The World of Marketing Technology is expanding at an incredible rate. In 2011 there were around 150 different technology providers in this space around the world, now there are more than 6,500. With so many providers with so much leading edge innovation, across the entire sector, is there any upside in using your agency’s proprietary technology?
There are five things to consider:
Agency investment in time, money and resources
Looking at the maths, an independent technology vendor can sell their technology to anybody within the normal legal and commercial bounds. An agency can only sell their technology to their clients. Why? Because another agency will never use a competitor’s technology given data privacy and the basic problem of essentially paying a competitor.
This being the case the commercial opportunity for a vendor is often much greater than an agency’s in any particular technology, and therefore their investment opportunity is much greater. This has played out many times over successive waves of technology. Bid management technologies have been built by many agencies over time but they could never invest the kind of money raised by independent providers (e.g. Marin Software $100m over 8 rounds) and therefore not match their breadth and depth of functionality.
Core competence and focus
Of course the major agency groups have specialist areas focussed purely on technology and certain areas of technology. However as a group, trade-offs will need to be made or decisions will need to be taken that are influenced by other parts of the group to the detriment of the pure technology… this could be related to existing partnerships and relationships, strategic focus of the group being so diverse or technical decisions. The outcome can be suboptimal.
Compare this with an organisation whose sole purpose and drive and investment and passion is purely a specific area of technology.
Which of these options gives you the best opportunity for the best technical solution?
Technology Based on unique IP and or relationships
The previous two points are those that are “against”. How about the case “for”?
Certain agencies may have a unique approach to a marketing problem. They may have built technology around this unique approach and own that IP. This may not be available from anywhere else…I have built technology like this for agencies and whilst the investment opportunity is still limited, typically the business case is compelling because it scales efficiently something that would be very inefficient without technology. For the agency this makes sense, for the client, they get a unique technology, wrapped in managed client service, from one touch point… and that technology is making sure you get better accuracy and faster turn around on that delivery…win, win.
Likewise, linkages in the value chain can bring competitive advantage that is very difficult to replicate, and so unique and protected relationships related to technology – be it data sources, distribution networks, commercial leverage, and a host of others – can bring this to an agency technology offering. In this instance the technology can be unique and unrivalled in the ecosystem.
If as a client you may have a few thousand agency staff around the world using an agency proprietary piece of technology that they have been trained in and get support in their local market and in their local language. Moving them to an independent vendor’s technology can be challenging and expensive and fraught with quality issues. Sometimes it’s better to leave the problem with the agency and hold them to the outputs.
Why would agencies build technology rather than license and pass the cost on to the client? There are multiple reasons, some of which have already been identified and can be summarised as internal efficiency/change management and leveraging IP.
There are three other commercial reasons: Technology companies can be valued higher than consulting type organisations and so there is a valuation aspect. Secondly they can make money from clients without providing people (which is why the valuation is higher) and so hours (and therefore cost of delivery) is no longer in proportion to revenue; revenue is independent of head count for this particular part of the P&L. Thirdly the client is locked in. If they no longer like their agency, moving them on means moving on from the technology…and for a global organisation this can look and in reality be problematic.
Of course there are many other factors at work not just these 5; but at the heart is a sincere answer to the direct question, what do you need from technology to deliver your business objectives? And then with knowledge of the 6,500 options, rationally selecting your architecture (these tech need to fit together) to deliver the answer. Part of that selection process has to be related to their commitment to the development of their product alongside any inherent IP that looks attractive, and of course the change management considerations.
At Flock we help organisations navigate these problems in technology transformation…if you recognise any of these issues please feel free to get in touch.