FOCUS: HI-TECH PR - Keeping an eye on future markets - Convergence of technologies has resulted in a flurry of mergers and acquisitions in the hi-tech sector. Good IT PR agencies both large and small must examine how they can benefit from the trend

Hi-tech PR has been a boom industry. Annual fee income increases of 30 or 40 per cent have been common in recent years and some medium-sized agencies have even managed growth rates of 70 per cent or more.

Hi-tech PR has been a boom industry. Annual fee income increases of

30 or 40 per cent have been common in recent years and some medium-sized

agencies have even managed growth rates of 70 per cent or more.



But with talk of a recession, allied with changes in the IT industry,

many hi-tech agencies are now revising their growth forecasts, either up

or down.



One trend is having a significant effect on the marketplace, and will go

on doing so in the long-term. The convergence of separate technologies

has already resulted in mergers and acquisitions among the major

industry players. This year has seen several mammoth deals, including

the merger of Compaq and Digital and the acquisition by telecoms company

Nortel of data networking company Bay Networks.



’I don’t necessarily believe the pace of acquisition activity is very

different to what we’ve seen before,’ says Tim Dyson, chief executive of

specialist hi-tech PR firm Text 100: ’But there are still grounds for

some very serious mergers to take place by some very serious companies

trying to weld the two worlds of voice and data communications

together’.



IT companies occupying the middle ground could well be left behind.

Brodeur Worldwide chairman and chief executive John Brodeur predicts:

’What I think is likely to happen is that there will be a few global

players that are very strong and have a good chunk of market share and

small start-ups that are also doing very well.’



It is hardly surprising that the consequences of merging technologies

are the subject of hot debate within the hi-tech PR industry. Will it

mean fewer companies and therefore less work? Grant Butler Coomber (GBC)

partner Jill Coomber is optimistic that the sector will continue to

grow.



’As larger companies which tend to have older technologies converge,

smaller companies in newer sectors start up,’ she says.



’There is a wave of internet and telecoms companies sweeping through

now. Companies that are start-ups now could be dollars 200 million

companies doing serious PR two years down the line.’



’There will be more business around and the market will be more

competitive,’ suggests Brodeur. ’There will be more revenue, but fewer

large accounts.



Accounts that are worth dollars 500,000 now might be worth dollars 2

million when you get two or three companies merging’.



Good IT PR agencies who can see the commercial implications actually

stand to benefit from convergence according to Lewis chairman, Chris

Lewis.



’It is a question of waking up to these commercial opportunities rather

than just getting excited about the technology for its own sake,’ he

says.



Convergence will almost certainly accelerate the globalisation of the IT

sector. Large merged companies will be streamlining their worldwide

operations. Smaller specialist companies, such as those in the internet

market, will also be keen to have an international presence.



’Globalisation is a tidal wave. The demand is as strong as I’ve seen in

any other movement in PR in the last decade. It is not just the global

giants - even some of the smaller start-up companies such as those

involved in software or the internet are setting up as global

organisations,’ notes Brodeur.



How best to serve these global organisations is a matter of concern for

PR agencies, large and small. Many are already on the acquisition trail

or looking for suitable partners. The latest example came in October

when WPP-owned Ogilvy PR acquired US hi-tech PR agency Alexander

Communications.



It cited, as the rationale for the deal, ’increasing demand for global

branding and integrated worldwide communications in the technology

industry’.



According to Dyson, Ogilvy PR’s move was ’another sign that major

communications companies are finding the only way to make serious

progress is by acquisition’.



Coomber admits that GBC is regularly approached by bigger agencies

looking for others to buy up, but insists that GBC is not

interested.



’From our perspective, the more competitors that are bought up and join

bigger companies, the better our position is. We’re a strong independent

agency backed by strong partners in other markets, which you don’t

necessarily get with owned agencies,’ she says.



As with their IT clients, it seems that the agencies most vulnerable to

takeover may be those who are medium-sized.



’We’re a reflection of the industry and I think there will be a few big

players and niche players,’ says Brodeur. There will inevitably be more

consolidation in the IT PR industry and he predicts that this will

result in around five or six major global agencies.



Simon Quarendon, chief executive of Words Group, says that the industry

will polarise between large global agencies and niche players.



