In-house, Outsource, or Midsource?

Did you ever get an email from a Google Ads representative wanting to talk about your account?

It’s possible that the message came from a representative in the Philippines who is well-trained on Google’s products and wants you to spend more on Google Ads.

Those representatives are not Google employees. They work for a human-resource company that Google contracted for ad sales and account support services.

This brilliant Google Ads team — by contract in the Philippines or other developing countries — does the implementation work and research while supporting Google’s efforts worldwide.

One former Googler in charge of clients spending several million dollars in U.S. ad spend said, “…I had a team of 25 in the Philippines who did everything for us — created sales presentations, did audits, implemented campaign ideas, and more.”

Google makes billions of dollars in revenue by leveraging HR partners in developing countries that support ad sales efforts globally.

This strategy is called midsourcing.

Google’s internal strategists supervise outsourced technicians in roles such as advertising research, support, and sales.

You can leverage midsourcing, too.

The return on investment might make sense depending on your company’s strategy and readiness.

How to midsource:

• Find an HR partner for the department you want to scale, such as marketing or customer service.

• The HR partner should have an in-house team in the developing country you’re looking to source talent. That team has efficient processes, policies, and procedures that you won’t have to develop in-house.

• Transfer your company’s strategy to the midsourced team. Provide access and showcase how to get the results you’re looking for.

• Assign a full-time resource from the HR partner — nearly 100% of this person’s time and talent will be focused on your company.

How Does Midsourcing Work?

Midsourcing is an innovative method to scale your team quickly and efficiently. It combines the benefits of in-house with the flexibility and affordability of outsourcing.

It’s new to many ecommerce businesses, although large tech companies were the first users. They hire HR companies to administer labor in developing countries for them.

These HR partners do the recruiting, hiring, productivity coaching, skills development, payroll admin, discipline, and more — so you don’t have to build that competency in-house.

For example, Google hires HR partners in the Philippines. Those partners hire and train Google Ads sales reps who support in-house Google product teams (and select clients) in the United States, Australia, and New Zealand.

The HR partners are under strict contractual rules to represent Google. They receive Google email addresses and appear as if they’re Google employees.

Managers at Google provide the strategy, product knowledge, and account access.

Why Do Tech Companies Midsource?

Michael Porter, a professor at Harvard Business School, wrote, “The essence of strategy is choosing what not to do.”

Most tech companies choose to focus on their products or platforms. That’s their core business.

Some also keep key-account product services and support in-house. That’s why Google has thousands of in-house ad sales and support representatives in its offices worldwide.

But with millions of clients to serve, at some point, the fully in-house strategy isn’t efficient or cost-effective. It becomes easier to apply in-house processes to support outsourcing, but with a twist. It’s called, again, midsourcing — the outsourced talent must act as if they are in-house.

Is it the tech company’s business to sell ads? Or does the business focus on building the platform for the ad inventory? Each company chooses a different path that aligns with its business and internal capabilities.

Each has a midsourcing strategy in place to meet its in-house needs while taking advantage of the flexibility of outsourcing.

Midsourcing for Ecommerce Companies

How can ecommerce companies create a midsourcing strategy?

Ecommerce teams should first consider their company’s “product.” Is it one item? An entire category? Does success rely on sourcing expertise? Manufacturing? Customer service?

What is your company’s biggest revenue source? What do you sell to end-users? And what differentiates your company from competitors?

For example, customer service is the critical differentiator of Zappos. It likely invests and retains customer service in-house. The company’s entire culture is built around it. Zappos won’t outsource that key differentiator unless, in the rare case, another company can do it better.

Thus at Zappos anything beyond customer service is a candidate for midsourcing — again,  the hybrid strategy of in-house and outsourcing for scaling teams.

But companies selling commodities such as deodorant and toothpaste rely on marketing or branding expertise to differentiate from competitors. Those companies would likely bring some marketing functions in-house or to an exceptionally close agency. “Marketing” is not the primary product for the companies’ end users, but it does help sell those products. So roles such as marketing strategists or marketing leadership could be retained in-house.

The rest of the marketing team could be midsourced.

Pros and cons of in-house teams. Click image to enlarge.

Before you midsource, assign an in-house leader who can manage, guide, and own the strategy while adapting and adopting to outside help. (The exception is outsourcing the strategy to agencies or experts in your industry and audience.)

