Outsourcing is most common in the United States where three big vendors dominate the IR website industry. But it is becoming increasingly popular in Europe and other parts of the world, too.

When companies use these IR website factories they essentially opt for a communal approach in which there are inherent compromises to be made in terms of individuality and branding. However, the attraction of template sites has traditionally been the ability to have a website that is quickly and easily kept up to date with little reliance on stretched internal IT resources.

While it is difficult to argue against outsourcing with IR departments that otherwise wouldn't be able to manage an IR website on their own, many companies would be better off severing or at least restricting their use of third-party vendors.

A litany of problems
Based on hundreds of site reviews, we are convinced that companies are:

• Overpaying for services that provide modest or negligible value to IR websites.
• Paying thousands of dollars each year for the hosting of low-maintenance pages that they could host themselves for next to nothing.
• Being sold services that have never been tested for usability, or which break established rules of Internet standards bodies.
• Paying for services that should be free because the vendor is already being paid by someone else.
• And compromising the credibility of their sites because they are getting bad advice from vendors.

This article explores the above list in greater detail, providing practical examples to illustrate the argument against completely outsourcing your IR website. These examples also paint a picture of an industry that has profited handsomely from regulatory challenges confronting companies, while doing little or nothing to contribute to the transparency and ease of use of online corporate information.

Are you paying too much for content that investors don't really want?
A lot of the stuff website vendors provide as part of their packages isn't high value content for IR websites. Things like third-party financial fundamentals, earnings estimates and stock quotes and graphs aren't why investors use IR websites.

Institutional investors have professional data sources like Bloomberg and First Call that provide them with more aggregated information than could ever be feasible for you to provide on your website. Retail investors can get more data on most companies from Yahoo! Finance than they can get from an average IR website. I'm not saying that stock charts and earnings estimates are entirely irrelevant, you just don't want to pay a lot of money for them when they are not high-value content for investors.

According to an Association of Investment Management and Research (AIMR) survey and a Nielsen Norman Group study (See Lots wrong with IR websites, study finds) companies should focus their website dollars on the things that investors can't get anywhere else.

High up on the list of must-haves you can include things like:

• Information on your company's strategy;
• Industry fundamentals and trends;
• Easy-to-use SEC filings and financial reports;
• Webcast transcripts; and,
• Details of your company's values and corporate responsibility.

Of course, much of this information is so company-specific that vendors will have to find ways to give their clients greater flexibility to design unique pages. They will also need to work more closely with their clients to articulate each company's unique story.

For the most part, I am skeptical of the big vendors' ability to provide higher levels of customization. They have a tendency to make decisions that work for them, but which run contrary to the long-term best interests of their clients and their clients' investors. It's inherent in the business model.

Companies who need to outsource their sites might well do better to go to smaller specialized vendors. An interesting development is the emergence of vendors that specialize in providing sites to specific industry sectors, such as SNL Financial's IR Weblink for banks, thrifts and real estate companies. This model shows great promise, but we'll have to wait to see if vendors emerge to provide the same type of service to other sectors.

Why pay thousands of dollars for pages that are rarely changed?
Many companies are paying vendors thousands of dollars per year to host pages that they logically should be hosting themselves. The best example of this practice is corporate governance sections.

Vendors are charging exhorbitant annual amounts to host the corporate governance sections of their clients websites. There is no way to justify these fees when corporate governance information is rarely updated and requires no special technology.

Essentially, companies are paying thousands of dollars per year for basic Web hosting of a dozen or so webpages. If companies hosted their governance sections on their own servers -- or even if they outsourced to one of hundreds of cheap Web hosting services available -- they'd be paying mere pennies.

We also believe that any reputable vendor claiming to provide complete IR website packages should, as a matter of course, include pages for corporate governance information rolled into a single fee. Corporate governance disclosure should not be an optional extra.

What is your vendor doing to improve usability?
When usability of your website is bad, it's usually because someone else's self-interests are getting in the way. Big website vendors are notorious for putting their own self-interests ahead of those of their clients and their clients' investors.

One of the worst examples of this are image-based reports, which suffer from terminal usability problems. Image-based reports are not good for companies because they are not usable for investors. In a relationship medium like the Web, it's not a good idea to frustrate the people you want to build relationships with. And frustrate your users is exactly what happens with image-based reports.

An even bigger problem is that most vendor-hosted sites don't work with search engines on companies' websites. Studies have found that about half of all Web users rely on search engines to find what they're looking for on a website. The other half rely on finding the information by navigating around the site. If the search engine on your corporate site doesn't index the IR pages you've outsourced then your site doesn't work for half of your audience. There are workarounds for the search problem, but some vendors show little or no interest in implementing them.

NEXT: No Testing For Usability>