’Agencies that go global are playing for very high stakes and only

relatively few can play that game. So I suspect that the rest of us will

become more specialised,’ he says.



He also believes that the total number of hi-tech agencies will

mushroom.



’Lord Chadlington said recently that he was not so concerned about the

threat from big agencies but from smaller virtual agencies,’ he

says.



’Senior managers are being shed and are using their pay-offs to form

small virtual consultancies and taking their clients with them. They can

offer their clients drastically reduced prices, and this is all driven

by technology,’ he adds.



Words Group itself is planning to go down the viritual path and has

about 4,000 square feet of office space which Quarendon aims to fill

with as many smaller agencies as possible, with whom Words Group will

form alliances.



One medium-sized agency with ambitious expansion plans is Lewis

Communications.



’We’re ideally looking to acquire any other agency that we see as good

competition,’ says managing director Chris Lewis. He says that the

agency has around pounds 5 million to spend on acquisition but

acknowledges that it is very difficult to find any that are worth

buying.



’It may be we end up working in partnership with a bigger player on the

global stage which can give us access to a bigger market,’ he says.



Lewis believes that smaller agencies could well start making moves on

much larger rivals and those that are not committed to technology,

whatever size they are, will badly lose out on the sector’s

opportunities. ’The expert knowledge and innovative approach new

agencies have brought is a real differentiator and will make them a

force to be reckoned within the turbulent times ahead,’ he says.



As convergence and globalisation exert their influence on hi-tech PR,

there is another factor that could shake up the industry. Recession has

been a word on everyone’s lips and while most experts say we are not

technically there yet, the threat still looms.



Most people in IT PR, however, are resolutely bullish about prospects

whether there is a slump or not. ’There are some instances where the IT

industry has actually benefited from recession. Large organisations are

looking to cut costs and IT systems can help them achieve this,’ says

Oast Communications partner Barry Monk.



And if there’s such a thing as a right time, now and the next five years

or so is it for the technology industry. Most organisations are now

spending millions on year 2000 compliance. ’This means they are not

investing in other areas of technology and a lot of systems are getting

a bit dated,’ says Esme Page, managing director of Herald Germany. ’So

spending will kick in in these areas after 2000.’



One important difference between any upcoming recession and those that

have gone before is that IT now occupies a much more important place on

the corporate agenda. It has moved out from the back office to become an

integral part of every area of business. Whatever is going on in world

economic terms, companies need to reinvent themselves. They are

committed to strategic spending on IT.



Even so, a recession could hit the larger agencies hardest. Those with

lower overheads could feel the benefit of companies quitting bigger

rivals or deciding to outsource their marketing and PR.



’There is always the value for money question,’ Quarandon says. ’When

push comes to shove smaller agencies could undercut their larger

rivals.’



Any tightening of corporate belts is also likely to bring increased

demands for proven high performance. Citigate Technology chairman Suzi

Frith says: ’Clients want to ensure they are getting the best value for

their spend so there will be increased emphasis on benchmarking.’



Another effect could be for companies to review their PR accounts more

often, prompted by heightened awareness of what agencies are up to, and

of the competition among them. Dyson hopes ’this will drive out

mediocrity and increase professionalism’.



The flip side is worrying though. ’It may also push people to go for the

lowest price, which would be sad because low prices tend to mean low

quality,’ he says.



One thing is very clear. There will inevitably be casualties in the

hi-tech PR industry. Periods of growth are notorious for masking

mediocrity.



But, as technologies converge and the pace of development slows, the

competition for getting media coverage will intensify. This will expose

any lack of journalistic knowledge and poor technical expertise. Weak

stories will fail and so too will weak agencies.



INTERPR: TAKING PART IN THE GLOBAL MOBILE REVOLUTION



In May last year, InterPR, a network of European agencies which includes

Profile PR in the UK,won the pitch to handle PR across Europe for

Iridium, a consortium of companies from more than 20 countries which

recently launched the world’s first global mobile phone service using a

constellation of 66 satellites. Burson-Marsteller has been retained by

Iridium in the rest of the world.



Profile PR senior account director Michael Wadley believes it was

InterPR’s ability to demonstrate its co-operative capabilities that

helped it win the pitch. ’Each agency is responsible for its own

domestic market, but the InterPR network carries out PR for Iridium in

Europe as a virtual team,’ he explains.



