The choices seem straightforward, but the comparison is anything but apples-to-apples. The truth? While direct-licensing may look less expensive on the surface, it carries hidden costs that can cripple marketers.
These add-ons, ranging from implementation and staffing to inefficient usage, can add up in the long run. If marketers are weighing the investment needed to bring technology in-house, they need to come to terms with the financial obligations that go along with it.
The biggest hurdle comes after the contract is signed, when the marketing organization faces the task of implementing the technology. Most major marketing tech contracts are for software-only, so they don’t include any kind of onboarding support. This often results in the licensee hiring a third-party consultant to lead the implementation.
These consultancies are brilliant; they’ve recognized the market need and they’ve carved out a niche to fill it. They’ve also realized how much they can charge to spearhead an implementation. Marketing departments that have budgeted $250,000 may now suddenly find themselves paying $500,000 before they’re even fully set up.
Then there’s the question of who gets trained to use the software. “Owning” technology means that someone within the company is going to be assigned the full-time task of managing and overseeing it. Often, this requires a team of people spending a significant amount of time learning how to operate the software, or it requires the brand to bring in a new team that is already proficient. Either way, more time and more money are being invested.
Now that the brand has successfully implemented the product and has the necessary staff, they should be off to the races, right?
No, probably not. Even when these two vital pieces are in place, many organizations fail to use tech to its fullest extent. It’s like buying a new car and then leaving it to sit in the garage all the time.
The same can be said for marketing technology. The licensed product may be the best in class, but in the nine months it took to negotiate the deal, the marketing team couldn’t stop what they were doing. They had to keep buying media and executing marketing and advertising plans.
That likely means they were using an agency or a tech company that offered managed services. Once the implementation is complete, they may well continue to use these managed service providers. Like public transportation, it can be much easier to pay someone else help you get from point A to point B, even if you have the best car in the world.
At the end of the day, a brand that licenses a piece of marketing software has already put in the time. They’ve gotten the necessary approvals before signing a contract and paying the licensing fee. They’ve then spent another nine months implementing the software and either training their in-house team or hiring new staff. They’ve likely spent at least double the original licensing fee, while continuing to sign off on media deals that pay a high margin to the providers executing the buy.
In short, they’ve paid an incredible amount of money to “own” a piece of technology without really confronting the reasons they paid for the technology in the first place – including transparency and control. For most brands, that’s too high a price to pay just to keep making the same mistake.