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2019 is practically here, and digital agencies and brands are readily outsourcing their services and needs. Why is this the case? Because of the ease and efficiency provided by a multitude of workflow apps and tools storing data in the cloud. Collaboration has never been simpler and is no longer bound by the schedule or location of your collaborator. However, the types of outsourcing and the root causes of the outsourcing efforts are different depending on the nature of the business. In this article, I will explain the primary reasons brands and digital agencies outsource.
Digital Agencies
The term digital agency hasn’t been around for a long time. In fact, if you Google the term “Digital Agency” the only definitions are from digital agencies, themselves. Digital agencies are simply businesses that have translated their services into a digital format, and offer support to brands and organizations that need consultation or more direct services to target their desired audience.
Reach New Markets
Every business wants to expand into new markets, however, their reason for doing so may vary. Reaching a new market is a challenging task for those who are not well-prepared, or do not have the support systems set in place to assist in this feat. A digital agency may want to reach new markets for many reasons, but here I’ll explain those related to competition, market potential, and cultural fit in other regions.
The International/Domestic Market is Too Competitive
No matter how hard you try, there are always going to be times where the best thing to do is to leave. This doesn’t have to mean your business isn’t competitive and cutting-edge, it may just mean that your domestic market isn’t the best market to offer your services in. As a digital agency, and with the simplicity of working with international clients through the use of technology, this isn’t as much of a doomed scenario as it used to be. An agency could be from the smallest, most remote village on the planet, and still they would be able to compete on the global market if their services and organizational culture fit the client.
Reached Maximum Domestic Market Potential (Percentage of Market Share)
With businesses progressively going digital, the number of digital agencies in the world appears to be rapidly growing. Because of this, digital agencies in their domestic market may reach the maximum market potential in their niche simply because there are so many competitors taking slivers of the market share away from everyone else. Outsourcing allows digital agencies the chance to grow once more, on a market that is similar to their own (if they choose to target similar regions).
Organizational Culture & Services Fit Well in Other Regions
Sometimes businesses feel just as uncomfortable in the place they were founded as a kid in high school who feels left out. But this doesn’t mean the business or the kid are rejects, it just means that they haven’t found their audience. In the realm of business, this is easily solved by outsourcing your services, and in the case of the kid, by moving to a city or place that has a culture that fits the kid’s values and beliefs more closely. So, if your services aren’t selling domestically, look elsewhere rather than giving up.
Expand Revenues
I think this is fairly self-explanatory. Doesn’t everybody want to see their revenues grow? This is a situation more closely linked to market potential, mainly because market potential translates into higher revenues, but can also indicate that the digital agency’s home country is not pricing their services according to the quality of the services they deliver.
Domestic Pricing of Services Too Low for Quality of Services Provided
The pricing a digital agency can ask for their services, regardless of the quality, if the domestic economy is weaker than foreign economies. Therefore, it is smart for most digital agencies stuck in this scenario–unable to get a competitive price for their premium services in the domestic market–to outsource to escape financial woes and lack of value despite their skills, expertise, or professionalism.
Reached Maximum Domestic Market Potential (Revenues–Must Expand to Earn More
As we spoke of above, if a digital agency, or business in general, reaches its maximum market potential, then revenues will not grow any larger than they are at this moment. Over time, they may even decrease. Due to this fear of stagnation, digital agencies should consider expanding to foreign markets in order to increase their market potential and, subsequently, their revenues. Higher revenues will allow further growth, and sustain the digital agency’s projections.
Sub-Contracting
Sub-contracting may seem like a grim situation to be in, but it doesn’t have to be. Business, when conducted collaboratively, appears to benefit the client the most, and a happy client means they will return to complete more projects with the digital agencies they like.
Too Much Work/Not Enough Resources
Even the best Digital Agencies sometimes bite off more than they can chew. In these cases, it is not strange for a digital agency to subcontract a portion of the initial project to another digital agency that would both be better suited to fulfill the task and has the time. The primary contractor (the original digital agency) may see the need to subcontract as a negative outcome, but this should not be the case. The client will be happier if the entire project is completed well, regardless of whether or not an element of the project was subcontracted to another digital agency, and will be more likely to return to complete another project.