Conference calls are a regular feature of account management. Sometimes

the client, which has its European base in Germany, uses conference

calls to brief agencies. E-mail is also used for this purpose. But

Wadley stresses that this sort of contact is no substitute for

face-to-face meetings involving all Iridium agencies, which take place

on a quarterly basis in different venues. ’The quarterly meetings give

us a forum to get a lot of information on the table quickly and work

very effectively,’ he says.



All European agencies are regarded as equal and are able to contribute

campaign ideas. ’We’re very proactive and we all generate ideas, and the

client appreciates that,’ says Wadley. Ideas created in one country are

used in other countries as appropriate. For example, a 200 days to

launch party for the press in the UK was remoulded as a 66 days to go

party for the Spanish press a few months later.



Although Profile was a competitor to B-M in the European pitch for the

Iridium account, Wadley says the agencies are now working very closely

together on global PR. ’There is a lot of information sharing. We put

our ideas through Burson-Marsteller and they give us feedback. We also

look at their ideas, and sometimes criticise them, or add to or amend

them’.



Profile enjoys a particularly close relationship with B-M in Washington,

where Iridium has its headquarters.



’A lot of the corporate information comes from Washington, and we spend

a lot of time with Burson-Marsteller getting positioning statements

right and making them coherent across the globe,’ says Wadley.

Conference calls involving as many as 30 countries are also a feature of

global activity.



In the New Year, Profile is set to play an important role in a global PR

campaign for Iridium that is currently still under wraps. ’This will be

a massive campaign kicking off in January. A lot of intricate

co-ordination work with B-M will make it happen across the globe,’

explains Wadley.



CANON: RAISING ITS APPEAL AMONG FEMALES



Women have traditionally been ignored in technology marketing campaigns

that have focused on bits and bytes rather than how technology can

enhance lifestyle.



This summer Canon’s Computer Products division briefed Cohn and Wolfe to

create a campaign to broaden the appeal of its products beyond avid

’techies’ and grow its market share in the wider consumer market,

particularly among women.



Cohn and Wolfe recommended a highly targeted lifestyle-based advertorial

campaign to ensure maximum impact within the selected media. This

approach was chosen, says Cohn and Wolfe associate director Chris Cox,

so that Canon could get across its key messages accurately and avoid the

traditional product-oriented treatment of technology.



Advertorial treatments were specifically tailored to suit particular

editorial environments. A double page spread in Practical Parenting

showed how computing technology could be used to create invitations,

banners, t-shirts and thank you letters for children’s birthday parties.

In BBC Gardener’s World magazine the advertorial explained how computers

can be used to plan a garden through the seasons.



A direct response mechanism was built into the treatments through

competitions and information hotlines which allowed impact to be

measured. Responses show how successful the advertorials were in

reaching target audiences.



In Practical Parenting, 90 per cent of respondents were women, while in

Gardeners’ World 57 per cent were women.



The success of the first advertorials led to Canon running an eight-page

special supplement in the Mail on Sunday’s You magazine in

mid-October.



This showed how Canon products could enhance the lifestyle of each of

the members of an imaginary family. Women made up 52 per cent of

respondents to the supplement.



Following its work for Canon, Cohn and Wolfe commissioned Gallup to do

research looking at women’s attitudes to technology marketing. A

thousand women representing a broad cross-section of society were

interviewed by telephone. Gallup’s research revealed some interesting

statistics. Whereas 68 per cent of women felt supermarkets are generally

sensitive to their needs, only 31 per cent felt that computer companies

are. 75 per cent of women said they wanted advice when buying technology

products. But while 16 per cent of women said they were very interested

and 22 per cent that they were quite interested in internet access, only

four per cent were very confident and 13 per cent quite confident in

buying products in that area.



Jim Murphy, a non-executive director at Cohn and Wolf and a former

director of the Henley Centre, is working on a report which will look at

the findings of the research plus Cohn and Wolfe’s own desk research and

experiences of working with the media and Canon.



’There is a great thirst for advice about technology from women, but the

level of confidence about buying is lagging behind interest,’ says

Murphy. ’This is potentially one of the marketing vacuums, and there is

the need for more supportive PR from companies marketing technology

products’.



