Outsourcing: David Bonthrone, Executive Vice-President, Group FMG (Part 1)

When people think of outsourcing, things like customer service and Web development often come to mind. Group FMG is an international marketing solutions company with business offices in New York, London, Bangalore and Chennai. Group FMG helps clients develop brand strategies, builds e-commerce solutions and produces content that attracts customers and facilitates business growth. The company has worked with well-known brands like Microsoft, Staples, Fortnum & Mason, Sears, Kenneth Cole, and the New York Philharmonic among others.

Sramana Mitra: Hi David. Let’s start with some background about you and your company.

David Bonthrone: OK. FMG — Fresh Media Group — has, in fact, been around for 20 years. It started life in London as a production company. When the digital age came about, the company sought to get a competitive advantage in the marketplace by offshoring non-critical mission functions in the digital production space. So, we built, from the ground up, a robust offshoring facility to help us produce content across multiple channels, specifically digital content as well in Chennai, India. We have folks housed there, developers and some designers – primarily developers. The mission-critical, roles like creative director, project management, producer, carried on in London. We have folks in London.

The company was acquired in 2011 by two private equity groups:  IVF (India Value Fund) and Zodius Capital, both out of Mumbai. It was acquired for approximately $20 million, and the fund has about $100 million to make some acquisitions or to continue making acquisitions going forward. Some investment has been used to scale the operation into the United States, and in late 2011, we appointed a group CEO. We have established a presence here in New York where we had about 19 staff members currently. That’s preceding the Pod1 acquisition. We managed to close the acquisition of Pod1, which is a premium digital e-commerce company that has historically built e-commerce websites for premium fashion brands and retailers. Our thinking behind that is we’re being engaged by brands, retailers and agencies to actually produce content with what we call the SoLoMoCo phenomenon: social media supported by local office on mobile devices. Creating content is a role for ad agencies. It’s pretty cool if you can close the loop by enabling commerce to be undertaken or for consumers to be able to transact with brands.

That’s a little bit on the organization, and it’s a little bit on the rationale linking Pod1 to FMG. The organization has 357 people globally. We have 150 in London, 150 or so in Chennai, 10 in Bangalore and, now, 47 folks in New York.

SM: OK. Can you put some perspective on the kind of outsourcing that you’re doing? What is your landscape overview and where are things going?

DB: Well, if I can talk a little bit more broadly, I’ll bring it back to the e-commerce function. What we’re seeing out there is – I think it’s fair to say – that over recent years, many business functions have come under the procurement microscope, and hence, there has been a trend toward offshoring non-mission-critical functions. The marketing services group thus far hasn’t come under the procurement microscope, given that it’s always had a kind of creative halo around it. We always go back to Lord Leverhulme’s quote from many years ago, “I know that half of my advertising budget is wasted, but I’m not sure which half.” But now, with all analytics and click-through rates and technology and software available to measure all of that, we believe that marketing services – and I include advertising and media – are going to come under more scrutiny from the procurement department, which will be looking for greater cost efficiency and returns on goal as employed.

So, we believe that there is a need for some reduction in costs in the industry, and one way to do that is through a globally balanced delivery model, onshoring versus offshoring. It’s no secret that the leading holding companies that are responsible for driving brand sales and consequent brand equity value on behalf of leader advertisers have started to develop a centralized offshoring production facility for some of their agencies and/or clients. The most successful one – probably the first to market – is the Red Works division of Ogilvy and Mather. And then, within WPP, which actually owns Ogilvy, we’re seeing the emergence of a group called Hogarth, which provides a centralized production service for WPP-owned agencies. The other holding companies are at differing stages of development. I would suggest that WPP is the front runner in the space. Omnicom is probably second in the space. And from what I’ve seen, Publicis Worldwide is third and then Interpublic Group comes in fourth. What Interpublic Group is doing at McCann Erickson, sometimes the world’s largest agency, depending on the exchange rate, is moving quite quickly.

We’re seeing a trend toward consolidation within the global agency networks. What we offer is an independent resource. So, for clients, there’s no margin going to the holding company. Perhaps what’s most important about what we offer is the very folks who live and breathe at FMG is their employees, the folks who’ve been responsible for going to India for two, three, four years and building that state-of-the-art center from the ground up. It is part of our culture. The people are ours. It’s not sent off as a freelance thing or as a partner relationship. So, there’s a crisp, succinct, clear working process in the way that we manage projects.

This segment is part 1 in the series : Outsourcing: David Bonthrone, Executive Vice-President, Group FMG
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