Pros and cons of outsourcing. Click image to enlarge.

Outsourcing as many functions as possible is generally a good practice.

Per the Harvard Business Review, “It’s no longer a company’s ownership of capabilities that matters but rather its ability to control and make the most of critical capabilities, whether or not they reside on the company’s balance sheet. Outsourcing is becoming so sophisticated that even core functions like engineering, R&D, manufacturing, and marketing can — and often should — be moved outside.”

You can outsource a strategy, a project, or any other component of your company. Media buying or customer service are popular long-term outsourcing options for ecommerce brands and agencies.

Midsourcing combines the benefits of in-house with the flexibility and affordability of outsourcing. Click image to enlarge.

The last and often best option for scaling a team is midsourcing — combining the benefits of in-house and outsourcing.

Need ideas on which roles to midsource in 2023?

Let’s look at a few common challenges for ecommerce companies.

Common Ecommerce Challenges

The three most common challenges that ecommerce businesses face in 2023 are:

• Slow sales.
• Higher costs of doing business (mainly due to inflation).
• Where to cut costs.

Sales Slump. Seemingly every ecommerce brand runs into sales slumps throughout the year. Many products have some seasonality.

Here’s an example. Kris, running a brand in the health and wellness niche, had a seasonal dilemma of rising ad costs and supply chain challenges, creating a perfect storm of slow sales.

The solution for Kris’s company was email marketing because its buyer list was 100,000 people. Email was largely untapped for Kris’s brand.

According to Constant Contact, an email marketing provider, “The average ROI through email marketing is $36 for every $1 spent.”

So it makes sense to optimize email marketing in ecommerce, especially when Klaviyo reports that 27% of revenue for ecommerce stores is (or should be) driven by email.

Email is an excellent way to climb out of a sales slump.

But here are two more tactics to overcome a drop in sales:

• Website conversion rate optimization, where the focus is on the user’s experience with your website.
• Ad conversion rate optimization, where the focus is on the quality and quantity of traffic coming to the website from ads.

Both options require creativity, technical, and analytical skills. They also require ongoing commitment, focus, and a long-term investment. Once you start optimizing, you’ll never want to stop.

Kris’s health and wellness brand turned to midsourcing to scale email marketing because in-house team members were implementing other strategies in ads, search engine optimization, and website conversion rate optimization.

Midsourcing roles to overcome a sales slump:

• Email marketing specialists,
• Website conversion rate optimization specialists,
• Ad specialists focused on optimization.

Higher costs of doing business. Inflation impacts ecommerce supply chains, such as:

• Cost of energy to produce and distribute goods.
• Blockages or backlogs of supplies are at sea or in warehouses.
• Global events (Covid, wars, politics) slowed manufacturing processes.

The bottom line is that creating products and delivering them to buyers costs more.

To offset, some businesses can raise prices (unless the pricing is regulated). You might also consider capital allocation, planning, and projections.

Roles to midsource:

• Pricing is typically core to a business. It’s one area to keep in-house or consider hiring a consultant or agency.

Cost cutting. This is one of the biggest challenges for ecommerce brand owners and agencies in 2023.

Bryan, an ecommerce agency owner, was running into this challenge. His ecommerce courses were selling like crazy. Moreover, demand for his agency services skyrocketed.

Bryan was scrambling to fulfill the demand while controlling costs. He didn’t have time to hire locally beyond his existing team. And fulfillment needed to happen now.

Bryan opted for slightly restructuring his team so he could midsource talent who then fulfills his agency obligations.

He saved over 50% on people by using marketing personnel from developing countries versus expanding his team locally. He paid top salaries to overseas talent and provided health benefits and other perks, enriching their lives, families, and communities.

There are many ways to cut costs in ecommerce:

• Increase quality to lower return rates.
• Renegotiate with manufacturers and suppliers.
• Improve packaging efficiency.
• Renegotiate shipping and warehousing contracts.
• Reinvent your processes where possible (aim for efficiency).
• Restructure your organization chart.

Bryan focused on the last option — restructure the organization chart — because people are usually the largest costs in marketing agencies. He also wanted to prepare his company to adopt a midsourcing strategy.

Rather than join the layoff trend, turn your in-house team into strategists and try midsourcing.

