They're in-house, they're outsourced, why Design is the first to get dumped
and why this isn't new
It's the end of 2024, a year that has continued a trend of mass layoffs that has directly created an oversaturated job market globally. This trend is exacerbated by Generative AI, a technology that can autonomously generate creative outputs, thereby diminishing the value of traditional creative skills in profitless companies. As a result, next year doesn't look good for medium to enterprise-sized digital consultancies and agencies. Let's walk through what's been happening and see if we can find light at the end of this bleak tunnel.
Navigating Shifts in Digital Design and Transformation
For the last 100 years, organisations have alternated between bolstering in-house teams and relying on external partners for services. This pattern reflects a response to economic, technological, and workforce trends. For instance, in periods of economic growth, businesses may invest in building robust internal teams that align closely with their culture and strategic goals. In contrast, outsourcing becomes a pragmatic choice to access specialised skills, reduce overheads, and scale quickly during economic downturns or rapid technological evolution.
After World War II, the United States' efforts in reconstructing Japan illustrate a significant example of strategic outsourcing and technological evolution as part of economic recovery. Initially, U.S. policies focused on fundamental reforms in Japan's political and economic structures. By 1947, Japan was facing an economic crisis, characterized by [specific economic challenges]. This led to a shift in the U.S. approach to stimulating recovery. The reverse course in occupation policies between 1947 and 1950 marked an emphasis on economic rehabilitation to prevent the spread of communism.
During this phase, Japan transitioned to become a supply hub for the U.N. forces during the Korean War. This change created opportunities for Japanese businesses to adapt, leveraging their manufacturing capabilities to meet the wartime demand for goods and services. This reliance on foreign (U.S.-led) guidance and markets allowed rapid industrial growth, characterized by [specific industrial developments], ultimately laying the groundwork for Japan's post-war economic miracle.
This period serves as a beacon of hope, demonstrating how economic recovery strategies can include outsourcing and partnerships for rapid scaling. This pattern resonates with modern practices where nations or corporations seek external capabilities during periods of upheaval to ensure growth and stability.
Recent data indicates significant shifts in outsourcing practices in engineering and R&D. According to Bain & Company's 2023 report, a robust 10% compound annual growth rate in engineering and R&D spending is expected through 2026. This surge is driven by the increasing complexity and cost of innovation, mainly as companies aim to position themselves competitively amid rapid technological change and economic uncertainties. The report also highlights that, even in recessionary environments, firms investing in R&D tend to gain a competitive edge.
Value Attribution: Cost vs. Outcome
Another crucial digital Design and transformation cycle is how businesses attribute value to these services. Companies often weigh the importance of cost against outcomes. Outsourcing, typically more budget-friendly, enables firms to tap into a diverse talent pool and reduce immediate financial strain. However, outsourcing can limit direct oversight and dilute alignment with brand culture.
On the other hand, maintaining an in-house team ensures continuity and a deep understanding of the company's ethos, facilitating innovation that closely matches strategic goals. This control over innovation and strategic alignment can empower businesses to navigate market trends with agility and rapid response.
How Agencies Can Adapt
Digital agencies must align their services with these behavioural cycles to stay relevant. By providing scalable solutions, agencies can appeal to businesses shifting between models. This strategic alignment with market trends will ensure that agencies are always prepared to meet the evolving needs of their clients.
Specialise in Outcome-Focused Solutions
Emphasising the ability to deliver outcome-based results rather than just fulfilling tasks and demonstrating how their expertise leads to tangible outcomes will make agencies more attractive when businesses shift their value attribution from cost-driven to outcome-driven models.
Risks of Outsourcing for Long-Term Strategy
While outsourcing offers clear benefits, it comes with risks that businesses must consider for long-term success. One significant risk is dependency. Relying heavily on external partners can erode in-house knowledge and reduce a company's ability to adapt independently. Outsourcing sensitive Design and production activities may also present security and intellectual property concerns.
And what about me?
For designers, this are uncertain. 2025 looks to be a year of business growth, but that will most likely be through maximising profits, and that usually means outsourcing your skills. If you're in a large western country that will also mean those jobs not being in your country, with many businesses throughout europe abusing the weaker econonmies of those nations residing in the south east of europe.
However, companies increasingly view outsourcing as a means to supplement, rather than replace, core capabilities. This means in-house design roles may continue to be central for strategic projects, think desing leadership and the ability to delivery outcomes, while agencies will remain sought after for specialized skills in producting and delivery of outputs.