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Interview with Charlie O’Rourke on The Pros and Cons of Outsourcing

Interview with Charlie O’Rourke, Financial Services Leader, former SVP of First Data and currently Chief Technology Strategist with the Fotec Group: “The Pros and Cons of Outsourcing”

Recent industry surveys reveal that more businesses are using outsourced services as a means of cost-cutting and potentially a strategic business productivity tool.  In these studies, executives said they believe outsourcing can provide many benefits, including access to a valuable talent pool where a company may lack expertise.

We asked Charlie O’Rourke, one of the financial industry’s most respected and successful veterans, to give his insights around the growing outsourcing trend and provide some tips on how a company can be successful leveraging outsourced services while avoiding potential pitfalls.

Attain Marketing: We’ve seen more companies looking to outsourced services as a way of achieving their business objectives.   In your opinion, is this a good trend for businesses and what benefits can they gain by outsourcing?

O’Rourke: Yes, I believe those companies that prepare themselves for outsourcing can benefit immensely as part of an overall business strategy.

First, let me clarify what I mean for our purposes here today.  To me “outsourcing” is a practice used by companies of contracting out some of their business functions to an external provider.  For the purpose of this discussion, I am referring to outsourcing as the utilization of hired resources inside U.S. borders.

While I agree there are benefits that a business can gain from outsourcing, there are also potentially huge downside risks of incorporating outsourcing without proper evaluation of its practice within a company.

Outsourcing is not something a company should embark upon simply for cost savings, recommendations from others, or without a critical eye toward the potential outcomes and whether outsourcing fits within their overall business strategy.

I realize expense reduction is often a very significant factor.  However, other considerations are just as or even more important.  A proper corporate outsourcing readiness evaluation would include, among other things, assessment of the company’s strengths and weaknesses, core competencies, culture, traditions, and vision for the future.  When a company’s strategies are well defined and aligned with a vision toward the future, they will include how to utilize outside resources to augment and complement business objectives.

If there is no strategy and strict oversight, outsourcing may end up costing your business more in the end.  Additionally, it could possibly destroy effectiveness in other areas such as agility, flexibility, customer service quality and competitive advantage.

However, if consistent with its strategic objectives, incorporating outsourcing of appropriate business functions can provide a company with the ability to better focus on its core business and gain competitive advantage at the same time.

Attain Marketing: Should businesses have concerns about outsourcing certain business functions?  In other words, are there “best practices” around outsourcing?

O’Rourke: Someone once told me that if everyone is adopting a “best practice” you can bet that it is no longer the best.  Now that the “best practice” is well understood, it is a perfect opportunity for consultants to provide textbook solutions and cookbook remedies while extracting nice fees for their services.

Mindlessly following “best practices” because they have been used at a Fortune 500 company, are the newest fad, everyone is adopting them or they are the rage for consultants nowadays, may not be in a company’s best interest.  Each strategic and tactical practice needs an evaluation with a critical eye on your company objectives.  Specifically, the practice should fit strategically, operationally, and culturally in your company.

It is unwise to “copy” or “clone” another organization’s recipes in terms of strategy, business theory, management tools or technologies.  Only when you understand your culture, values, purpose, strengths, and direction should you consider which business functions are eligible for outsourcing.

Each company has unique requirements and needs to evaluate which practices are “best” for its business, culture, and customers.

If I were to give general guidelines for outsourcing, I would say companies should retain their core functions in house and then look to outsourcing those business functions that are noncore.  That is the simplest guideline I can give.  Although often difficult and time consuming, proceeding without a diligent assessment will guarantee less than optimum results and possibly failure.

Attain Marketing: What are some of the business functions that are best suited for outsourcing?

O’Rourke: Given some of the caveats above, some logical places (unless of course a core competency) to look may include functions in human resources, administration, accounting, marketing, public relations, communications and legal.

There will be many others depending on the company and each business will have to decide on the criticality and impact of outsourcing in a particular area.

Attain Marketing: Being marketers, of course Attain is interested in your thoughts about outsourced marketing and PR services.  Are there advantages?

O’Rourke: I believe companies like Attain can definitely enhance a company’s marketing, media relations, and communications capability.

Small companies are obviously going to benefit quite a bit by using companies like Attain because they typically do not have sufficient, or in many cases, any expertise, talent and skills to effectively perform many of the required functions in these areas.

In the case of larger companies, the ability to utilize outside marketing expertise often times yields tremendous advantages.

I believe a company can achieve optimum outsourcing success when it embeds the resourced personnel with their internal employees.  They assimilate into the culture and have the same objectives as others in the corporation.  They understand the company values, culture, strategies as well as the industry, the business, and the company’s products and services.  They serve as an expert member of teams, departments, or divisions of the company.

Attain Marketing: Well said Charlie, and many thanks for the unsolicited plug ;-).

I’d like to add, potential advantages gained through an outsourced marketing team include access to an expanded list of analyst and media contacts, specialized public relations and marketing tools – as well as expanded services that may be limited or not be available at all within a company.

In addition, an outsourced team of marketing/PR specialists can provide an expanded scope of services in the categories of lead generation, sales support, social marketing, communications and media relations – possibly at the same cost as one or two internal employees who are providing a more limited scope of services defined by their specific role.

Any last thoughts?

O’Rourke: Companies that are too quick to outsource business functions as solely an expense reduction often suffer negative consequences.  Lower cost is always alluring but results may be much different than expected.  Companies should adopt an outsourcing plan that fits within their overall strategies.  This will yield results that are consistent with their direction and that do not negatively affect the company.

