Adaptive Path was acquired by Capital One. Happy Cog shut its office in Austin. Teehan+Lax closed its doors and its founders went to Facebook. In the UK, Mark Boulton Design has been acquired by Monotype. These are leading web design agencies; the stars of our industry. So it’s not surprising that these events have been a shock for the community — especially at a time when the business climate is in a state of flux. Last year was tough. In a recent net interview (issue #266), former Happy Cog man Greg Storey described 2014 as “apocalyptic” for web design in the US, with many agencies failing to attract the levels of business they’re used to.
Combined, these factors paint a dramatic picture and have prompted much hand-wringing over the long-term viability of the agency model. At first glance this may seem justified, but notice that the downturn in business for many agencies and a few high profile closures and acquisitions are not necessarily linked: Teehan+Lax reported 2014 to be its best year ever. It didn’t shut up shop because it was struggling.
“The majority [of the sales] have been agencies at the peak of their careers, with big order books and companies falling over each other to work with them,” says Clearleft co-founder Andy Budd. “If anything I think it demonstrates the power of agencies to hire great talent, build brands and create demand.”
UX designer Karen McGrane warns against reading too much into the decisions of individual firms. “[This] gives people a warped impression of what is going on in the industry. The fate of particular firms is overwhelmingly based on financial decisions (often real estate leases). This says nothing about the fate of the industry as a whole.”
The rise of in-house
So, acquisitions may not be a sign that those particular agencies were struggling for business, but they’re not inconsequential either. A major force that has come to prominence over the past year or two is the building up of in-house design teams at large companies. And it’s not just internet giants such as Google and Facebook — it’s banks like Barclays and Capital One, and firms such as Accenture, which acquired Fjord in 2013. IBM has announced it will hire “hundreds of designers per year over the next five years”.
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Big businesses have realised that design is too important to be outsourced, and they want to own the design strategy within their company. This creates an even greater demand for designers, particularly in Silicon Valley. “It’s a hostile hiring environment and a difficult place to recruit, ” says Budd. “After all, how do you compete with six-figure salaries, free staff canteens, company climbing walls and a host of other perks?” Big business is drawing heavily on the talent pool that’s available to agencies, and the shift also means that less work will be contracted out.
Then there’s the phenomenon that’s putting the squeeze on agencies at the lower end: the so-called commoditisation of web design. Platforms like Squarespace have made good design widely available and affordable, meaning small companies with simple needs can now build their own sites. Agencies that have so far relied on this kind of business and don’t find ways to innovate will begin to see a downturn.
The evolution of the web itself is another factor driving change. “The web does way more in way more places than it ever has. That’s complicated — especially if you’re trying to get things to work on a bunch of different platforms, which I bet you are, ” says Cloud Four co-founder Lyza Danger Gardner. “Technologies are young and unpredictable, meaning even if you’re staffed to the gills with relentless super-geniuses, embarking on any modern web project is at least in part a process of experimentation and iteration. This makes the traditional agency model of waterfalling strategy to static comps to implementation and development challenging — or even impossible in some cases … the web’s evolution is forcing iterative thinking on us. We have to adapt, re-assess, kill our darlings, re-route.”
The realities of the modern web, combined with the building of in-house teams is driving a shift towards a more collaborative way of working. “One potentially successful model is the ‘teach them to fish’ structure that turns the historically arm’s-length relationship between agency team and customer a bit on its ear, ” says Gardner. “This involves merging teams on both ends into one extended team, with the agency serving in a strategic and educational role, as well as working on implementation tasks. This shifts the value of what the agency is providing to encompass the longer-term benefits of an educated client team.”
“Technologies are young and unpredictable, making the traditional waterfall agency model challenging, or even impossible. We have to adapt, kill our darlings, re-route” — Lyza Danger Gardner
Brad Frost is also ‘teaching clients to fish’ in his role as a consultant, and he sees move as a positive progression. “It’s really exciting to see that trend, because that’s where real organisational change can happen,” he told us. He sees many agencies occupying a role as coach and educator as opposed to swooping in, doing the work and then leaving.
One such agency is six-person outfit Bearded. Founder Matt Griffin explains that due to its small size, it’s difficult for Bearded to offer long-term maintenance to customers, so it’s better for the agency to collaborate closely with the client team and leave them with the skills to run things themselves in the long term. “Most of the work we do now involves some amount of training and workshops about responsive design patterns, extensible approaches to organising design and code, pattern-driven design — things that not a lot of people have a ton of experience with, ” says Griffin.
He’s confident this approach makes business sense: “I can’t speak for other businesses, but at Bearded we’ve been on a steady increase in work and revenue since we began in 2008. This year already looks like the best year the business has ever had.” Many other agencies — including ZURB, Hanno, Sparkbox and Paravel — have all developed their own particular frameworks for working in partnership with their clients.
