Hosted vs. In-House Marketing Databases
October 1st, 2008 by: Debbie MegeeAt the DMA conference, the long standing debate over hosted (service bureau) vs. in-house marketing databases will continue. In our experience, there is no one right answer. Each organization must consider the issues of costs, speed, development, equipment and specialty software.
Which is cheaper?
Some claim outside service bureaus. There is the age-old argument of mark-up versus leverage. Some say if you do it in-house, you can avoid the mark-up of everything that is done by the service bureau. That is true to some degree. The other argument is that the service bureau can leverage equipment and resources across multiple clients. That is also true to some degree. It all comes down to:
- How much segregation of data and processes does the client need?
- How much customization does the client need?
- How much dedicated staff versus shared resources does the client need?
If your database can share space and resources with other clients and if your marketing needs can be met with an off-the-shelf solution, it may be cheaper to use the service bureau. But you may have to sharpen the pencil a few times before you get there.
Which is faster?
Traditionally many believed it was faster to use a service bureau. However, with the technology available today, this argument is harder to make. Many of today’s PCs are faster than yesterday’s mainframes. Many of today’s database systems are built to run incredibly fast on a personal computer. Unless your database is incredibly large and your marketing processes incredibly complex you can probably get very acceptable speeds on relatively inexpensive machines.
Some say you should leave building to the outside experts because they have that “building” expertise. The product is better. But, unless you have a really complex business, what unusual building expertise is really required? Two factors are critical to the successful building of any database. First there is the knowledge of the data and how it is used and how it relates together. If you build it outside, much time (and maybe some trial and error) will be needed to transfer this expertise. The other factor is the actual “construction” of the database. Experienced “database builders” can be hired to build either in-house or at a service bureau. The hires may be long-term employees/contractors or temporary/part-time contractors depending on future maintenance and enhancement requirements.
And “building” the database today doesn’t really mean building every nut and bolt. There are many database system packages available today that already have the built-in structure and engine. All you have to do is load the data into that pre-determined structure. This is not to say that this is always easy but experienced contractors can help with the load and provide minimal support thereafter. If your requirements are complex and customized, this will be expensive and time-consuming regardless of whether you build it in-house or host it at a service bureau.
Some may say that it takes a long time to study the available database software packages. But this is true whether it is installed internally or externally. Your marketing staff needs to understand the capabilities and functions of the database system to ensure that business requirements can and will be met.
What about the equipment?
In the old days of mainframes, extensive expertise was required. But, there really is no longer a need to build marketing database systems on the corporate mainframe and have it managed by the corporate operations IT department. Now when everyone has a PC on their desk and databases can be built on a server which is little more than a “large PC”, hardware knowledge is more widespread and easier to manage.
And the expense of these systems is not much more than we spent on a PC and printer ten years ago. There are many advantages to having the marketing system “hooked in” to the corporate network to more easily share data and reports throughout the company to improve knowledge and interactions with the customers.
Learning the system may take longer if you build the database in-house rather than letting the service bureau do it for you. But the advantages of knowing the capabilities of the system and having direct control over the functions can be a huge advantage. And today’s marketing database systems are much more user-friendly than they were ten years ago. That coupled with the fact that our young marketers are much more technologically savvy often makes the learning curve issue moot.
A few other considerations…
What about the issue of other specialized software and experience? Address standardization, merge/purge, NCOA and statistical modeling software are also needed to clean and manage the data on your marketing database. This software is readily available at service bureaus and can be leveraged across many hosted database solutions. These tools can easily be purchased and learned by in-house marketing technicians but the learning curve and up-front cost may be steep.
There is an argument that once the investment in software and education is made that it will get cheaper over the long-term. Investments in modeling software and statisticians can pay off handsomely over time. But, these specialized tools can still be used with minimal difficulty for an in-house database solution by sending data to service bureaus or modeling consultants periodically.
Other issues of data security and data control may force the issue of building the data in-house. There are ways to keep the data secure at Service Bureaus but sometimes the corporate rules prevent it.
So, don’t let anyone tell you there is only one best way or that the answer is black and white, or always a yes or no for hosted versus in-house marketing databases. Each company will need to evaluate their own resources, capabilities, flexibility, complexity and inclinations. And there are plenty of us consultants that will be more than happy to help you figure it out!