I would always strongly encourage any small web agency to build and maintain a stable and trusted freelancer network that can be called upon in times of project management crisis, however, there is a long-term and real danger of outsourcing work on a regular basis that can go un-noticed until it is too late.
Why Outsource At All?
At any one time, a web agency will need to outsource digital project management, design or development work to a freelancer for a variety of reasons. These range from lack of in-house skill, employee illness to a sudden influx of business that cannot be resourced internally.
All of these are solid reasons to outsource work and can prove commercially viable. Because most of the reasons are a reaction to an unforeseen event, a wise agency management team will always have a bank of reliable freelancers with a vast array of design and technical skills to call upon in such times.
The Snowball Builds
The negative effects of outsourcing are slow to develop at first making them very difficult to identify, but once the seed is sown, the effects gain velocity and size and by the time they are plain for all to see it is difficult to recover from. This snowball building usually follows like so:
- Small digital project arrives that needs management/technical/creative skills or resources your in-house team don’t currently have
- The in-house team are working on large client work that is too in-depth and risky to handover to a freelancer given timeframes and account relationships
- Small project work is outsourced to a freelancer
- In-house remain on large client work and/or within skill set
- New small digital project ends and in-house team haven’t learnt any new skills
- In-house team can’t take on any new small projects that require new skills
- Go back to Step 1
The Snowball Effect
The effects of this on a one-off basis is negligible, the project is completed, and with a drastically reduced cost to the business resulting in a higher profit margin and a happy management team, but if repeated it can have disastrous long-term effects on your business, for example it can:
- Stop your internal online team from developing new skills
- Reduces the chance of the in-house team gaining valuable experience
- Decrease team morale due to being kept constantly on the same large client projects
As the cycle continues, the in-house team slowly becomes out of date with the latest web trends and technologies (given that larger clients are generally slow moving) thus impacting on your agency’s ability to respond to new digital projects effectively, and staff members become increasingly frustrated with the lack of opportunity to develop their skills and experience online, eventually opting to leave the agency for one where these kind of opportunities are available.
I have personally seen, over a three year period, a web agency go from having a high revenue generating skilled in-house digital project management, design and development team become a low revenue generating relatively un-skilled team where all web design and development work was outsourced. The passionate and ambitious skilled employees left one by one, and were replaced with employees who were mostly indifferent to the industry and saw it as a job rather than career.
Was the overall revenue of the agency the same? Just about, was the business a creative and skilled web agency still? Not at all
This slow but devastating transformation impacted almost every part of the business, for example, potential clients did not recognise the business as a web agency any longer and ceased to invite to tender for digital projects and thus the client list reduced and it became almost impossible to attract new web skilled employees to the company.
Spot The Warning Signs
Early identification, long-term strategy and pre-emptive action are the keys to avoiding this negative spiral. The early warning signs are there to be spotted and come in several forms:
- The need for freelancers seems to become more frequent than the month before
- One regular freelancer becomes two, then three
- Freelancers are used on the smaller projects while in-house staff are on the large projects
- Team morale drops
- There are ‘office whispers’ of frustration at freelancers “getting all the fun work”
- More new project briefs are answered with use of a freelancer in mind from the outset
- Skilled and experienced employees choose to move on to another company in the same industry
The long-term strategy and pre-emptive actions that must be applied to avoid this predominately focus around a disciplined approach, from the start, and an on-going commitment, from the directors and senior management, to developing the in-house team’s skills and experience.
Pay Now, Not Later
The willingness of a business owner to resist the temptation of using a freelancer and reduce profit margin in the short-term on some projects, and allowing for in-house team research and training (and mistakes – the most effective training technique in the world!), for the long-term benefit and growth of the agency is the essential ingredient to avoiding the transformation.
It takes determination, discipline and a fair amount of sheer entrepreneurial courage in the face of adversity to apply this long-term strategy, but in doing so the future of the agency is only made more secure by the skill set and the value of the in-house team is kept on the cutting edge of the web industry.