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Outsourcing: David Bonthrone, Executive Vice-President, Group FMG (Part 3)

Posted on Wednesday, Jun 27th 2012

SM: Talk to me about the kind of work that your Chennai operation does.

DB: We do a lot of print production work. Within that, I mean cleaning up images for printing and production. We have a fast turnaround facility that can handle a lot of volume in terms of print. That’s some traditional work on the traditional print production side, cleaning up images, getting the right colors in there and retouching facilities, laying out flat what we call flat paneling, so laying out publications. Then the enormous migration into the digitization of those assets might be everything from developing an email campaign all the way through to developing the code and hosting and maintaining it for a particular customized website, micro site or even, in the future, an e-commerce-based site.

SM: OK. What is your estimate of that entire market for outsourced services of that kind right now? How big is the market?

DB: Well, if you look at a traditional advertising agency … let’s say that for every $100 spent on advertising, maybe 80% of it is spent on the media. Another 10% is spent on the production and another 10% is spent on creative and/or strategic fees. That’s a bit of a broad brush statement, but then you take the whole advertising industry and look at the expenditure and then take 10% or 12% across the board, which is allocated to production, how much of that is offshore today versus in time. It’s difficult for me to figure on that, but if you look at our competition, for example, the numbers stack up, and it’s pretty significant. So, it’s certainly in the tens or hundreds of millions going forward.

SM: OK. It’s not the real creative work but more the taking creatives and doing a lot of the post-production work, so to speak, and then porting it to lots of different formats.

DB: That’s exactly right. We seek to partner with agencies. We seek to be the plumbing inside. We understand that the agencies will be more competent than we are on developing strategic insights and creating concepts to deliver on those consumer insights. What would we hope to do is enable them to pass some cost savings on to their clients through a balanced onshore/offshore production facility.

SM: So, you want to expand your outsourced services business to a variety of agencies and significantly broaden your market share in that space?

DB: That’s right. If you look at our revenue, compared to other balanced onshore/offshore facilities, a disproportionate amount of our revenue sits in the agency bucket. It’s only 5% or 10% where it should be nearer 40% or 50% if not more.

SM: Let’s talk about the talent pool that you need to do this kind of work in a place like Chennai or Argentina or Costa Rica or wherever it is happening. What is your experience in doing this work in Chennai? What kind of attrition do you experience, and what are the dynamics of your workforce?

DB: Because our people have been out to India and set the facility up, there’s a retained culture there. We’ve managed to attract talent from top competitors because of the portfolio of assignments that people could work on. I’m not going to give you a quantitative number on the attrition rate because I’m not aware of it.

SM: Is it a problem? Outsourcers in India are facing huge attrition problems.

DB: It’s not a problem for us because we are small enough at the moment. We have interesting, dynamic work, which has an element of creativity to it. People enjoy that. The working environment is second to none. It’s a state-of-the-art facility in Chennai, so all of the employee benefits and the quality of the office and the nature of the work are more interesting than the traditional offshoring facility where they might just be answering telephones and dealing with unpleasant customer enquiries or some other service. The emergence of this space has opened up the eyes of the workforce, and they want to work more in a creative industry. So, attrition has not been a problem for us. If there’s some competitor out there that offers better rates of pay, maybe it will become a problem in the future, but at the moment, people want to work in a more creativity driven field, and we have this state-of-the-art facility in Chennai. That’s what people are after.

This segment is part 3 in the series : Outsourcing: David Bonthrone, Executive Vice-President, Group FMG
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