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Tech Vendor Vs. In-House: Which One’s Right For Your Brand?

This article is part of our April 2019 series about customer experience. Click here for more.

The insource vs. outsource tech debate may not be new, but it is becoming increasingly louder as data ownership, governance, and customer experience management (CXM) take center stage in the C-suite.

For its part, McDonald’s decided to take the in-house route with its late-March announcement of plans to acquire personalization company Dynamic Yield. 

“It’s not uncommon that brands think if they bring the product in-house, they can customize it specifically for their needs and get around the customization of a third-party platform, but more often than not this is a misconception,” said Drew Burns, principal product marketing manager at Adobe. (CMO.com is owned by Adobe.)

According to Jay Warren, VP of AI and Analytics at Cognizant, working with vendors involves challenges. For example, there is a significant cost leakage that exists in workflows with some martech vendors, and, often, access to data is spotty. 

In addition, Warren added, some technology systems provide a limited ability to evaluate attribution or ROI, and reporting cycles are often slow–sometimes as high as six months. Yet, this is less of a “vendor vs. in-house” debate, according to Adobe’s Burns, and could signal that companies aren’t partnering with the right vendors. Experts say, there are a whole slew of challenges to going the in-house route.

The People Quotient
According to Glen Hartman, head of Accenture Interactive, North America, bringing technologists and developers in-house is easier said than done. The biggest challenge, he said, lies in developing the right mix of skills and capabilities to pull it off and keeping up with the rate of innovation.

Cognizant’s Warren agreed. “Companies must determine if they have the in-house talent pool available for media campaign planning, media buying, billing and reconciliation, and analytics and attribution functions,” he said. “The availability of such resources is a major deciding factor as to whether these individual functions are done by a vendor or in-house.”

Upkeep
In addition, an enormous amount of development and maintenance goes into the ongoing evolution of technology—which tech companies have mastered, Adobe’s Burns said.

“If you decide to do something like this in-house, you will have to take a portion of your engineering team and make them dedicated to this product,” Burns explained. “It then becomes a product that you need to own, you need to maintain, and you need to develop further because there's going to be ‘asks’ of you in the same way that you ask a vendor for capabilities based on consumers’ ever-changing expectations.”

According to Janet Balis, partner, global advisory leader for Media & Entertainment and Americas marketing practice leader at EY, the value of working with a vendor is the talent and skills that come along with doing so.

“[The process of] reviewing vendors can also be productive because it challenges a brand to really articulate their needs,” she told CMO.com. “The key is not to be driven by the capabilities and innovation of technology vendors. Rather, [a company] should invest the time to understand the use cases that drive value from technology and then shape their vendor landscape around those needs.”

Another advantage of going with a vendor is that in most cases they will have a robust set of training materials and resources, and can help build an organization’s core competencies from a tech-stack perspective, said Chris Ross, VP, analyst at Gartner.  

“If you’re in the software business, your documentation and training are core to being a software business,” Ross explained. “[But other types of companies] may not be good at those things.”

Ross’ advice to companies? Think about the man power, the skills, and organizational structure needed to maximize the full potential of technology—not just at the implementation and integration phase, “but at the ongoing run-and-operate phase.”

Building A Single View  
Brands have always had a proprietary sense about their data, especially when it comes to sales, financial, or customer data, EY’s Balis said. The key is understanding it holistically.

“Transactional, behavioral, attitudinal, demographic, and psychographic data all have more value analyzed together to look for strategic patterns and drive answers, not only for marketing but for the full end-to-end customer experience,” Balis said. “Increasingly, wherever the data actually sits, brands will be looking to bring data together across organizational, political, and technological silos to get more real-time or faster-time insights and action.” 

At a time when companies are so focused on breaking down organizational silos—and data silos, specifically—bringing technology in-house could actually fragment data even more. For example, if a brand decides to buy a personalization technology, it might still need to outsource capabilities such as analytics, campaign orchestration, and ad serving, which means data will live in different places, Adobe’s Burns explained.

According to Gartner’s Ross, the marketing industry at large is gravitating toward a more synchronous infrastructure, where all of the various pieces of a technology are tightly integrated, building a single view of the customer.

Even companies that take tech in-house will need to outsource some parts of a CXM solution, Accenture Interactive’s Hartman said. “Customer demand is so fluid and the pace of technology and data innovation is so rapid that it makes sense to have a mix,” he explained. “It’s too challenging to run the brand day-to-day while evolving with new client demands, and leveraging new innovations in technology and data types to serve those customers.”  

The strongest vendors will have deep expertise in the full tech stack and integration points to enable all the data to flow into one place, building a single customer view, Hartman said. They also must be able to stitch together first-party, third-party, CRM, Google, Facebook, and ERP system data in a cohesive manner across channels, Cognizant’s Warren added. “Only then will data silos cease to exist and a complete customer view emerge,” he said.

The ultimate goal for many organizations—personalization at scale—requires intelligence as well as synchronicity between solutions, Adobe’s Burns adds.

“We don’t want to be doing display in a different way than we’re doing the website, and a different way than we’re doing the app, and a different way than we’re doing our email campaign,” he said. “That’s not the way our customers engage with us or want to engage with us.”

Cost Factors
Choosing to work with a vendor, while seemingly a large investment, can still be more cost-effective than going in-house when a brand factors in the hefty price tag of acquiring technology, maintaining infrastructure, and retaining the talent to run it all, Burns said.

“Going with a vendor means you are essentially licensing the solution, and there’s the expectation that it will stay current and evolve for things like new, modern web technology like single page applications or IoT,” Burns said. “You are partnering with a company that has promised to own, maintain, and evolve, and so you've significantly reduced your overhead.”       

EY’s Balis advised companies to “also consider the operating reality around issues like support, data management, and talent, for example. Process and people around the vendor choice are at least as important as the vendor decision to operationalize successfully.”

The problem for many companies lies in the fact they aren’t getting their money’s worth for their technology stacks, Gartner’s Ross said. In fact, recent Gartner research found that 61% of marketers said they are not getting the value out of the marketing technology they already have, citing limitations in fully understanding the capabilities of their tech stack.

That is precisely why many companies that use a vendor also create marketing ops teams, who are essentially power users of the tools and technologies. “It’s not that you have to go reinvent your technologies,” Ross said. “It’s just they have to invest more time in them, and make it easier for people to learn how to use the tools, to apply them to the problems that they have.”        

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