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Trends evolve quickly in all areas of our lives - and not least in the FM marketplace. Dave Wilson argues that two new trends will fundamentally affect the industry. - What advantages do buyers see in an integrated, global approach?
- What will the effect be of globalisation and convergence for FM professionals?
Perhaps driven by the relative youth of the discipline, two important trends have shown significant development in the last 12 months.
These are the increasing attraction of global contracts for major corporate buyers, and the convergence of facilities and property.
Taken together, these developments flag the possibility that the FM market will change radically before most of us grasp what is happening.
We could soon be working in a market with only three or four dominant providers on the supply side.
These players' market dominance will define what FM is, and thereby define (and constrain) the options for buyers, smaller suppliers and facilities professionals.
Without being Luddite in our reaction to this, whatever our role in the industry, it is important that we develop appropriate and considered responses to both trends.
Demand driven
While there may be a temptation to attribute the cause of this rapid change solely to the emerging dominant suppliers, I believe that this has been a demand-driven process, with an increasing number of client corporations becoming aware of the power of a truly integrated service to deliver step-change in costs and performance.
That awareness is, in part, a reward for the various individuals and professional bodies who promote FM - the world has woken up to our insistent collective claim that FM is a business-critical service.
If the result has been a switch from dismissive ignorance of FM to an embrace of the possibilities that it offers to business, we ought to be pleased about that.
However, the suddenness of the transition, and the swift reaction of some supply-side companies, means that the industry at large and professionals within it may feel threatened. Is that a proportionate reaction?
In my view it has been inevitable that at some stage major global buyers would align themselves with major global providers.
If we look at catering, for example, as a service industry comparable to FM, it is apparent that there are really only two caterers with global reach.
Not many sectors have developed quite that extremely - maintenance, cleaning and security have yet to make that leap - but it is clear that in each sector there are individual companies with significant multinational capability.
And what advantages do buyers see in an integrated, global approach? There are several factors that have converged to bring about this position.
They include:
- A recognition of what FM brings in terms of consistency across a widespread portfolio;
- The increasing seriousness with which Corporate Social Responsibility is being taken;
- The need to export best practice in cost management and reporting;
- The need to respond quickly to changing global market places, in particular the requirement to deliver new operational facilities in emergent markets with minimum lead-time.
If we add to the mix the essential need for property decision-making and implementation to be aligned with FM, then we have a powerful blend of corporate drivers of change.
But with one exception, FM companies have not been in a position to meet this challenge on a global scale.
This has left the field clear to be dominated by real estate businesses, who have a number of natural advantages over their FM competitors.
They already have a wide geographical coverage and the ability to add new territories with relative ease, so they can follow their customers if necessary into the most obscure locations.
In addition, they have an established professional and brand credibility, and well-established relationships with senior corporate decision-makers.
Finally, they have the financial strength to develop new solutions and support their offer with credible savings and service commitments.
From that position it is relatively simple for them to add FM capability to create an integrated service offer that most FM suppliers cannot match.
Interestingly, the relationship model adopted by these organisations has been predominantly the principal contractor role, which has not previously been the norm in the developed facilities market places, where TFM or an integrated delivery model had become the default expectation of buyers.
This, too, will have a considerable impact on our industry. However, my purpose here is not to consider the merits of this (although I've been a proponent of the principal contractor role for many years).
What I do want to consider is what all this change means for suppliers and FM professionals.
Changing market conditions
Buyers now have to evaluate the new global and regional supply opportunities against their own readiness, to ensure both that the client organisation is prepared for such a significant change in supplier relationships and that the promised benefits can be measured and delivered by the selected partner.
However, it is worth repeating here that the scale of these relationships and the costs of procuring and implementing them might lead to very long relationships between client and supplier which, once created, will tend not to be tested in the market unless there is a very widespread suboptimal performance by the management supply partner: in other words, the effect in the medium-term may be to reduce competitive opportunities at the globally procured level.
In addition, because most of the buying companies are already significant customers for FM in their domestic marketplace at the moment, a secondary effect may be to remove 'exemplar' clients from the portfolios of national or regional suppliers, in effect constraining those suppliers to competing only for a client base that is limited to their current operational geography.
If we look at the major clients supported by the largest FM companies in the UK (look on i-FM or at the company websites) we can see the dramatic effect this will have on business prospects and growth.
Additionally, because the global contracts are (as noted above) mostly based on the principal contractor role, client organisations are going to be further removed from the supply chain servicing them.
The property and FM providers are mostly using regional partnering agreements to facilitate quick, risk-free implementation of services, with their own role defined as procurement and management of their local and regional supply partners.
If this trend continues, we can begin to see two key effects for the bulk of current FM providers: their market for direct client relationships will be radically altered and limited to smaller opportunities, while they will find themselves reporting to, and being managed by, the global property and facilities companies.
What this will amount to is a removal of the smaller companies' ability to add value, since the global management providers will be in control of defining service quality, creating innovation and managing client relationships.
In effect, there will be a rapid commoditisation of facilities delivery, with all the pressure on margins that entails, and the removal of differentiation through service innovation that many smaller businesses currently claim.
Lastly, because global contracts are often by definition 'one size fits all' solutions, the resulting effect on service standards may be to create a lowest common denominator approach, which again suggests a move towards commoditisation at the point of delivery.
It is not as simple as saying that global contracts = pressure on margins: that will depend on the geography and the policies of the principal contractor.
But we could see increasing regionalisation (cross-border supply contracting) on the one hand, balanced by more opportunities for smaller companies in developing geographies and in markets that have barriers to entry, difficult labour supply issues or are simply physically remote. What is evident is that there will be an increasing impact on services companies, for which they need to plan and prepare. Preparing for the effects
Of course, depending where you sit, all this may not concern many people beyond the senior managers of the FM and services suppliers. But what will the effect of globalisation and convergence be for facilities professionals?
We might anticipate that as a result of consolidation of standards and processes, the scope for developing initiatives and relationships will be considerably constrained.
While local client-side managers may continue to hanker after more control of their local infrastructure and service quality and cost, the facilities manager actually tasked to deliver services is likely to have less room to vary the services.
Even at a senior management level, there will be new pressures: after all, what does an upper middle manager add to their organisation when a global FM and property provider steps in, offering 'best in class', significant savings, ready-made processes and procurement options, and a universal set of procedures?
Against that, the large providers may offer the individual professional greater training opportunities, an ability to concentrate on service quality rather than process management, improved career prospects, and the chance to grow into multinational roles.
It is easy to see why people might feel threatened by the trends, but it should be approached as a time of great opportunities.
Just look at catering, where we can see a plethora of smaller businesses still thriving beneath the major players, in niche markets of one kind or another, often owned and managed by people who have learnt their skills with the major players before setting out on their own.
FM may or may not develop in the same way. But greater efficiency through homogenisation is the future, and the only certainty is that those who plan for it will deal with it better than those who don't.
Dave Wilson CFM is Senior FM consultant at Corporate Property Advisers. He is Deputy Chair of the BIFM and a past-Chair of the BIFM International special interest group, and past Board member of EuroFM and past Chair of their practice network group. Please visit www.corporatepropertyadvisers.com
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