Why data management is moving offshore

The dramatic transformation of the data industry has implications for agencies, clients and brands alike, according to Jed Mooney, Managing Director of Datahold.

The data industry - the cleaning, processing and management of client brand data and databases - is undergoing a dramatic shakeout.

This has implications for agencies, clients and brands alike.

After all, nearly every integrated marketing campaign has customer and prospect data as its very foundation.

For industry insiders, the symptoms of transformation have been a bit like climate change - a few straws in the wind have turned into overwhelming evidence.

Take two recent examples: earlier this year the global director of EHS Brann Discovery and Data Euro RSCG 4D announced that many database companies will cease trading by 2009 and abruptly left to set up his own consultancy based in Singapore and London.

Back in London, leading bureau Identex (owned by WWAV) has lost more than a third of its staff since the beginning of the year.

The above are just two examples of a much greater shakeout within the data industry.

What's causing it? The reasons are many but can be distilled into two trends.

First, clients are taking back the management of customer data in-house.

Secondly, data has become increasingly commoditised and only those bureaux which are truly price competitive are surviving.

Driving these two trends are computer hardware and software costs, which have fallen dramatically.

Hardware and software that would once be out of reach of most companies are now available to all at a fraction of the cost, even compared to six or seven years ago.

Feeling newly empowered, clients have therefore taken their customer data back in-house and employed data experts to manage the operation.

Viewed as a combination of heightened cost savings and greater day-to-day control, brands are now rushing to take back control of their data management en masse.

Unfortunately, what brand managers are failing to realise is that whilst they have greater control over their data, they do not have a service level agreement with their data department.

Many brand owners will privately tell you that while the cost savings are real, the disadvantages can be debilitating.

What happens, for example, when the data operations manager has taken a sudden leave of absence be it paternity leave, sickness or compassionate leave? What happens when other departments, such as accounting or customer service, are vying for the time of the data operations manager? Many brand owners are finding that greater control actually gives way to less control in reality, hampering their marketing campaigns (particularly those that are time sensitive).

For external data bureaux, the situation is no less difficult.

Most data bureaux are competing against both each other (and against clients bringing data management in-house) solely on 'management hours' or employment costs.

With data management itself now a commodity, this is causing a huge shakeout.

After all, there is a limit to how far costs can be cut before business models fail outright and this is what is happening.

It's for this reason that the data industry is starting to move offshore.

With offshore charges typically less than half of what one would expect in the UK, along with 24/7 flexibility, offshore data management makes a compelling case.

Furthermore, using virtual private network technology, data is not sent anywhere but 'accessed' (similar to how many IT departments access company computers from remote locations).

Offshore data management does not, therefore, breach EU data protection rules.

Because of this offshore data management is rapidly becoming the fastest growth area within UK marketing, and it is no coincidence that many of the industry's leading figures are realising this and setting up offshore operations of their own.

It's the new 'third way' that combines huge cost savings along with agreed service level agreements - brands win and data bureaux win.

When a Global Director of an agency network's data offering leaves to set up his own offshore consultancy, it's time everyone sat up and took notice.

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