“The skills and resources required by digital transformation are vast, and I believe it’s going to be impossible for every company that has a digital component to resource internally” — Andy Budd
Differentiate and innovate
While the new ecosystem doesn’t remove the need for agencies, it does require them to differentiate themselves. McGrane explains that rather than competing head-to-head in areas where clients have decided they are better off hiring full-time staff,“ agencies need to articulate a service offering that is different from what their clients can do in-house. That will naturally evolve over time, as clients build up their in-house teams. Lots of types of work might be served by an outside partner: research, branding, innovation, concept prototyping, performance, content strategy and so on. This may be because the work is ‘spiky’ — it requires a larger team over a short time frame — or may be because the work benefits from an outside perspective.”
There’s also the fact that it’s hard, time-consuming and expensive to build these internal teams. “The skills and resources required by digital transformation are vast, and I believe it’s going to be impossible for every company that has a digital component to resource internally, ” adds Budd.
Differentiate and innovate: that’s the advice coming from industry veterans. But how might this be done? Specialising in a particular sector is one answer. There are also fresh opportunities to be found: “Ancillary applications [are] growing in numbers and complexity, creating all kinds of integration challenges,” writes business development advisor Blair Enns.
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This chimes with the prediction of Chris Butler, COO of Newfangled, that information logistics is the future of web development. In a recent article (netm.ag/bulter-267) Butler argues that while some might see the arrival of new platforms as a threat, it’s actually an opportunity. He puts it like this: “When your expertise is in connecting platforms, the appearance of a new one is opportunity knocking, not slamming the door in your face.”
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He uses Salesforce as an example. It used to be a web app, now it’s a platform — and making it work with clients’ internal systems is a big job. He goes on to say that programmers at Newfangled are spending the majority of their time on “the complex task of brokering the flow of information from a variety of systems through our platform.”
Designers become leaders
Carving out a niche isn’t the only challenge for agencies — the structure of their business can be another factor holding them back. ZURB founder Bryan Zmijewski argues that organisations suffer from a lack of design leadership — that is, designers who take the initiative to “drive innovation, inspire teams and create growth opportunities”.
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To nurture this shift, we need business structures that support design, as well as management training for designers. Designers, however, are often reluctant to take on these roles. Luke Wroblewski recently tweeted: “Designers tasked with [the] responsibility of product leadership [are] unable to lead strongly enough through just their work to carry an entire organisation”. In a related article (netm.ag/wroblewski-267), he writes: “This kind of responsibility requires designers to go beyond design. Which often puts them out of their comfort zone.”
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McGrane also believes designers need to broaden their skillsets: “We as a profession are often at the mercy of ‘business people’ because we don’t want to do [these kinds of roles].” She explains: “For most agencies the problem is potential revenue they are not capturing – bench time, business development time and so on. The root of that problem is that they don’t have great operations, and there’s no way to know when their staffing size and project revenue are out of alignment. Similarly, businesses run themselves into the ground by staffing up too quickly and then (reasonably) not wanting to lay people off when the pipeline thins out.
“These decisions are tough and they require focused attention from people who really want to make the best decisions for the business and not just for the people or the quality of the work. Even though this work is hard, it’s also work that more designers should learn how to do.”
The road ahead
The era of web design agencies showing up, building a site and leaving looks to be drawing to a close, but the signs point to it being replaced by something better. The increased level of collaboration between agencies and clients is a boon for everyone because it leaves companies with the ability to maintain their web properties and gives consultants greater power to effect change. The rise of in-house teams is shaking things up, but consultants that specialise and offer something different to what a client can do in-house will find a place in the new ecosystem. The emergence of new platforms will be a threat to some, but an opportunity for others.
According to a recent report, the web design services industry in the US is currently worth $21bn. Things are changing, but, as Storey puts it: “No matter how you dice up the numbers, that’s a lot of Adobe subscriptions and opportunity.”
The future of the agency model
by Clearleft’s Andy Budd
If I lived and worked in San Francisco, the current ‘death of the agency’ debate may have slightly more poignancy than it does for a UK agency. The slew of new tech businesses there quickly hoovered up the local talent, and designers are now valued at around $1–2m per head as part of an acquihire.
Should we all be worried? Well, firstly, not everybody wants to go in-house. Working for an agency has a number of perks, not least the ability to cycle through a whole range of different challenges, rather than focusing on one single product. Outside the Silicon Valley tech bubble there are all kinds of organisations that need digital help, from online retailers to household brands.
Maybe you’d prefer to use your design skills to help a charity, rather than optimising ad placement for a wealthy-beyond-belief tech company. Large and diverse cities like London, New York and Tokyo will always need a robust agency culture to supplement and extend their digital capabilities.
Now, this doesn’t mean that agencies won’t struggle. With services like Squarespace and Shopify eating into the lower end of the market, agencies will be forced to get better at what they do, raising the quality bar for everybody. Sure, a few agencies will wobble along the way, but for every large agency that exits, I see dozens more waiting in the wings. So is the agency culture dead? Far from it. If anything, it’s healthier than ever before.
Tanya Combrinck is a technology journalist based in the UK, and has been writing about the web design industry for four years
This article originally appeared in issue 267 of net magazine.