Robert Dennis reports on an NMK seminar in March 2003.

The evening began with a talk from David King, in which he briefly outlined the upside and downside of outsourcing digital media work by advertising agencies. The advantages include:

• Enables the agency to focus on core skills and products � strategy, planning, branding etc
• Access to new and creative ideas that can inform the agency�s own thinking
• The opportunity to �shop around� for appropriate skills, experience and talent outside of your immediate organisation
• No capital investment needed in equipment and skills, which may not be cost-effective to maintain in-house
• No tissue rejection � environmental and cultural incompatibility as a result of having to accommodate very different professional teams (technical, graphic design etc) within one organisation and working culture

However, there are also disadvantages and potential pitfalls to outsourcing, and the following should also be considered:

• Brain drain: there is little retention within the agency of valuable knowledge, skills and learning
• There is a danger of a disconnect between strategy, planning and the creative process
• The agency loses credibility in any claim to be an integrated, full-service agency
• Financial implications: there is a danger of lost billings

David went on to describe strategies for over-coming some of these problems, and, in particular, the critical importance of achieving �good triangulation� � a fully-connected relationship between advertising agency, client and digital media agency right from the beginning. The alternative, �bad triangulation� occurs all-too-often when the digital agency is consulted too late on, and is expected to provide input into a project only after certain mission-critical decisions have already been made.

David outlined a few tips for helping to ensure that outsourcing relationships between advertising and digital agencies are effective:

• Be partnership focused: choose partners carefully and then get close and stay close Understand how/what your partner does and make sure they fully understand your role in the project
• Establish the digital agency early on in the process, and keep them closely informed as to the overall brand strategy
• Set partnership rules clearly upfront and stick with them � don�t grumble if this means undertaking extensive creative work (eg revisions, re-drafts, re-builds) that you agreed to
• Budget clearly, accurately, and transparently from the beginning � try to anticipate all contingencies so as to avoid disagreements later on

As a director at the Shoreditch-based agency online marketing agency, n1media, Andy is responsible for account and project management. With six full time employees, n1media�s client list is drawn from the home entertainment sector, and includes Fox, Eidos, BBC and Path�.

The areas in which the agency can call on its own in-house production skills include Design (HTML and Flash); Technical Development (.NET); Online Advertising (pop-ups, etc); Online Marketing; Online PR (reviews, video content) and e-mail marketing. Which quick turnarounds, short lead-times and constantly-looming deadlines n1 has had to develop an overflow mechanism to cope with the demands on its time and resources. Outsourcing was an obvious approach to consider.

Originally n1 considered outsourcing its technical development, eg HTML coding, and looked at a number of possible solutions in the UK, India and Russia. They initially decided against this, considering it important to keep this skills in-house. But as the demands on their resources were stretched they were forced to reconsider the alternatives. The increased need for a flexible workforce, unexpected deadlines and anticipated bottlenecks, all presented different challenges. Without ready access to a network of London-based freelancers and specialist recruitment agencies n1 faced the problem of finding the right individuals who were always available and affordable.

They considered their options. The alternatives to using UK-based based companies for outsourcing work their overflow work were mainly India, Russia and South Africa. They finally settled on firms based in New Zealand and South Africa which were smaller and cheaper.

Andy explained that there are several key factors to take into account when outsourcing. These include, for example, the cost, the time difference and the �human factor�. Telephone relationships are a poor alternative to face-to-face meetings with people you know.

n1�s New Zealand-based outsourcer was competitive; they knew him; and they shared agreed standards about what was expected. He was used mainly for anticipated bottlenecks, when n1 can predict they will be short-handed. The agency they found in South Africa was not as cheap but was competitively-priced. Also, the time difference was only two hours. n1 use the South African agency to meet unexpected deadlines. They had met the people at the agency before and struck up a connection.

Andy explained that working on a project-by-project basis n1 has the option of outsourcing work as part of a planned schedule (anticipated bottlenecks); but also for the unexpected deadlines with tight turnaround times.

It is important to have agreed coding standards and to set out clearly what is expected of the outsourced agency. Good communication channels are vital (eg, a messenger service or VPN access to servers once trust has been established with an agency). So far, n1 has not outsourced any creative or technical work beyond that of its own in-house skillset. They have used outsourcing predominantly as a way of managing overflow.

Finally, Surja Blaise gave a thorough description of his experience in managing projects outsourced to emerging nations, and the lessons he had learned from this. Surja described how his background in electrical engineering led him into the field of communication and media. As a project manager for Tesco�s online CD-ROM operation he experienced first-hand the technical challenges facing the industry. He also worked for BBC Online, Arcadia Zoom ISP and Associated Newspapers, implementing their Web strategy. His experiences in IT convinced him that outsourcing presented a viable alternative to many companies� in-house approach. Two years ago he set up Bosenet, outsourcing IT services from offshore suppliers to the UK. Most of the coding is done in India and the Far East, but client-handling is based in London.