Roles to midsource:

• Marketing specialists for Facebook ads, Google Ads, link building for SEO, email marketing, more.
• Appointment setters, such as for wholesale buyers or sales.
• Customer service specialists.

Structuring a Team for Midsourcing

One of the biggest struggles when scaling teams is migrating employees from task to strategy. Employees are used to performing and owning specific tasks and deliverables. And it’s hard to let go of that familiar territory.

For example, an employee might be responsible for Facebook Ads and thus continually tests new ad creatives, audiences, and tactics.

The downside to this type of work is that when you’re implementing, you’re not strategizing. And when you’re not strategizing, you’re getting the most from your talents.

Turning your in-house team into strategists is essential for successful midsourcing.

That starts with you, the owner.

Your role might change to focus on internal and external strategy and then communicate test ideas and strategies to your new team members so they can implement them for you.

Here are some common internal strategic initiatives and learning opportunities for leaders:

• Reading and continual learning in your industry.
• Developing documentation, systems, processes, and workflows.
• Courses and mentorship groups to learn new strategies.
• Analyzing and interpreting data to find opportunities and weaknesses in strategy.
• Free time for creativity and spontaneity.
• Creating short-term goals.
• Creating long-term goals.
• Funnel hacking — not just sales funnels but also social media, ads, and other tactics.
• In-person or virtual visits with clients to learn of changes and updates.
• In-person or virtual visits with other teams in your company to learn about customers or changes and updates.
• Audience research and mapping.

Here are some common external strategic initiatives and learning opportunities for leaders

• Algorithms for any traffic source: social media, search engines, and ad networks.
• Audience tastes and preferences.
• Audience migrations. Did they find a better solution? Where are they moving to?
• Emergencies such as Covid-19.
• Regulatory updates.
• Economic developments.
• Platform innovations.
• Platform disruptions.
• Political disruptions.
• Competition.
• Employee churn.
• Stale strategy.
• Limited ad budgets.
• Market development.
• New tools and processes to learn.
• Client or management demands and requests.

The following simplified organization chart showcases strategists (in-house) and technicians (midsourced).

Companies that midsource rely on internal strategists for supervision and direction, and external technicians for daily tasks. Click image to enlarge.

You may be going through a role transition, or several people on your team may be going through it, which can be frustrating.

The antidote to frustration is time. Spend more time with your team one on one — at least an hour every day per team member for the next six to eight weeks.

They’ll learn your strategies and help document their previous “technician” roles. They will tackle and begin to own your tasks and preferences.

Your time will start to look like this as a strategist focused on your team’s outcomes instead of on your previous task outcomes.

With midsourcing, an owner’s or manager’s time will start to look like this as a strategist focused on your team’s outcomes. Click image to enlarge.

Are you already making these changes and feeling ready to develop your midsourcing strategy for 2023?

Then you’ll need an HR partner.

Your HR Partner for Midsourcing in 2023

Grunt Workers is the world’s first full-service HR partner for ecommerce marketing agencies and teams who want to start midsourcing.

When you’re looking at scaling your ecommerce marketing team with specialists (also known as technicians,) schedule a no-obligation midsourcing strategy and pricing call with Grunt Workers.

They will go over everything they do for you, from recruiting to payroll administration and productivity coaching.

When you work with Grunt Workers, you’re providing a world-class salary to brilliant marketers from the Philippines — just like Google, Facebook, Accenture, and other innovative companies. You’re also giving them medical benefits, fringe benefits like grocery allowances, and changing their life.

You’re improving their family and community. Here are a few examples.

Prevented Bankruptcy
My husband and I owned a catering company when the pandemic hit. Grunt Workers hired us for email marketing outreach, saving our family from financial ruin. We love it. — Betty F., Outreach Specialist

Covered Medical for Family
My mother is nearing 80. I wanted to help her and my extended family: brother, nieces, and nephews. Grunt Workers’ medical benefits plus the salary have been a huge help. — Ellie B., Email Marketing Specialist

Remodeled Home
In 2022 we were able to remodel our entire home. We are so grateful for the constant work from Grunt Workers’ clients. Without them, we couldn’t have upgraded our home and living space for our family. — Rommel N., Graphic Artist

Workspace Upgrade
I bought a new workstation with a giant monitor. I’m earning more than ever. Thank you, Grunt Workers. — Annie A., Facebook Ads Specialist