The simple answer is that this will be different for every company and most use a mix of the two in order to have the most effective support for their ecommerce business.
This post provides a more in-depth analysis of this important question and provides a breakdown of the key issues involved in decision making.
The key factors that need to be considered if you are to optimise your in-house/agency team are:
- Individual competence.
- Speed and effectiveness in delivery.
- Total cost for delivery of work.
- Hidden costs.
The range of competence in performing an ecommerce task can be dramatic. Understanding a problem and knowing what needs to be done is all down to experience. A badly implemented solution can create lasting damage and ongoing problems. Alternatively, high-competence is a necessary requirement that ultimately leads to high-growth for your business. It’s important for any business owner to work out where the highest competence lies - whether it be within their own team or external. Always remember not to base this on what people say, base this solely on what they do.
Speed and effectiveness
The difference in implementation speed between a really good specialist and a junior can be equally dramatic. If the cost is simply a measure of time then an experienced individual may be many times faster at doing the same job simply because the task is familiar having done it many times before. An external agency that charges double the cost of an internal resource will be preferable if their speed and effectiveness is four times better.
A related point is that while an external party may possibly be quicker and more effective to actually do the work, if you are unable to quickly and easily contact them then, overall, it may be slower. Your own internal staff may be sitting next to you and (so possibly!) much easier to communicate with.
Total cost for delivery of work
This should be a relatively simple calculation provided you factor in all the costs. We are aware of several companies that manage an ecommerce turnover of well over £1 million per employee. These companies tend to outsource much of their ecommerce activities to agencies or freelancers. While businesses will always complain about the high cost of agencies, it can sometimes be a sobering exercise once they work out the fully-loaded costs of running their own team. While agencies may work to an hourly rate, this may well be a poor measure when it comes to value-for-money.
Many merchant businesses do not have the same amount of work to do every day, week or month. While staff usually have to be taken on for regular work, an agency can be used as necessary to fill in gaps. Some freelancers are also able to offer this type of work flexibility.
Whether it is an external party or your own staff, trust is a hugely important factor. With our own staff, during recruitment we measure this through a combination of forensic analysis of the individuals background combined with a variety of personality tests. It may not be perfect but it does provide a strong indicator. As a supplier we do as much as we can to promote a culture of always trying our hardest to act in the best interests of clients. It’s never perfect but we, like most agencies, genuinely attempt to follow that ethos at all times. Our observations are that the best and most successful merchant companies take exactly the same approach within their own teams. Trusted staff, just like trusted external suppliers tend to stay with businesses over long periods of time. Try to avoid taking on staff or third parties with high churn rates.
Hidden costs and value
When calculating the costs of your own staff, you also need to factor in the cost of recruitment, the costs of training as well as the costs of getting rid of staff that don’t perform. If you take on a member of staff, it may be helpful to work out how much additional ongoing profit you will need to make in order to cover all their costs.
In terms of value, my very-generalised (not always true but certainly biased?) view is that the people with the most knowledge in ecommerce are either from agencies or are freelancers. The reason for this is invariably because these people have usually worked on a very much wider range of projects and relish the learning curves that follow from the wider experience. The bottom line is that experience counts.
Very many of the manual tasks undertaken at great cost by a ‘traditional ecommerce team’ have the potential to be automated or at least semi-automated. Whether a person is internal or external to the company their fully-loaded costs are high. In most circumstances, simply throwing bodies at a task or problem is really not the right way to optimum high-growth for any kind of business.
In conclusion, we always recommend approaches to solving problems that are based on reliable data and evidence. With this in mind, you might consider scoring each of these seven factors for your own business and then weighting those scores in terms of how important each might be. These weights and scores will always be company specific. This may not provide the perfect answer in working out how best to build your team but should go a long way in helping clarify your decision making process.