Offshoring and in-house agencies

Offshoring – utilising creative production resource located in a different country – is increasingly being used by both external and in-house agencies, as well as production networks. But knowing what to offshore and how, and how to balance that team with other partners, can be tricky.

Anil Noorani is the Founder and Managing Partner of TKM Consultants which works with brands, agencies, SMEs and tech companies on delivering growth and marketing excellence, efficiency and effectiveness. He is also Global Growth & Strategy Partner for global creative production studio We Are Amnet. We talked to him about offshoring, how in-house agencies are currently making use of it, how to get the best from it and what we can expect in the future.

IHALC: How prevalent is the use of offshoring by in-house agencies and how do you see it expanding?

Anil Noorani: It is undeniable that both in-house and offshore strategies are showing signs of maturation and are starting to dominate the content eco-system. In a recent WFA survey, in collaboration with TKM, 42% of brands across Europe consider their in-house models either mature or very mature and 28% consider their offshore strategies mature. However what we are now seeing is the accelerated coming together of in-house and offshore production eco-systems, where the offshore model is being utilised to supplement resource and skills gaps, at lower costs, to alleviate the pressures of producing content at scale, especially for production activities related to content tiers 2 and 3. Independent, external agencies that utilise offshore partners, typically manage approximately 20% of their production offshore and expect savings of somewhere between 40% and 60% depending on the service. We see a similar model transitioning to in-house teams.

Offshore pre-media services are reporting fewer concerns around responsiveness, communication, resource availability and service quality. As a result, 76% of brands recently surveyed by TKM, agree that in-house and offshore production strategies are not mutually exclusive.

IHALC: What are the ways in which In-House Agencies are currently using offshoring and what are the drivers for using it? Do you see one particular model emerging as the preferred one?

AN: In the latest 2022 benchmark report for offshore creative production, the primary business drivers for utilising offshore teams all relate to resource, while the commercial benefits of offshoring, have for many, become a hygiene factor. The drivers include:

• Access to flexible resource to manage campaign peaks and troughs
• Access to new and additional resource, as talent pools become stretched
• Access to resource that could scale up, especially for versioning and localisation of content
• Access to 24/7 resource for quick production/post-production turnaround
• Access to expertise in specific areas, especially video post-production, digital banners and CGI.

The Smartshoring model is a model that is developing at pace. Smartshoring is a more progressive offshore model, a hybrid which brings offshore production hubs and regional (in-country) client services teams together, to ensure cultural alignment, enhanced communication and another level of quality assurance. The cultural alignment is crucial to building a long-term partnership, while mitigating short term risk. The production infrastructure is still primarily in a low-cost economy, ensuring the Smartshoring model can pass back savings to the in-house teams.

IHALC: What kind of cost-savings can IHAs expect to achieve by offshoring? 

AN: Based on the latest insight from the market, 42% is the average savings across all service lines, but up to 80% savings can be expected in some cases. For video post-production, retouching savings approaching 60% can be expected. For digital banners (static and animated), CGI, web development, corporate communications (including presentation services) and packaging and retail artwork, up to 40% savings should be built into any commercial business case.

IHALC: What kind of work is offshoring most suited for and how is that changing?

AN: Offshoring is most suited to work that relates to content tiers 2 and 3 including:

• multi-channel adaptation, post-production, re-versioning and resizing for video and motion, social, digital, e-mail, retail marketing and print
• transcreation asset localisation
• CGI for retail advertising and packaging
• web development, including landing pages, CMS configuration, e-commerce and mobile application development
• corporate communications, including presentation services, brochures and annual reports
• artwork and retouching for packaging
• retouching for print and e-commerce (D2C)

Video post-production and digital advertising (banner/display advertising) is seeing the greatest increase in market share of all offshore creative producton services.

Emerging services, include accessibility for digital content, XR/AR and VR development for immersive experiences and content management (supporting the integrity of DAM implementations to ensure assets are re-used and re-purposed effectively).

IHALC: Can you give us a sense of which territories are leading the way when it comes to offering offshoring expertise and what kind of services and skills are available?

AN: India continues to dominate the creative production offshore market, due to an unmatched talent pool, cities that have a heritage of 20+ years for offshore production (including Chennai and Mumbai) and an ingrained understanding of the international outsourcing market. India is also well-positioned geographically to service Europe and North America and fulfil overnight work, there are strong language skills, greater investment in brand guardianship, a highly developed digital and mobile market, and India is still commercially competitive. India provides a full range of creative production services, across all channels.

Other countries that rank well for offshore creative production, include Mexico, as the top exporter of creative assets in Latin America and a strong technology sector; Poland, due to its large-scale development capability and nearshore presence and the Philippines, with offshoring being the second biggest contributor to its GDP, competitive wages and it’s English-speaking.

IHALC: Are there any noticeable gaps in terms of what skills offshoring companies currently offer?

AN: Naturally, as we move further up the creative value chain, into brand strategy, campaign planning, master asset creation, photography, even copywriting and creative design, unless you are dealing with a pure play creative team, these services are better managed centrally, by tier 1 agencies. The offshore production studios can then take over responsibility for producing content at scale, through adaptation, transcreation, post-production and localisation.

