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- 2. Attributes for Achieving High Performance in Digital Advertising
Source: Accenture, Digital Advertising Study, 2008.
© 2010 Centro, LLC. Proprietary & Confidential | 2
Not
Important
Extremely
Important
- 3. Reasons to Pursue Outsourcing Are Not Cost-Related
Reasons to Pursue Outsourcing Triggers for Back-Office Outsourcing
48%
47%
41%
36%
35%
33%
17%
0% 20% 40% 60%
Reduce cost/increase
flexibility
Access to leading technology
Improve focus on core
business
Access leading edge process
knowledge
Increase speed of execution
Better quality of service
Enable a digital strategy
Percent of Respondents
34%
33%
28%
18%
18%
17%
16%
6%
0% 10% 20% 30% 40%
Budget pressure
Technology investment caps
Corporate restructuring
initiative
Get more out of shared
services
M&A/spin-off transaction
Business advisor driven
Approached by outsourcer
directly
New "C-level" functional
head
Percent of Respondents
Source: Booz Allen, Outsourcing Trends Study, 2010.
© 2010 Centro, LLC. Proprietary & Confidential | 3
- 4. Current Operating Model of Many Agencies Is Unprofitable
% of average agency revenue:
Consultation
• Brand strategy
% of average agency profits:
Ideation
• Creative concept
• Creative strategy
• Channel planning
% of average agency revenue:
Execution
• Project management
• Creative execution
• Production
% of average agency profits:
Coordination
• Revisions (all disciplines)
• Traffic
• Administrative
20%
80%
80%
20%
© 2010 Centro, LLC. Proprietary & Confidential |
Relative Value of Agency Services
Value perceived by client Cost incurred by agency
Perceived Value = Price
Consultation Ideation Execution Coordination
This is the basic broken financial model for agencies that we can help solve.
4
- 5. Agencies and Outsourcing Providers Can Access Same Drivers
Key Levers of Support Services Cost Reduction
25%
18%
12%
5%
0%
3%
15%
8%
3%
12%
8%
4%
3%
20%
30%
(Off-Shore
Centers)
50%
5%
2%
3%
5%
0%
35%
30%
25%
20%
15%
10%
5%
0%
Factor Costs Demand
Management
Automation Standardization
and Scale
Work
Practices
Delayering
and Skill Mix
Reallocation
Total Impact
Agency experience of what
is typically achievable
Impact on Overhead Cost Reduction
Total range of
opportunity
50% Requires more strategic decisions or
higher levels of BU coordination
Typically captured in earlier
phases of Shared Services
Source: Booz Allen, Outsourcing Trends Study, 2010.
© 2010 Centro, LLC. Proprietary & Confidential | 5
- 6. Outsourcing Model Delivers Smart and Efficient Ad Operations
Traditional Model Digital Model
Change Processes
• Restructure to focus on
core business needs
• Focus internal
resources on high value
activities
• Migrate services,
processes and people
• Gain efficiencies by
leveraging technology
and functional expertise
of provider
Strategy
and Creative
(30%)
Operations
and Programs
(50%)
Administration
(20%)
Source: The Outsourcing Institute, OI Index, 2010.
Strategy
and Creative
(5%)
Operations
and Programs
(30%)
Administration
(65%)
© 2010 Centro, LLC. Proprietary & Confidential | 6
- 8. 32%
31%
28%
24%
22%
19%
14%
12%
10%
9%
7%
Many Agencies Struggle to Realize Full Potential
0% 10% 20% 30% 40%
Weak control of cost and data
Excessive standardization
Outsourcers unresponsive to
changing needs
Poorly managed migration
Inflexible contracts
Worsened performance and cost
High turnover of account
management staff
Lingering shadow staff
Excessive effort in contract
management
JV unable to commercialize
Key staff attrition
68%
60%
57%
39%
23%
42%
36%
44%
22%
17%
0% 20% 40% 60% 80%
Access to vendor expertise and
sophistication
Improved quality of delivery
Increased focus on core
competencies
Reduced cost
Improved balance sheet
Expected
Actual
Percentage of Respondents Rating Benefits as Significant
Percent of Respondents
Source: Booz Allen, BPO Survey of U.S. Companies, 2009; Gartner Group, Survey of Marketing Organizations.
Expected and Actual Benefits of
Outsourcing
Main Challenges with Outsourcing
© 2010 Centro, LLC. Proprietary & Confidential | 8
- 9. Stated Reasons for Outsourcing Differ from Actual Reasons
Issues and Questions
• Are we just outsourcing a broken process?
• Do we risk outsourcing processes that
could have adverse impact if controls break
down?
• Will we fix adverse user behaviors by
shifting work outside the four walls of the
company?
• Is this a response to frustration at the
workforce?
• Will systems need fixing anyway?
Stated Reasons
Reduce Costs
Real Reasons
• Inability to reduce costs through classic re-engineering
or technology investment
Focus on Core
Competency
• Sick of dealing fire-fighting issues
• Lack of expertise or commitment
Instill Market
Discipline
• Sick of outsourcing threats
• Illogical pricing mechanisms and allocations
Improve
Flexibility
• Major workforce productivity issues
• Inability to influence union
Improve
Technology and
Innovation
• Unaffordable technology investments
• Made poor investment decisions in the
past
Source: The Outsourcing Institute, OI Index, 2010.
© 2010 Centro, LLC. Proprietary & Confidential | 9
- 10. Outsourcing Provider’s Advantages and Barriers
Labor Costs
Source of Advantage Barriers to Capture
• Different employment conditions
• Better delegation
• Labor located in low cost geography
Overheads
• Less overhead to absorb if smaller, more focused
organization
Specialization
and Focus
• Management can justify capex to investors
• Scale and experience can yield economic benefits
Market
Discipline
• Transparency and accountability that help identify and
reward true costs and benefits of activities
• Focus is on output, not input, and competition among
suppliers allows choices for purchasers
Flexibility
• Scale and scope of production can be adjusted rapidly at
low cost
• Networks of organizations can adjust to demand more
easily than integrated organizations
Technology
• Proprietary access to technology or other intellectual
property advantages, which the organization alone
cannot access
• May improve operational reliability, productivity,
efficiency and long-term total costs and production
• Employees or their representatives will not allow
suppliers to work with different conditions
• Communication and distance issues
• Some multi-national suppliers that bring other
sources of advantage will carry heavy overheads
• To capture scale, suppliers enforce process and
technology standardization, which may be too “plain
vanilla” for clients
• Processes outsourced may still be broken
• Competition for supply may be limited
• Company may poorly manage the market
• Large suppliers may lack required flexibility
• Existing organizations and unions may hinder efforts
of supplier to be flexible
• Understand the true advantages of the suppliers and
structure relationship to bring out and reward those
capabilities to align interests
Source: The Outsourcing Institute, OI Index, 2010.
© 2010 Centro, LLC. Proprietary & Confidential | 10
Criteria