Dentsu sees ‘tremendous competitive advantage’ in offshoring 10,000 jobs | Advertising
Dentsu International is moving thousands of jobs overseas because the agency group sees it as a “huge competitive advantage” at a time when clients need to save money to meet rising inflation.
The international arm of Dentsu, which employs about 45,000 people outside its home market of Japan, already has 7,500 employees, or 17% of its workforce, in less expensive locations. By the end of 2022, this is expected to increase to 10,000, or around 22%.
Sign of the importance of offshoring, Hiroshi Igarashi, managing director of Dentsu Group Inc, the Japanese parent company, explained the reasons during his recent presentation of the results of the second quarter.
The company has also created a new division, Dentsu Global Services, to manage its low-cost operations, based in 18 “delivery centers” around the world.
Offshoring – the practice of multinationals moving work to less expensive locations – typically involves a mix of offshore locations, which are often far from a customer or customer, and locations near the coast, which tend to be at a shorter distance.
Dentsu Global Services’ largest offshore operation is in India, where more than two-thirds of its staff are employed, and it also has a significant offshore presence in the Philippines.
The division’s most important nearshore delivery centers are in Bulgaria, Portugal and Spain for the EMEA region and in Argentina and Brazil for the Americas. Its other coastal locations include the Czech Republic, Serbia and Colombia.
A slide in the results presentation showed a breakdown by number of employees, with 6,000 people in India, 500 in Asia-Pacific, 850 in EMEA and 300 in the Americas.
In addition to Dentsu International’s existing offshore workforce of 7,500 people, Dentsu Japan employs approximately 700 people in low-cost locations, bringing the current global total to 8,350 and likely closer to 11. 000 by the end of 2022.
Increased cost pressures
Wendy Clark, managing director of Dentsu International, said she was “increasingly” talking to customers about the possibility of moving work to offshore and nearshore locations as “there are increased cost pressures in our business. and it’s “crucial for us to have commercial viability and also access to key talent”.
It claimed its growing offshore workforce is “particularly advantageous” as it competes with some global rival agencies that have only a small percentage in the “lower numbers” working in offshore locations.
“You can see it’s really becoming a differentiator for us and certainly in a time where cost becomes more of a priority for our customers, we see a huge competitive advantage,” she told investors.
Dentsu International faces competition not only from global rival agencies, but also from consulting giants such as Accenture, which has moved into marketing services and has a large workforce in India.
Michael Komasinski, Global Managing Director of Merkle, Dentsu International’s customer experience agency, is the executive sponsor of Dentsu Global Services.
Dentsu said it wants customer experience – one of three key service lines alongside creative and media – to generate 50% of international revenue by 2024 and be seen as a driver. key to the expansion of Dentsu Global Services.
Igarashi said the outsourcing allows Dentsu to “provide high-quality advertising, marketing, analytics, and technology services to our customers in a cost-effective manner.”
The company’s “offshore centers in India are easily scalable and provide coverage to all English-speaking markets and service lines and have round-the-clock coverage”, while nearshore operations are significant as they “can support regional markets that have specific language and time coverage needs and local data privacy requirements”.
He continued: “We have a skilled talent base ranging from recent graduates to more experienced professionals with a short lead time to recruit, onboard and train. This model generates benefits for customers, our employees and our company.
According to Dentsu, these benefits include diversity of thought, increased speed to market, and access to a larger pool of talent and more advanced technological capabilities as well as reduced costs.
Offshoring jobs has the potential to reshape the industry
Nick Priday, CFO of Dentsu International, stressed that the offshore and nearshore delivery centers are “very important to ensure that we are price competitive for customers”, but also help to improve the overall efficiency of the company.
Some internal functions such as finance and human resources can be managed at these less expensive locations, meaning the agency group is able to standardize its processes in a “consistently at scale” globally , according to Priday.
“Obviously it gives us much better transparency, much more control,” he said. “We use KPIs and dashboards a lot to really help us with our margin improvement initiatives, really focusing on the cost-to-service ratio across all of our business functions and making sure it’s fit for purpose, providing a quality service at an appropriate cost.”
Dentsu has approximately 65,000 employees, including in Japan, and is the fourth largest agency group in the world behind WPP, Publicis Groupe and Omnicom. With Interpublic and Havas, the “big six” employ more than 400,000 people.
An industry-wide decision to relocate jobs to less expensive locations has the potential to reshape the global marketing services sector, as it could mean there will be fewer roles in more expensive global hubs and established such as London, New York and Tokyo.