Again, I want to emphasize that company culture is very important.  Culture is often overlooked in the total equation.  The ability of a company to accept outsiders and embed them into the business is crucial.  Outsourcing will fit in some cultures but not in others.

I believe outsourced marketing is an area that makes sense, especially when outsourced personnel become an extension of the client’s in-house marketing, public relations, and public relations teams.

Attain Marketing: Many thanks, Charlie, we appreciate your input.

Today we’re seeing many companies turning to outsourcing as a way to deal with budget restraints while staying competitive in a sluggish economy.   Smart companies know that they can’t stop their marketing activities – especially if they plan on establishing healthy longevity in their business, so they see outsourced services as a great way to leverage talent and stay proactive.

Traditional PR is Not Dead

The fat lady has yet to sing.

In the PR industry we’ve been hearing rumblings of the great shift from the reign of mainstream media to the rule of citizen journalists and social media channels. While we happen to believe that social media has forever changed the landscape of media relations (BTW, a great read is “Putting the Public back in Public Relations” by Brian Solis and Dierdre Breckenridge), we think the death knell may be more hype than reality.

Through a market research project, Attain Marketing has been in the trenches with senior IT buyers from a wide range of companies, including BofA, Phillips and First Data talking turkey about the IT buying process.

When asked how they first become aware of products and services, 95% of IT buyers interviewed said that trade publications were their number #1 resource. Although many did say they turn to IT peers to hear more about new products on the market, none acknowledged the use of social networking tools or communities as part of this process – right now. Analyst reports also topped the list of influencers, but mainly as part of the validation process.

So, here are some “old school” PR tips that never die:

  • Leverage key relationships with influential analysts and media. Schedule press and analyst “tours” in a 3-6 month cadence around company milestones.
  • Position your company/products around hot current events and submit articles to trade pubs for placement. Here are some good examples: PC World and Wireless Week contributed editorial
  • Always let your customers tell the story: editors are much more willing to write about a customer deployment than your product. Example: SC Magazine
  • Content is king. Journalists are looking for good stories. Period. See previous blog posts: Content is King and Some of My Best Friends are PR Weasels
  • PR campaigns should be integrated with marketing and lead generation efforts for maximum impact

Don’t throw the baby out with the bathwater. Every company should evaluate the unique landscape in the market it serves, but usually a blend of the old and new PR strategies is the best recipe for success.

Making the Sale: Credibility Counts

Early stage companies face challenges on all fronts, but establishing credibility with mainstream buyers is often one of the biggest marketing hurdles.

©iStockPhoto.com/Sveta

©iStockPhoto.com/Sveta

A press release claiming market leadership and marketing materials chock full of tidbits about your product benefits and expected ROI may help initiate conversations, but they won’t close deals.

For products and services with higher price tags, pragmatic business buyers often need more reassurance about the credibility of your company before making a buying decision – especially one that is seen as risky (a.k.a. investing in an innovative technology).

Ultimately prospective customers want peace of mind that you can deliver what you promise. People often seek the opinions of others whom they consider better informed within their community to validate the legitimacy of your company and technology.

Establishing credibility with the influencers within your buyer’s community should be a company priority if you want to hit your sales growth targets. Press, analysts, reference customers and influential partners can make or break your perceived credibility.

When it comes to building credibility it is all about a sound strategy and commitment to execution. While owning a large percentage of market share with a strong customer base can be helpful to your credibility building efforts – it is not essential or a guarantee of success.

We have seen clients with shoe string budgets and only a handful of customers successfully build credibility within their prospective buyer’s community. While better-funded players with broader customer bases may falter because they fail to make credibility a priority.

Here are 7 credibility building strategies and tips that we have seen work for our clients over the years:

  1. Create, document and disseminate a plan of execution. If you fail to plan, you will fail to succeed. Bring company stakeholders together to get buy off on plan goals, tactics, roles and responsibilities, timelines, and metrics for success. Then distribute the plan to everyone in the company.
  2. Declare credibility a company priority. Integrate credibility objectives into company and employee performance goals. Every employee should understand how he/she is expected to contribute towards meeting the goal and provide incentives for employees that make significant contributions.
  3. Resist over-inflating your marketing claims. You quickly lose credibility by claiming your product is a wonder tonic that cures all that ails your prospective buyer. Be realistic about what your product can and can’t do and then consistently deliver on your marketing promises.
  4. Get your sales team on board. Sales people tend to be protective of their relationships and resist opening customer reference discussions too early in the sales cycle. But the most successful companies begin these conversations early and aggressively. Brand promotion and contract discounts can be effectively used as bargaining chips during negotiations to secure reference agreements. But beware… before the deal is inked make sure the customer’s corporate communications team is on board or the agreement may be worthless.
  5. Integrate the plan into every stage of the customer lifecycle. An unhappy customer does not make a good reference no matter what type of pre-sales agreement was forged. Make sure your reference customers get the support they need at all costs.
  6. Build strong relationships with influential press, bloggers and analysts. Research and find the industry influencers, track what they are saying and try to forge a relationship. Avoid spamming this audience with meaningless noise and unsupported claims. The only way to solidify a productive relationship with press and analysts is to provide real value, so be strategic in your communications.
  7. Maximize relationships with strategic partners. High profile partners can elevate your credibility if the partnership has some substance. Microsoft Certified Partners are a dime a dozen, but if you are able to announce that you are joining forces with the likes of Oracle to solve an industry problem, you will instantly garner more credibility.

The Bottomline: Building credibility is a shared responsibility across the entire organization. With a properly executed credibility strategy, even small companies can achieve great things. So get your plan in order, commit to enhancing your credibility quotient, and witness an increase in sales conversion rates and revenues.