Part of Project is not a Specialty of Agency
Sometimes, a project is too large for an individual digital agency, which may create a bad result overall. A solution to this is to subcontract part of the project to an agency that specializes in this type of task and can do it much better than an in-house department could complete that task.
Brands
I’m pretty certain everyone reading this article will understand the concept of a brand. Brands are everywhere, and some brands are so dominant they are present on every regional market. In fact, I’m going to guess that all of you have at least 1 branded product from a well-known multinational brand on yourselves at this moment. Is it a smartphone, your clothing, your work tools, or all of the above?
However, what you may not know about brands is that regardless of their size, they, too, outsource their needs when they’re incapable of completing the task themselves in a time-efficient or effective manner. Explained below are some of the primary reasons brands, regardless of their size and prominence, outsource.
Reach New Markets
Despite the fact that some of the largest brands are world-known, this was not always the case. It took years of innovative thinking, strategic planning, and some competitive edge to earn the moniker “multinational.” Outsourcing is a smart way for a brand to enter new markets, and add a bit of competitive edge in the meantime.
Reached Max Market Potential (Percentage)
It sometimes happens that a brand becomes so big that they have reached their maximum market potential, and cannot compete due to the maturity of the market. The only option, then, is to look elsewhere for more market potential–and expand into any desirable region.
Brand’s Image & Organizational Culture Fit in Other Regions
As I stated above, it doesn’t matter where you’re from, it matters how you think. The explanation I gave above for digital agencies also applies to brands. Sometimes, if a brand is respected enough, and has a good line of products/good services, then translating the image and culture of the organization to fit into other regions is a smart choice. Outsourcing projects to digital agencies may also even show a brand where their products or services, and their brand ideology, may fit the best.
Greater Security Overall (Long-Term Risk Reduction)
In the short-term, a small brand going global may seem like a bad business decision. However, in a long-term scenario, going global may actually mitigate the risk you may experience in one of the markets you are present in. When one market fails, another may be booming, and that alone adds an underlying safety-net to rebalance the losses accrued in one market.
Global Cost Leadership of Suppliers
Everybody wants to save money, especially big brands. This is why cost leadership increases a supplier’s competitive advantage so dramatically. Outsourcing allows a cost competitive digital agency to fight in any market across the world, which is extremely beneficial to brands of any size. If one digital agency is offering to complete the project a brand has outsourced at a higher cost than the international competition, then the brand is the one who gains the most from this scenario. Good results are good results, and a lower cost for the same good results is amazing for any brand.
Cost Too High Domestically or The Cost is Competitive and Desirable Elsewhere
In older, and more well-established economies, such as the UK, The Netherlands, The US, etc., there is a correlation between the standard of living and the cost of services. Therefore, if a brand needs a project done well, but the cost is too high domestically, then they will look elsewhere to find a more cost competitive digital agency that can meet their needs. This may be seen as a negative element, but it allows brands more choice in the long-run.
Better-Skilled Digital Agency Located Elsewhere
We’re lucky that in this century education is (generally) better than it has ever been. Due to this, there is no scarcity of talented and creative people, and they can be found anywhere in the world. This helps brands a lot, as
International Digital Agencies Fit Well/Domestic Digital Agencies Not Capable
As a brand, all that really matters is getting the job done well. This can either be positive or negative, and depends heavily on whether or not a brand has a pre-existing network of trusted digital agencies. However, even a trusted network of the brand’s domestic selection of digital agencies may not be enough. A project they may be assigned may just be too task-intensive or may be comprised of tasks that are not in the digital agency’s area of expertise. Therefore, it’s smart to choose the best-performing agency, regardless of location, to properly get the job done.
Conclusion
No matter what you do, or where you are, the world is getting smaller and more interconnected daily. This is not something to cause concern but should be celebrated. We can all conduct business more easily and efficiently than ever before, and we can communicate and collaborate from opposite sides of the planet if we want. This is a wonderful time to be alive, and business is booming.
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