Almost regardless of business sector, globalisation is continuing to create major competitive pressures as technology makes for easier communication and more rapid integration and market barriers disappear. A continuing focus on cost reduction and increased flexibility is essential for survival for most enterprises.

In the relentless search for cost reduction and flexibility, the outsourcing of FM is rising up the agenda of multi-national companies and there are clear signs of an evolving international FM market. Deloitte and Touche have identified some of the current trends that are driving this growth:

•     Most organisations with large portfolios view a centralised operating model as optimum;
•     Corporate infrastructure services – including IT, telecommunications and real estate – are migrating towardcentralised corporate shared service organisations;
•     Businesses desire to manage real estate services globally but are faced with an inability to execute this themselves;
•     Facility operations are being centralised;
•     In-house real estate and facilities departments are shrinking in size due to enterprise-wide initiatives and outsourcing.
  

Real estate only exists to create value for the core business. Deloitte and Touche suggest that best-in-class companies can answer yes to the following questions:

•     Do we know what our portfolio looks like?
•     Does it support our current business strategy?
•     Do we measure and control occupancy costs?
•     Have we optimised occupancy/utilisation?
•     Have we identified and sold excess properties?
•     Are our facilities in the right location?
•     Do we know the real value of our properties?
•     Have we used creative financing structures?
  

There is a strong desire to standardise real estate assets, the associated services and their costs as businesses are seeking to create and sustain flexible, cost-effective workplace environments. Realisation is dawning in some quarters that short-term cost reductions may be at the expense of an increase in lifecycle costs.

Over the past two years, Johnson Controls has noted a marked change in the FM marketplace. We have witnessed many large corporations adopting global standards within their businesses. Such standardisation has occurred in areas such as IT, procurement and FM.

We have been approached by a number of organisations, predominantly in the manufacturing, financial and electronics sectors, all of who are giving serious consideration to the possible adoption of globally outsourced FM contracts in the near future.

The key benefits customers say they are looking for from this type of global arrangement typically include:

•     Significant global cost reduction through the economies of scale of a single outsourcing contract;
•     Risk transfer;
•     Liability transfer;
•     Global standardisation of practices through one supplier;
•     Ability to implement policy changes quickly through a single instruction to the supplier;
•     Re-enforcement of change initiatives.
  

Too often it is the mature organisation facing a serious downturn in its economic cycle that turns in desperation to outsourcing in a search for quick savings. But it takes at least 18 months to effect a major FM outsourcing for a number of reasons:

     The difficulty in compiling a specification that can be used as the basis for a competitive tender – without exception, service levels differ from location to location and are not recorded in any consistent format;

•     The difficulty in overcoming resistance to change from an in-house country-centric FM structure;
•     There is no single commercial model offered by providers so comparison is difficult;
•     Employee legislation in Europe necessitates extensive consultation with workers’ councils before staff canbe transferred;
•     The recent spate of corporate financial scandals has caused organisations to focus on improved transparency in procurement and contracting which inevitably slows down the process.
  

A significant barrier to effective large-scale FM outsourcing is that a new, imaginative approach to procurement is essential. Traditional procurement methods based on comparisons of a number of firm bid prices against a clear specification is simply not possible. It is not possible to specify the scope of services in such sufficient detail that two suppliers can submit comparable bids. Many organisations have attempted this approach only to abort their process. To be successful it is necessary to select a supplier quickly, then negotiate a commercial deal that incentivises the provider to deliver.

How do you select a provider to negotiate with? One of the recognised difficulties of corporate buyers is determining who is truly an international supplier. Although many companies operate in different countries, this does not necessarily distinguish them as being able to supply a consistent FM outsourcing under an international management structure. Many providers claim to have an international manage-ment structure, but when tested they appear to be still very country-centric and strongly influenced by the parent country or company. Others simply comprise a loose network of agents. There still appears to be too few providers who can genuinely offer this service and the barriers to entry are rising rapidly.

Service delivery is locally provided. Clearly, the provider must have a local presence and an understanding of national laws, business practices and cultural attitudes and expectations. It is usually necessary for the provider to have legal entities in each country to effect the transfer of staff. The management structure must be global which will inevitably lead to tensions between corporate objectives and local service delivery cultures.

Johnson Controls believe that the current trend towards full outsourcing
of FM services will continue and have structured our business accordingly across the globe to meet the changing needs of our customers:

•     Alignment of management structures in the Americas, Asia, Europe, Middle East and Africa;
•     Investment in centres of excellence which collect best practices from around the world and disseminate consistency of specifications and process;
•     A global IT toolset which integrates the various applications which are required for the cost-effective delivery of FM service and the provision of management information;
•     Strategic account management structures and processes that cater for the needs of international corporate customers.
  

The unstoppable macroeconomics
of the world economy is driving multi-national organisations to seek cost and headcount reductions. Flexibility is the key to survival. FM outsourcing brings cost reduction and flexibility, but outsourcing cannot be achieved overnight. The message must be: don’t wait until it’s too late.