A year back when I was interviewing a social media startup for their interesting work, the founder informed me that while all the hard work was done by them, they couldn’t own it in public. The digital campaign had their sweat but it was in the roster of a large digital agency. Like every other business, outsourcing in Indian digital agencies is a common practice.
A brand assigns its digital work to a large network owned digital agency, in most cases the agency then sends out to a smaller digital agency for the ground work. Irony is that the large digital agency wins awards on international podiums for work, and sometimes even ideas, that had nothing to do with them!
One of the dark secrets of the Indian digital agency world, outsourcing is a known fact but one that never gets discussed openly. (Most large digital agencies refrained from commenting for this story)
Large agencies have been outsourcing work to smaller ones for quite some time now, shared Saurabh Parmar – “The obvious benefits are the profit margins and not keeping people on their payroll. I have seen scenarios where an agency is billing a client 10 lakhs and outsourcing it for 1.5 lakhs or so. For the smaller agency there is a new source of income without actively going and pitching for business. The person to suffer in most cases like this is the client since he is expecting a 10 lakh quality and getting a 1.5 lakh one.”
When a brand hands over responsibility to an agency, the brand is taking a big step by outsourcing their voice to them. If this voice gets further outsourced, it is not fair to the client, shared Rohit Raj, Co-Founder at The Glitch, who is completely against this kind of an arrangement. “It feels like a case of too many chefs spoiling the broth.”
Other reasons for bigger agencies to find smaller agencies is to have better skill sets as they have been started by people who have been core in this domain and have developed deep expertise. “Being small in structure, their turnaround time (very important for social media) is in hours instead of days. In large agencies, it is the interns which usually manage the daily ops of social media for brands with one creative director sharing his time over various accounts,” Rohit Awasthi, Co-Founder at Solomosalsa shared.
While it is a wise decision for a big agency but it is the smaller agency that is in soup. Talk to any digital startup the first thing the founder will say – “No one is ready to give credible work to a startup. If we get work either the client is paying peanuts or wants it for free in return of exposure to work with a bigger brand.”
Surviving is tough at a time when the market is being flooded with digital agencies. So much so that digital agencies in the country are going through an identity crisis. During such desperate times when survival is the only instinct left, such outsourcing deals come as a breather. “It is very tempting for a smaller agency to do the work outsourced by a bigger agency. It might be a good strategy for a smaller agency to do it in 1st year of their inception but they should build their network and in-house client in parallel,” Awasthi added.
But it isn’t a bad deal for smaller agencies since they make a decent profit and can also have some disposable income to hire good talent, informed Angad Manchanda, C0-Founder at Chimp&Z Inc. “I personally think it’s a great way for both the agencies to grow. Little unfair on the part of the smaller agencies but then they are getting the right guidance and experience on how to handle the situations which they might not have bagged had it been a direct pitch. The bigger agency on the other hand is making sure their business grows and is paying the smaller agency on time, since they are bound by processes.”
Beyond the cost factor, bigger agencies also go for such engagements at times when they can’t go on hiring spree or when they are on a lookout of specialized teams. “While strategy and content is not something that can be outsourced, when it comes to certain elements like video or tech oriented stuff, it’s always good to involve people who are the experts on that wing and work hand in glove with the same. For example, when it comes to mobile app development, we always partner with a team that specializes in app development and work together to deliver a kick ass product. To develop and sustain an in-house mobile app team would not make sense for an agency and therein outsourcing to specialists make sense. But outsourcing of strategy and agency accounts to smaller agencies is unpardonable,” Raj explained.
Even so the outsourcing engagement for a smaller agency involves problems such as payment issues, hiring internal talent from the industry also becomes difficult as you don’t have big brands in-house and you tend to limit yourself to smaller brands and pitches. Because of such problems, Awasthi tells me that as a principle, “We now don’t work with any intermediary agency”.
Outsourcing business is an adjustment between the bigger and smaller players. Not always do smaller agencies become the scapegoat if they don’t chose to be one. “It’s about working with the right partners and working with those who follow ethics. Most importantly if the smaller agency goes out to get work just to get work without setting expectations of delivery then it would seem like they are the scapegoats,” said Angad.
It is a catch 22 situation for a startup that dreams to do interesting creative work for which the industry will recognize. However reality is bitter and if startups know what they are getting into, set processes right and terms of working with the bigger players then survival isn’t tough. “We know the work we have done we can’t add them on our pitch deck, forget feeling sad that we don’t get credit anywhere. For me more than awards survival is crucial,” informed a digital agency founder who didn’t wish to be named.
Overall, nothing summaries this entire debate and it’s more of a rational decision a founder takes based on situations. Rohit is of the opinion that the picture below summaries the entire debate well, what do you say?