Marketing Outsourcing - The cost vs. capability interplay

I have run marketing and communications departments for small and large organizations for over 15 years now and I cannot but agree with Professor Gail McGovern of the Harvard Business School when she says that 'few companies own all the marketing expertise they need'.

It is very easy to find low level tactical resources for your team - to run your trade shows, clean your databases, design your collateral or websites and track your marketing campaigns but as you go up the value chain to programs like thought leadership, new media strategies and CRM, the quality and availability of resources just dries up. So the perennial question that CMO organizations are faced with is 'what do we outsource?' and more importantly, 'why do we outsource?'. The answer more often than not lies in the interplay between cost and capability.

Organizations either outsource for reasons of cost - because outsourcing makes better fiscal sense, gives them shared access to best practices and allows for better utlization and deployment of existing resources. The key interplay here being investing in organic capability building vs. outsourcing and hiring plans always seem to trail business growth. The other reason that drives outsourcing is capability (or lack of it) - quite often the right resources are hard to come by and we are saddled with well meaning, talented marketing managers who are lower down the learning curve, while business imperatives require our people to hit the ground running.

While marketing organizations have been pioneers in the space of outsourcing - and we have been doing this long before the days of IT or call center outsourcing, the maturity of outsourcing has been pretty low with a high reliance on traditional advertising or design firms who have clearly not been able to change with the times. The result - several CMO organizations continue to be under-leveraged and operate at sub-optimal efficiencies.

Clearly, the answer is in looking at your marketing department as any other business function and splice it into a group of well defined processes that lead to measurable outcomes. Once that is done, the rest is easy - each process can now be evaluated on the basis of cost and resource intensity and strategic relevance and a few processes that are core to the business should be retained in-house and the rest outsourced to a vendor or a location where it can be best done.

So how does the CMO organization decide what they should in-source and what they should outsource and where? I have a 'marketing investment matrix' that I have developed that could serve as a useful little tool for this - more about that later!