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‘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
• But what is a really core competence?
– Customer service? Processing? Marketing?
Transformational outsourcing
Mazzawi (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 outsourcing
Barthemeley (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 Marketing
Simms 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
– 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 selection
Hudson and Jackson in Pickton & Broderick Ch 16
Viewpoint - objectivity
Media solutions - bias/neutrality
Management and Control
• 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