ANALYSIS: Midsize agencies: Tech firms were noted by absence from HP's roster

HP's decision to consolidate its PR with three big agencies raises the question as to whether midsize tech firms can compete. But size may not matter.

HP's decision to consolidate its PR with three big agencies raises the question as to whether midsize tech firms can compete. But size may not matter.

Last year, IBM got the PR industry buzzing by selecting three vastly different agencies - the newly created OneBlue and midsize firms Text 100 and Magnet Communications. Last week, HP got just as much buzz when it tapped three old-guard global agencies: Hill & Knowlton, Burson-Marsteller, and Porter Novelli. Both RFPs started similarly enough. More than 50 PR agencies around the world had already served each of the two technology giants, with the further challenge posed by HP's merger with Compaq. IBM sought to align and strengthen its messaging through consolidation. So did HP. So when IBM tapped two midsize agencies like Text 100 and Magnet, it gave many agencies hope that Goliath didn't always beat David. But HP dismissed its 15-year relationship with The Hoffman Agency, as well as the corporate work Applied Communications did during the tumultuous merger, to instead go with its three global agencies. As the economy staggers on, RFPs from marquee clients such as IBM and HP remain few and far between. Agilent just consolidated most of its PR work with Weber Shandwick Worldwide, ending relationships with agencies such as A&R Partners. And earlier this year, PeopleSoft switched from Phase Two Strategies to Porter Novelli. But many hi-tech clients are still choosing midsize agencies over global agencies. Nortel just tapped Magnet to handle its corporate work, taking that business away from Fleishman-Hillard. And ePiphany took its business from Hill & Knowlton to Applied. So does HP's decision highlight trouble down the road for midsize agencies, particularly those that are hi-tech-centric? Or is this just a bump in the road? "This decision speaks volumes," says Bill Ryan, whose own midsize hi-tech firm Niehaus Ryan Wong closed earlier this year. "The days of the midsize boutique firms being able to win big pieces of business are over. Let's put something in perspective. Just [the large agencies'] tech divisions are bigger than any midsize like Applied or The Horn Group. "A large, multinational corporation like HP, they're looking at global capacity," adds Ryan. "What the midsize agencies are up against is the point of view that one-stop shopping works. These big tech companies want to feel like they are dealing with big agencies. And these companies are realizing that they are businesses first. They need to think like business people first, not technology people. And at the end of the day, the agency has to understand the business objectives." But spend any amount of time with a midsize agency, and you'll learn that's not necessarily the case. Midsize agencies can bring a great deal of flexibility, lower overhead, and greater access to top talent. That flexibility allows an agency to mold itself to a large client's needs, as The Hoffman Agency says it did working with HP's enterprise groups. "Large companies will still hire midsize firms," says Horn Group president Sabrina Horn. "Midsize agencies have just as much of a chance. We'll have to work harder to get it. But if we win it, the clients are better served, because that business is so crucial to us." Bob Angus, president and managing partner of A&R Partners, agrees. Even though the firm lost Agilent to WSW, Angus is confident midsize agencies will continue to thrive. "I don't see why [HP's decision] would be an indication of things to come," says Angus. "Companies are still looking for the best value. HP's case is special. We're still seeing the big deals. Companies are going after the most capable agencies, regardless of size." A sign of caution for tech firms Phil Greenough, president of Greenough Communications, doesn't see HP's decision as a blow to specialty tech firms either. Instead, he sees it as a sign of caution. "The [economic] climate is rewarding caution, and [HP] made a cautious decision." Greenough thinks that's indicative of hi-tech PR in general right now, as "there is no boldness. No one is stepping out and taking risks. If you go with caution, you go with predictability. Companies need to be bold and stick their necks out. And that's the downside of this kind of consolidation." Hi-tech PR firms have thrived over the past two decades as hi-tech companies blossomed, looking for agencies that could help explain what they had to offer. But Andy Cunningham, CEO of Citigate Cunningham, says there is less need now for hi-tech agencies, as they have done their job of making consumers and businesses more comfortable with technology. Twenty years ago, no one had even heard of the internet. Today, new technologies are being adopted faster and faster, and many new products and services are touted more for the value they can bring than for the technology itself. "I doubt HP considers itself a technology company," says Cunningham, who adds that Motorola took its PR business from her agency to Hill & Knowlton about three years ago. "They behave more like Coca-Cola. But we do work with Sun Microsystems, which is still very rooted in technology. They still need a firm that can help translate those technology benefits." "Midsize is where it's at," asserts Kerry McClenahan, a partner at McClenahan Bruer. "I think that HP's consolidation is a smart move. They have better control over the messages. And generally speaking, the big companies always go with the big firms. So it might be harder for midsize agencies to chase the really big clients. Right now, those big agencies are looking to throw their A-team at everything. They are public companies, and they have to make their numbers. But we are able to be so much more nimble. When budgets expand and contract, we can accommodate that. When budgets shrink, those big firms will put junior people on those accounts, and that's not in the best interest of the client." So the opportunities for midsize tech firms certainly aren't going to dry up. But as tech companies become bigger, and their products become more of a way of life, they will seek firms that can provide a lot more than just hi-tech PR. "Intel isn't tech," asserts Michael Busselen, Fleishman's technology practice chairman. "Dell isn't tech. Yahoo! is as much entertainment as it is technology. 'Intel Inside' is ubiquitous. We see it as one of many different agencies. And they are going to look for PR beyond hi-tech. They want to bring in the consumer practice. They want expertise in corporate governance and public affairs." HP's decision may not be indicative of tough times for midsize agencies, adds Busselen, but he agrees with Cunningham that the heyday for the midsize tech specialist was in "the era when technology really needed to be explained. Now I see several of these agencies aligning themselves with agency networks, trying the replicate the reach and capacity of the global firms. And there isn't a single viewpoint or culture. It's a loose affiliation of folks, that leaves them short of what a global agency can do." Creating unwanted conflicts But some suspect that what HP's global agencies will do is fight each other. "[HP] picked the two biggest competitors," Cunningham points out, referring to H&K and Burson. "It could be very hard to get these big agencies to work together." Angus agrees, adding that those agencies will constantly be jockeying to see if they can increase their piece of HP's PR pie. "These big guys have a huge appetite," says Angus. "At least IBM picked agencies with different disciplines." "The midsized, we're more specialized," adds Angus. "We are not so distracted with food and travel, and with other disciplines. There will always be the role for the specialist, who is fast on its feet." Agencies of all sizes are equally capable of fantastic and terrible work. And while size certainly matters in some cases, most PR agencies no doubt prefer to be judged on the quality of their work, not the quantity of their staff or offices. Because in the end, clients need to realize that it's not the size of the agency that matters. It's how you use it.

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