The Shift Away from Design Agencies Has Started in San Francisco

Peter Merholz, a lauded designer and veteran of San Francisco’s design services industry, published an interesting blog post inspired by the recently announced closure of the San Francisco office of Smart Design, as well as by the completely unexpected acquisition of Adaptive Path, a leading independent design agency in that city for many years, by the financial services company Capital One. Merholz posits that studios and agencies are suffering as more and more companies double-down on building strong in-house design teams. He wrote:

What’s actually happening, according to friends at agencies, is that clients’ willingness to buy design from agencies is decreasing, and project budgets have been shrinking. And the prevailing theory is that this is happening because companies are building in-house teams, and that’s where their ‘design budgets’ are going. Whereas in the past, a company might spend 20% of a design budget internally and 80% externally, that’s now swapped.

This is consistent with my thoughts on where the profession is heading. Three years ago, in a post called “The End of Client Services,” I wrote:

It’s not as if the services model works so well for clients anymore, either. It’s one thing to manufacture a widget and turn to a design studio to create a logo, a package, a brochure for it—to basically tell its story. But more and more, every business is becoming a digital business, is responsible for digital products. If a company is not able to design, develop and maintain their own products without outside help, then what kind of future does that company have?

It makes sense that it’s happening first in San Francisco, where there is presumably a larger concentration of potential studio/agency clients who have gotten hip to this idea that it no longer makes as much sense to farm out their design needs. But the phenomenon won’t be restricted to the Bay Area, not by any means. There are both material benefits and genuine downsides to our profession when this kind of fundamental shift happens, but in my opinion the shift is inevitable.

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