IBM: TAKING SYSTEM 390 INTO EMERGING MARKETS



For the last four years Ogilvy PR Worldwide has been coordinating a PR

campaign for IBM’s System 390 mainframe computers across Europe the

Middle East and Africa. At the end of last year this remit was extended

to include Eastern Europe. Then, in May this year, Ogilvy’s brief was

widened still further to include China and India.



’I don’t think there’s another product that’s managed in such a way in

terms of the geographical spread and transcontinental planning,’ says

Tony Hynes, account director at Ogilvy PR.



Hynes coordinates the campaign from his office in London, working

closely on strategy with his client in the EMEA region and with the IBM

manager in charge of emerging markets.



The System 390 account is handled in 32 countries via a ’best of breed’

network. In China and India, that means Ogilvy-owned agencies. Offices

in Bombay, New Delhi, Bangalore and Chennai cover India. In China,

Ogilvy PR operates in Beijing, Shanghai and Hong Kong.



’These markets are very different, although they are all banded together

under the emerging markets umbrella,’ says Hynes. ’We take a lot of

strategic advice from our partners in these countries about audiences

and PR activities.’



Tactics used in the emerging markets are quite different from the System

390 campaign in the West. This tends to concentrate on traditional media

relations with the trade and business press. For example, Ogilvy PR has

found university lecturers to be quite an important audience in Eastern

Europe. IBM has funded summer schools in the US to train them in the OS

390 system. Government communications programmes are also being run in

the emerging markets in conjunction with IBM’s government division.



Ogilvy PR is still able to make the most of its EMEA experience when

dealing with emerging markets. ’We have a bank of thematic approaches

that have worked in the West. Because the emerging markets are behind in

terms of economic development, themes we have used in the past in the

West are pertinent there now,’ says Hynes.



After just a few months the System 390 campaign in the emerging markets

is producing results. The mainframe computing option is being recognised

as a viable alternative to distributed computing.



’We’ve had very positive feedback from sales staff in the emerging

markets, particularly about the success of the brand recognition

campaign. The System 390 is on people’s lists now, when it was not

really in the past,’ says Hynes.



GRAYLING PR: CHANGING THE FACE AND FORTUNES OF EQUANT



Equant claims to operate the world’s largest business telecomms network

and has a presence in 220 countries and territories. This summer, the

company went through a corporate rebranding exercise. At the same time,

it sought an initial public offering on the stock markets in New York

and Paris. Equant asked Grayling PR, which has worked for it across

Europe since early 1996, to co-ordinate the PR for both projects on a

global basis.



Grayling manages Equant’s European PR programme from its London office,

using its network of owned companies and affiliates. It consults with

the client’s corporate headquarters in the US, the main European office

near Slough and with Singapore for the Asia-Pacific region.



The firm has put together a communications manual, Q & A documents and

supporting literature such as position papers and background material,

plus the general PR approach these underpin.



Robert Fenner, a director at Grayling in London, explains: ’Equant

selected us for the IPO and rebranding because they felt this needed

central co-ordination and was too big and important to be handled

separately. We’d proved our worth in Europe and also had regular

consultation with Equant in the US so we’d built up a fund of trust with

them.’ Running the programme for the IPO involved advising Equant’s US

headquarters about the documentation required and strategic advice.



’We worked closely with the company at all levels and in all regions to

ensure that all external communications were not only as open as

possible, but that they conformed to appropriate legislation,’ says

Fenner. Grayling also drafted all non-financial press releases and

briefed key spokespeople.



The concurrent rebranding called for Grayling to explain to internal and

external audiences the benefits of the three operating divisions all

being given the Equant name. This involved preparing briefing materials,

setting up interviews and organising discussions with analysts.



The IPO was a big success. Shares were substantially oversubscribed and

have traded profitably from the first day. Fenner says: ’PR plays only a

part in that, but Equant is now noted as an extremely competitive

company in the network services field.’



He believes the exercise showed the advantages of a centrally managed

global campaign. ’It is co-ordinated and consistent and clients don’t

have to spend time dealing with individual agencies. We had to ensure

that there was a substantial reporting procedure in place so Equant

could turn to us for a one-stop report on progress.’



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