Outsourcing

‘80% of the marketing department will soon be farmed out to third-party

suppliers’ Simms Marketing 6/3/2003

Motives for outsourcing

• Labour flexibility

• Unleash market forces

• Concentrate on core competences

• Transformational outsourcing

Core and peripheral labour-force

Atkinson 1984

Market forces• Competition for contracts encourages

– cost efficiencies– quality control– creative approaches

• breaks down restrictive practices• privatisation and ‘quasi-markets’ in the

public sector (Johnson and Scholes)

Strategic outsourcing(Johnson and Scholes)

• Value-chain decisions ‘make or buy’

• Identify core competences leading to competitive advantages

• Non-core functions can be farmed out to specialists who do them more cheaply or better

• But what is a really core competence?– Customer service? Processing? Marketing?

Transformational outsourcingMazzawi (2002) Business Strategy Review 13, 3

• Traditional o-s aimed at reducing cost

• Transformational aimed at improving performance and agility

• introducing a new business model or management approach

• contracting for competitive advantage

Dangers in outsourcingBarthemeley (2003) Academy of Mgt Excellence 17, 2

• Outsourcing the wrong activities

• Poor selection of contractors

• Poor contract terms

• Personnel issues

• Loss of control

• Hidden costs

• Lack of exit strategy

Outsourcing in MarketingSimms Marketing 6/3/03 pp22

• 1980s Advertising and Research outsourced to full service agencies

• 1990s FSAs compete with specialists – market competition forcing down costs– balance of power shifts to client

• More staff needed in-house to manage these relationships (IMC approach)

• Growth of direct marketing and customer relationship management

• expansion of in-house staff in these areas

What is core?

• Marketing strategy – you should not outsource the marketing brain

• Marketing services– arguably the most inefficient process in modern

business– long slow expensive chain of decision-making

New models

• Co-sourcing– marketing services activities pass to an agency

• In-sourcing– marketers recruited for short-term projects

• Surrogate marketing departments– for SMEs – define and implement strategy

Considerations in agency selectionHudson and Jackson in Pickton & Broderick Ch 16

• Viewpoint - objectivity

• Media solutions - bias/neutrality

• Expertise

• Management and Control

• Confidentiality

• Speed/Timing

• Cost

Implications• Emphasis changes from managing staff to

managing contracts/relationships

• Problems of training and development– people are dropped into operational roles earlier

• Concern that a smaller dept means less influence in the business

• Impact on creativity?

• Simms Marketing 6/3/2003• Hudson and Jackson in Pickton & Broderick Integrated Marketing Communications Ch 16• Barthemeley (2003) Academy of Mgt Excellence 17, 2

• Atkinson (1984) Flexible Modes of Organisational Structure

• Barthemeley (2003) Academy of Mgt Excellence 17, 2

• Mazzawi (2002) Business Strategy Review 13, 3

• Johnson and Scholes