Number 26: Spring 2004
Outsourcing: Are US Marketers Toast?
By Nick Wreden
Editor's comment: Outsourcing has been a hot topic for some time. First it was manufacturing but the current move is towards outsourcing other areas of business. Most recently, this has turned to marketing with companies looking at lower-cost but equally effective solutions for their marketing.
The rhetorical tomatoes flew fast: "That can't be true!" "We're a strategic partner with our clients." "We've been successful at this for 10 years." And my favorite: "We have relationships"
The event was a PRSA convention in NYC, and I had just addressed attendees on the top three challenges for PR professionals in the next five years. Challenge #3: "Overseas outsourcing of PR and marketing."
Two events made me remember the negative reaction. One was the recent layoff of a very talented friend because her marketing job was outsourced by a Fortune 50 firm. The other has been the torrent of bad news about job loss and outsourcing.
According to a Federal Reserve Bank of New York study, more than 2.7 million jobs have been lost since Bush took office, the longest downturn in the U.S. since the Depression. "Instead of seeing a recession as something just to weather, managers this time seem to have seen it as an opportunity or even a mandate for permanently changing the way they operate," writes Erica Groshen, an assistant vice president at the New York Fed. Two of these permanent changes are in corporate automation
and outsourcing.
While marketers can adopt and adapt to corporate automation, outsourcing represents an increasing job threat. In a well-publicized study, the trend-analysis consultancy, Forrester Research, predicts that 3.3 million U.S. jobs will be shipped overseas by 2015. Although the "giant sucking sound" of job loss is associated with manufacturing, Forrester says more than 2 million of these jobs will be white-collar positions. Gartner forecasts the outsourcing market will grow to from $1.3 billion to $24.3 billion by 2007.
The denials of those at the PRSA event sound similar to those of the tool-and-die makers in the '80s whose jobs got outsourced to Mexico and to the IT specialists whose jobs started going overseas in the '90s. It makes no difference how skilled, educated and talented you are, or how long you've been in the business, or even how much your clients love you. When it comes to paying someone $60 an hour vs. $6 an hour for the same task, it's not a difficult decision in executive suites.
Marketing represents the next wave of outsourcing for three reasons. First, the advantages of overseas outsourcing are too compelling to ignore. It saves money, and even benefits the U.S. In a strong argument for free trade, a new study by the McKinsey Global Institute says the U.S. economy receives at least two-thirds of the benefit from offshore outsourcing, compared with the third gained by the lower-wage countries receiving the jobs.
Next, marketing represents an easy and logical candidate for outsourcing. It's rarely a core competency. Firms have been outsourcing advertising, PR, telemarketing and direct mail for decades. Indeed, many agencies even preach the benefits of outsourcing.
Finally, the constraints against overseas outsourcing are crumbling. Low telecommunications costs puts expertise from around the world as close as a phone call away. Overseas English skills are often better than my own Southern drawl, and American culture has become so globalized that taxi drivers in Malaysia keep up with the J.Lo & Ben saga. Talent and experience easily match those of U.S. firms. Superb branding assistance, from strategy to Web projects, are available from numerous firms. TeamAsia in the Philippines is internationally recognized for its work with Microsoft and other clients. TigerMedia in Malaysia is at the worldwide forefront in developing profitable customer equity and retention strategies. The New Zealand firm Jack Yan & Associates has been a pioneer in everything from online magazines to the development of moral global brands. Few can match the talents of Stefan Liute and his team at Grapefruit Design in Romania. The list goes on.And most compelling to top executives: Fees are a fraction of those charged by many U.S. agencies.
So what can U.S. marketers do?
- Move up the branding value chain: The U.S. was able to survive earlier outsourcing waves because it moved from basic manufacturing to industries based on intellectual expertise. In much the same way, marketers need to build up intellectual capital. Go beyond knowing how to generate logos, press releases and ads to understanding the role of distribution, data synchronization, forecasting and other issues on brands. Leverage proximity by developing two-way communications links with customers.
- Use metrics for a competitive advantage: After 30 years, even interns in Pakistani agencies are knowledgeable about "positioning," "awareness," "4 Ps" and other mass-economy marketing relics. Few know how to add accountability to branding through measurements such as retention rates and customer equity. Without such ROI-based knowledge, you'll always be at the mercy of someone willing to bill less.
- Leverage the trend: Take advantage of these overseas resources, and pass the savings to clients.
- Support infrastructural investments: While the U.S. squanders resources on "don't-worry-be-happy" tax cuts for the rich, other countries are investing heavily in education (China), logistics (Malaysia), universal broadband access (Korea) and power (Japan). They understand that future national competitiveness rides on investments made today.
A recent New York Times article quoted a high-level programmer whose job had just been outsourced: "If you sit behind a desk, your job is at risk."
Unfortunately for marketers, that's true.
Pool Version 2.0
© Nick Wreden /
Through the Loop Consulting Ltd 1998-2004