The Challenges and Pitfalls of Outsourcing in the Media and Broadcast Sector
by Mike Cronk, Partner, Marquis Media Partners
The trend of outsourcing services in the media and broadcast world has been no less significant than in other industry sectors. The impact though, if it goes wrong, can be publicly visible with an immediacy and scale unlike that of any other business. The closer the outsourcing of a service to the programme making activity or means of distribution; the greater the risk to the output and audience impact if there is a problem. Yet still organisations get it wrong. This has resulted in some managers questioning if such a service should remain a contracted operation. It is if course the wrong question. Successful outsourcing is possible providing proper consideration is given to how it is done and clarity of what is to be achieved. Whilst much of my experience has been in the media and broadcast field the issues are no less relevant to other sectors.
Being clear about the service profile of what you are outsourcing, a commodity service or something more complex is key. Contracts that establish a framework to manage bespoke or multi-service arrangements with differing service profiles as a commodity are destined to fail or at least result in a very unhappy audience or bunch of users! It needs to be addressed at the outset as it will drive all aspects of the tender, contract, performance levels, contract management structure and ultimately price.
Core Business or Peripheral
Another way of looking at this issue is the extent to which the service being outsourced is core to the business and therefore more critical if something goes wrong, or more peripheral with less impact in the event of a problem.
The diagram (figure 2) shows broadcast related activities and the extent to which they are core business services or not, and the impact in the event of a failure. Whilst some of the terminology may be broadcast specific, those activities around the top right hand quadrant, are those most closely associated with the technologies and services upon which programme making and the play-out and distribution (the means of getting content to audiences) depend; the ones that will bring blank screens or “dead-air” if they stop.
Figure 2 : Core Business or Peripheral
In the same way that bespoke or more complex services need a different approach to the way they are defined, measured and managed; those that are closer to the core business need to be defined in a way that is materially different to the performance measurement approach of commodity services. How this is done will largely depend on the approach the buyer wants to take; whether a partnership output based approach is preferred or a more contractual and prescriptive approach.
Prescription V Partnership
An outwardly simple concept, but in practice many organisations aspire to a partnership relationship with their supplier then set out to manage in a contractually adversarial way. The latter is often the result of poorly written contracts and customers who do not have the capability, confidence and expertise to manage an effective partnership relationship. The words do not match the deeds.
This approach is a choice for the client. Broadcasters tend to be a cautious bunch as their brand is built on their reputation for content quality and reliability. If the choice is one of partnership, then the approach and culture has to match the aspiration. Teams on both sides of the contract need to have a shared set of goals and commitment to making it work. Managers or individuals left behind in the client who are not committed to making outsourcing work can be a destructive barrier to success.
Sitting down and working through problems in a shared way, rather than chucking them over the fence is vital to building trust. Client and supplier should have a shared understanding of each other’s business objectives. The relationship needs engagement from the board down to the day to day contract management contacts. The client should be sharing their strategy and plans for at least one to two years ahead. This is particularly important in broadcasting and the media world where technology, ways of working and the means of reaching audiences are changing faster than in most other industries. The supplier needs to understand the potential impact of the changes on the way they provide services and be able to develop and agree a road-map with the client that matches technology replacement and upgrades to the clients’ strategic goals.
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Many promises are made as part of the process of contracting out, reduced cost, better career prospects for staff, access to capital, leveraging the supplier’s global capability and so on. Perhaps the most overhyped phrase is the opportunity to deliver innovation. Something all in the high tech world are seduced by, in yet it is one of the most difficult to deliver. Contracts often have aspirational clauses that talk about innovation with little description about what it means, how it will be delivered, or more importantly measured. It then becomes a huge source of frustration to both sides. Shared strategies, road-maps and investment plans can help. The only way I have seen success is where gain share arrangements and invest-to-save incentives encourage both sides to push for change.