IHALC: How has the pandemic impacted offshoring trends?

AN: The disruption in market predictability and the move to hybrid working coupled with the shift to ‘digital first’ or ‘direct to consumer’ strategies, has seen a significant disruption in production models, as agencies, whether they are in-house or external, come under increasing pressure due to workforce and talent shortages, and a reduced spend on content production.

The offshore market has undoubtedly accelerated in importance due to the pandemic, and has provided a potential solution to both the resource and commercial pressures, in-house teams are under. As forecasting became less predictable, access to flexible ‘transactional’ resource became an option. The ability to tap into larger talent pools, relating to video, motion, digital and CGI also supported campaign production needs, where finding skills was a challenge. As we moved to hybrid working, a culture of “everything done in-house” slowly moved to a collaborative model of ‘in-house’ and ‘offshore’, as new digital workflows, virtual briefing and campaign management dashboards became the norm, enabling the rise of the offshore model.

IHALC: In order for in-house agencies to implement and run effective offshoring, what key factors do they need to bear in mind? What roles and resources do they need to have in place? Are there challenges in terms of procurement and contracts?

AN: According to our latest findings, the three most important factors in onboarding an effective offshore partner include:

• Excellent communication cadence. That is planned, structured and regular reviews with the regional client services teams and offshore production project managers, to iron out any issues.
• Implement rigorous SLAs, even at a transactional relationship, so expectations are clearly met.
• Schedule client workshops at the start of the relationship, to manage a knowledge transfer programme, relating to the communication matrix, brand guidelines, ways of working, technology activation and the production workflow.

I would also add, visiting your offshore partner’s studios can significantly accelerate the relationship, iron out any cultural challenges and develop empathy, which will set you up for success.

Well-defined roles and resources are crucial, but the emergence of marketing operations, in particular, is a role that can help strike the balance between the marketing teams, the in-house team and the offshore partner. Offshore teams, by their nature, need to be efficient and deliver quality – working closely with the In-house Studio Manager, Marketing Operations lead and offshore Project Manager, will ensure all parties and processes are well represented.

In terms of procurement and contracts, multiple procurement relationships exist with offshore teams, the most common are:

• The Transactional Model; which is flexible, requires no volume or commercial commitment so relieves pressure on cash flow, however you may not always get the same team, brand knowledge is shared across multiple team members and strong project forecasting is required, to ensure resource and skills availability.
• The FTE Model (Fixed Term Employment); employed full time, and allocated to the brand, full time. This ensures a consistent team, knowledge transfer can be done once and retained, the in-house agency can be involved in the recruitment process and accelerates continuous improvement due to consistent team members, lower fees than transactional, but volumes need to be regular and the skills required should be well defined up front.

Often the FTE model is combined with a transactional model to overcome peaks and troughs in volume.

IHALC: Where can things go wrong with offshoring?

AN: Agreeing your success factors up front is crucial, so you know what success looks like, and all teams are aligned around this. Clearly the quality of the work is non-negotiable, but the quality standards, rounds of amendments and briefing process, must be well understood and agreed up front. The skill sets, levels of expertise and capability must be well defined and tested via pilots before live work progresses. Finally, cost savings must be achieved, and timelines hit. This requires robust, clear SLAs, with continuous improvement practices in pace, to ensure successful ways of working.

An aligned culture is non-negotiable, with positive chemistry meetings at the start of the relationship.

IHALC: How do you see the impact of automation impacting offshoring – will it reduce the demand for offshoring lower tier work and how will offshoring adapt?

AN: As we know, automation is transforming how many companies manage high volume of adaptation, especially in digital advertising, where concepts can move to network ready ads across multiple channels, formats and markets quickly. While content versioning for video allows for multiple versions to be created and deployed directly to the relevant social channel.

Automation is impacting the offshore market today, but many offshore providers are staying ahead of the curve and investing in automation engines for their customers, those that do will stay relevant, as they continue to move upstream and extend their offering.

IHALC: What are the key measures of success that IHAs apply to offshoring?

AN: In our latest benchmark report, the top 5 measurements of success were;

• The quality of work is to the expected standard
• Cost savings are achieved
• A trusted relationship between the in-house team and offshore partner has formed
• Work is always done to the deadline
• There is an investment in innovation and technology to drive improvement.

IHALC: How would you advise IHAs strike the right balance between offshore, in-house and outsourced teams?

AN: This is a great question and finding the balance is a challenge, as there are so many moving parts. I would suggest you need a well-defined strategic vision, that drives relevant action to ultimately build the right model. The strategic vision needs to look at industry trends, the organisations culture, market dynamics, sustainability and brand, creative, content, cost and efficiency objectives.

In addition to the vision, a skills and capability assessment will assist in determining the gaps, in terms of processes, talent and technology.

Finally, build a guiding coalition. Avoid silos and build a coalition that is well represented, with in-house members, external agencies, marketing representatives and offshore specialists at the table. This team should operate with well-defined shared practices and coordinated progress. This, of course, requires strong leadership to ensure that in-house agencies can find the balance between offshore, in-house and outsourced teams.

For more on the work of TKM Consultants, visit tkm-consultants.com