Who You Gonna Call?
Breaking down white labeling vs. strategic partnerships
No matter how small or large your company, you will need to outsource something eventually. Even the top companies in the world don’t possess the necessary proficiencies in every aspect of their global life and why would they? The ol’ saying “Jack of all trades, master of none” comes to mind. For most companies out there, they have a specific product or service they provide and do it well. However, difficulties will arise, whether it be with a particular aspect of their business (human resources, marketing, shipping etc.) or with a particular aspect of their deliverable that isn’t in their wheelhouse. They need a specific skill set to ensure their company runs smoothly or to ensure their deliverable is completed on time and to specifications. Those companies have a choice – hiring internally or outsourcing to a reliable vendor who can fill the void. It’s a difficult choice that has pros and cons associated with each. Most of us have experienced the boom-bust cycle in the hiring practices of a company. Company A is small (or specialized) and hires out for Skill Y. Company A grows and outsources more of Skill Y. Very often one of two things happens eventually:
- Company A looks at their financial spreadsheet and doesn’t like all the money they spend on outsourcing
- Company A has a string of bad luck hiring unreliable vendors and figure that these failures are hurting their bottom line (and their reputation)
Here comes the boom. Company A creates a new internal department, hires lots of people and no longer sees their money leaving the company. Company A continues to prosper with this new internal team that they can rely on because they “control” everything – they personally interviewed each individual in-person, these new hires are working only for Company A from 9 AM-6 PM, five days a week and they control how much money is being spent on Skill Y; they should know as they did the hiring. Long live the boom cycle! There are, however, some holes in the above that eventually lead to a bust cycle.
Who are you?
While outsourcing can be a tricky endeavor, so can hiring someone internally. Personally interviewing someone does not ensure that someone will be a good hire. I have personally experienced numerous hires in the past where resumes were fibbed or portfolios were stacked with work that just couldn’t possibly be theirs. Even negative and disruptive personality traits can be difficult to suss out until it’s too late. Now Company A is stuck. And firing an internal hire can be an HR nightmare fraught with legal pitfalls. Endure, take notes, and wait until they can build a case with HR in a way that won’t get them sued.
Are you still here?
Markets change, people’s desire for a certain product or service can stop on a dime and the world in general is constantly in flux. You need to adapt to new landscapes and this includes a need – or lack thereof – for Skill Y. For example, back in the day it cost a fortune to make a mobile app so hiring an internal team might have made sense, depending on need. Now, that has drastically changed. What is Company A going to do now with that cube-farm of app devs? How many mobile apps do they need to sell their product? Why did they hire so many resources? What are they working on now? Company A has no idea but they do know that they’re paying for all of their salaries … with benefits. Remember – they now work for Company A, 9 AM-6 PM, five days a week whether they have something to do or not. (Rob in the corner was promoted to Executive Creative Director – he’s pulling in some serous money, too.)
I’ve made a huge mistake.
Eventually and inescapably comes the bust cycle. Company A needs to clean house, reassess and wonder where all the money is going. Oh yeah – paying a team of people full time (with benefits) for a skill they no longer need or need less of. Especially if the skill is not a crucial part of Company A’s service or deliverable, downsizing is an inevitable decision. There is a core team of people with a core set of skills crucial to Company A that needs to thrive and expand so to separate the chaff from the wheat is only wise. The bust cycle is complete. However, to many small business owners and vendors, this is the beginning of the boom cycle.
Outsourcing – You have chosen … wisely
While outsourcing and hiring an outside vendor can be scary, once you find a reliable one, it can be a game changer. Whether it be through a strategic partnership or white labeling, outsourcing to handle specific needs can relieve a company’s resources to allow them to focus on their core business and product. As the owner of a boutique digital development company, I have experienced both and they both have their advantages and potential (or perceived) disadvantages. A quick breakdown:
White labeling (Pay no attention to the man behind the curtain):
Simply put, white labeling is wrapping up a vendor’s core competency into your own offering as a selling point. A potential client has no idea you are outsourcing a portion of the work they are hiring you to do. Company A can expand upon it’s main deliverable to promote a more comprehensive package because in their back pocket, behind the scenes, is the Vendor, ready to add that extra piece of the puzzle that puts Company A’s deliverable over the top of their competition. For both vendor and client, there are some pros and cons.
