Is Outsourcing A Threat to Marketing & Other Services?

Much of the attention about outsourcing has revolved around manufacturing, programming and technical support. But services such as marketing, accounting and legal support are also threatened by outsourcing. A customer loyalty expert offers tips on strategic responses to outsourcing.

(PRWEB) March 3, 2004 -- Executives at advertising, PR, accounting, legal services and other firms believe their jobs are safe from outsourcing because they are "strategic partners" with clients or can provide insights unavailable elsewhere.

Nothing could be further from the truth.

At least that's what Nick Wreden, author of FusionBranding: How to Forge Your Brand for the Future, argues. But he also provides ideas on how U.S. and European service firms can successfully compete against the cost advantages offered by Asian outsourcing firms.

According to a Federal Reserve Bank of New York study, more than 2.7 million jobs have been lost since 2001, 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, predicted 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 outsourcing of service jobs follows a trend that began in the 1980s, when tool-and-die makers and other sophisticated manufacturing skills got outsourced to Mexico. IT 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 for PR or advertising vs. $6 an hour for the same task, outsourcing is not a difficult decision in executive suites," says Wreden, a customer loyalty expert.
   
Marketing represents the next wave of outsourcing for three reasons, argues Wreden. First, the advantages of overseas outsourcing are too compelling to ignore. It saves money, and even benefits the U.S. In an argument for free trade, a 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 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 more than adequate, and American culture has become so globalized that taxi drivers in Malaysia keep up with the latest Hollywood gossip.

Based on his international experience, Wreden finds that talent and experience easily match those of U.S. firms. Superb branding assistance, from strategy to Web projects, are available from numerous firms in the Philippines, Malaysia, Hong Kong, Romania, Russia and Korea. Many of these firms work with P&G, Microsoft, Ford and other world-class firms.

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? Wreden advises the following steps:

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 under standing the role of distribution, data synchronization, forecasting and other issues on brands," says Wreden. "Leverage proximity by developing two-way ccommunications links with customers."

Use metrics for a competitive advantage: After 30 years, even interns in Pakistani agencies know 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," says Wreden.

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.

Wreden pulls out a New York Times article that quotes a high-level programmer whose job had just been outsourced: "If you sit behind a desk, your job is at risk."
   
"Unfortunately for marketers, lawyers and accountants, that's true," says Wreden.

FusionBranding: How to Forge Your Brand for the Future is available at Amazon.com and leading bookstores. For additional information, contact Wreden at nick(at)fusionbrand.com. http://www.fusionbrand.com
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