to constantly stay current with the latest and greatest platforms and technologies.

 

All of this is all best summed up in a recent study by the In-House Agency Forum which concluded that, when it comes to transitioning to an in-house agency,  the grass isn’t always greener.

 

“The fact is, as with anything, how our partners manage their marketing needs to be driven by insight, careful consideration, innovation and what the market is telling them they need,” says Jacob Leffler, President of The Basement. “As long as you go in with your eyes open to the challenges an organization can face, know what you don’t know and are ready willing and able to work collaboratively with someone to overcome them, you can make insourcing work.”

What’s Next?

Our mission as an agency – whether as an Agency of Record or as a resource partner to a robust in-house platform – is to provide that collaboration. It’s no wonder that so many of the in-house agencies we explored earlier still maintain, in some capacity, relationships with outsource partners. In the parlance of the category, these are referred to as “hybrid” agency relationships.

 

Once again, we discovered that when it comes to the ever-evolving dynamic between marketers and their agencies, there are two sides to every story. And so it is with insourcing/outsourcing.

 

Still,  common threads run through the broader narrative. Vision. Innovation. Collaboration. Flexibility. A willingness to share. A  willingness to listen and learn.  All of these speak to the very heart of what a partnership can and should be, and are the reasons why we all do this in the first place.

Contributors:

Todd Bolster
Todd Bolster
VP, Account Services
George Evans
George Evans
DIRECTOR OF BRAND & CONTENT STRATEGY
Jacob Leffler
Jacob Leffler
President
Brian Phillips
Brian Phillips
CEO
Noah Sarff
Noah Sarff
Executive Creative Director