- They appear to be a one-stop shop. This can be especially soothing for a client that is working with an especially sensitive or proprietary product.
- There is a direct line of communication and authority. Client doesn’t know the vendor exists so there is no confusion as to who to speak to or who is calling the shots.
- They get all the glory when a project goes well.
- Covering up can be a bit of a pain. Conference calls with the client mean everyone needs to be on the same page in terms of who work for whom and there can’t be any hints that the vendor is not onsite or otherwise part of Company A. It’s not lying, per se, but trying to maintain the veil of secrecy can be an awkward one.
- They get all the blame if something goes wrong with the vendor. If a vendor fails a company for whatever reason, since the client knows nothing about them, this is all on Company A.
- Simply put – more work. White labeling allows a vendor to work with a myriad of clients, not just business to business. Whether it’s accepting spill over work from a larger company in a similar field or providing a small piece of a larger deliverable for a company in any industry, white labeling allows vendors more versatility to get work in more places.
- More often than not, less fuss. With a buffer between the vendor and the client, it’s often Company A that is dealing with the difficulties of indecision and client wrangling, only passing down directives when fully vetted and clear action items are defined. Vendors have a scope, so their client (Company A) has to adhere to them. (More often than not.)
- No glory (other than potential rehire). Company A gets all the glory for a job well done and even though your deliverable contributed, no one knows because you weren’t out front. Often times, white labelers will have in their contracts that a vendor can’t lay any claim to a project in their portfolio so, like a tree in the forest, if you can’t claim responsibility for a job well done, did it really happen?
- The money can be too good to grow outside your comfort zone. White labeling can often become a drug. With many clients constant feeding in work, what’s the use of sales? What’s the use of innovation? Too much money working behind the scenes can cause stagnation and lack of vision or purpose.
Strategic Partnerships (You go … we go):
In my opinion, these are the way of the future. The mystery is over – a lot more companies outsource at least part of their deliverable or service. Whether it be the 5-star restaurant whose desserts come from a boutique bakery down the street or an advertiser outsourcing its web development capabilities, it may sound cliché but “everybody’s doing it” so why not flaunt it? Why not openly declare “We are a well oiled machine – a streamlined company with a fantastic product – and by the way, for this part of said product? We’ve teamed up with Vendor Super Awesome here who specializes in said part?” There is no loss of accountability – only an increase in transparency and emphasis on agility and efficiency.
- Transparency. Nothing to hide, nothing to dance around, less to worry about, more accountability.
- Per the super-biased rant above, there is something to be said for doing what you do best and relying on someone else who does the same if it bolsters your product. In most cases, the vendor is providing only a portion of the deliverable and in no way would replace Company A. In the case of the restaurant, would someone stop going to the restaurant if they knew the cake was from down the street? They are going for the whole meal and experience, not just for the cake.
- A smaller piece of the glory pie. Transparency means the client knows who did what so the glory is shared by all.
- Transparency. Nothing to hide, nothing to dance around, and the ability to include work in their portfolio. Shared fortune and glory.
- No hiding in the shadows.
- Potential confusion in the line of command. As a strategic partner, depending on how the contract is written up, Company A is probably still the vendor’s client but that becomes increasingly hard to manage when Company A’s client has direct access to the vendor.
Let’s wrap it up
There are pros and cons to any business decision and one size doesn’t fit all. But the keywords for today’s fast-paced world seem to be agile and efficient. It would seem like good business to focus on what you excel at and lean on reliable partners to fill in the gaps where you’re less experienced. Trying to do everything yourself can be overwhelming, especially for small-to-mid-size businesses trying to get to the next level. It can detract focus from the main mission of the company and the product can suffer. Don’t be a Jack-of-All-Trades – be a master of one. Let outourcing be your friend.
If you’re looking for a digital content developer to help bolster your brand or your marketing collateral or you’re looking for some visual pizzazz to make your product or service pop, why not check out Red Card Studios? We’ve been in business for over 15 years working with companies big and small helping to take their business to the next level. We’ve got the skills and a proven track record. What else could you want?