Surja explained the benefits and problems associated with outsourcing, and particularly with outsourcing offshore. While many companies have been reluctant to experiment, those that have done so have found there are significant cost savings when they outsource, and project delivery times can be accelerated. They also have access to a wider range of expertise than can be offered by an in-house team. India in particular is a rich source of IT know-how with 95,000 IT engineers graduating every year. The benefits to the outsourcing company are that they can offer new services, handle bigger and more complex projects, handle more projects, compete with larger companies and improve customer satisfaction by building long-term relationships with clients.

While not every service can be outsourced, those that can include software development and maintenance, intranet and ERP implementation, IT-enabled services (call centres, etc) and system integration and migration. Less successful are: graphic design, multimedia development, Web hosting, network management and consulting. All of these require close contact with the client.

Choosing the right country to outsource to is crucial, and there are advantages and disadvantages associated with each. Over the last 4-5 years India has become �IT heaven�, thanks largely to its ready supply of highly-educated English-speaking programmers. China and Russia follow close behind as providing a balance between cost and quality.

Apart from the language barrier there is the time difference to consider. With a 4-5 hour difference in India, for example, there is little chance to access the outsourced team during working hours. Cultural differences are also a significant factor. Surja gave examples of the �Yes� problem (ie, when asked, everything is said to be possible), the rigid hierarchical structure of most Asian companies and the potential for misunderstanding.

In terms of technology and scalability, prospective outsourcers should consider whether the firms they use are up to speed with the latest technology, whether they invest in R&D, and if they have a methodology. Developers and programmers need to work together.

Questions also arise about the level and quality of support offshore firms can provide. Will they be available when needed? Will they provide the necessary documentation? And what is their standard warranty period? Legal indemnities and service-level agreements (SLAs) should be valid under UK law. Infrastructure considerations such as bandwidth, reliable networks and alternative supplies in case of power failure are also important. There is also the ethical angle to take into account. While programmers in India are paid well above the average, appropriate remuneration and working conditions should always be included in a Request for Information document (RFI) before outsourcing any work.

Surja concluded by saying that companies considering outsourcing should identify suitable projects; get to know their partners; collaborate on the specification; create a development schedule with milestones; create a clear line of communication with well-informed people; incorporate structured testing into the scheule; aggregate feedback; and make sure they have a point of contact in the UK.

If interested in the original event click here.

Speaker Profiles

David King, Managing Director, Digital @ JWT Europe, Middle East & Africa
David King is MD, Europe, Middle East and Africa of Digital @ JWT, a subsidiary of the J. Walter Thompson Company. David joined the WPP-owned company in January 2000 and oversees growing operations throughout Europe and in Jeddah and Tel Aviv. Working with clients like Nestl�, Kraft Foods, Shell, BMW, Siemens, Sun Microsystems, Heineken, Diageo/UDV, Kellogg�s and Telefonica, the Digital @ JWT team has in just two years moved from number 48 to number 11 on the Adweek Interactive Agency rankings. Prior to joining JWT, he served as MD/CEO of Icon Medialab UK, part of the largest European-based global digital communications consultancy. David joined the London office in November 1997, growing the company from four staff and no clients to 90 dedicated professionals providing Internet, intranet, extranet and e-commerce solutions. Before joining Icon Medialab, David King served as founder and Managing Partner of DDB Interactive, the new-media division of DDB Needham Worldwide Communications Group. David also spent 21 years in the production, development and marketing of broadcast television programming on an international basis, and, since 1986, has been heavily involved in the design and creation of computer-based applications.

Surja Bose
Surja Bose was born in Germany of Indian descent. He studied in Calcutta and Berlin before graduating in Computing and Communications from the London Guildhall University. After 4 years of experience in the IT Industry as a developer, project manager and strategist, he set up Bosenet LTD. He has worked on projects for Associated Newspapers, Department of Health, ABN AMRO, Quester plc, jobsworth.com and others. Bosenet is a London based company providing offshore development services to organizations in the UK and Germany. The company's vision is to significantly reduce IT development costs by outsourcing coding to its development centres in India. Bosenet's success lies in its ability to be near the client - in the UK - to understand requirements, and manage and implement projects, while ensuring the highest level of quality, providing a wide range of skills and achieving huge cost and time-savings. www.bosenet.com

Andy Buist, Director, n1media (www.n1media.com)
Andy Buist is a Director at online advertising and marketing specialists n1media. n1 works for a number of clients in the Home Entertainment industry, including Twentieth Century Fox and the BBC. Andy's role at n1 is a combination of Project and Account Management, which involves developing new and existing accounts and managing key projects for n1.

Hilary Kelsh
Hilary Kelsh obtained a BA(Hons) degree in Graphic Design at Central St Martin's College of Art and Design as a mature student, and then freelanced as a designer and animator in film and television for six years. She began her career in digital communications as an account executive with The Brilliant Agency, and went on to to become Business Development Director at American communications agency Modem Media Poppe Tyson, and then Director of Marketing with Swedish based multi-national communications consultancy Icon Medialab. In these roles her responsibilities included developing new business strategy, managing relationships with new and existing clients, and generating new business opportunities. Now working as an independent consultant for clients including n1media, and helping to develop the NMK programme, Hilary is a regular contributor to industry events and conferences.