FM market development: An ANZ perspective
Research in an ISS white paper titled ‘Perspectives on the FM market development’ found that the Worldwide FM outsourcing market is expected to grow from US$959 billion in 2012 to US$1.3 trillion by 2018, with growth evident across global markets from North America and Europe to Latin America and Asia Pacific. This demand is now coming from both the public and private sectors. The changing economy in the Asia Pacific region requires a new way of thinking about the way facility management services are delivered. Providing added value, increasing efficiency while also taking responsibility for regulatory compliance and business continuity is an increasing trend being seen at ISS and other providers across Australia.
Rather than outsourcing a single service, or maybe two lines of services, customers are now requesting a fully integrated solution, to further drive cost reductions. They also want the provider to self-employ, so that control is maintained and the services can more easily be integrated, through multi-skilling or shared responsibilities. For example, for high-end buildings with multiple public areas, there is a real business benefit to a cleaner reporting of a maintenance issue and arranging rectification, before the end users of the building even notice the fault. These sorts of innovation or service levels cannot be delivered through a subcontracted model with different reporting lines. Through integrated solutions, FM companies are no longer just operational service providers, but strategic partners – an alliance of sorts.
A recent report by Hays Recruitment on the job demand in the FM industry highlighted the growing trend of outsourcing FM work to integrated services providers. This is in tandem with more companies looking to outsource as much non-core business activity as possible.
Outsourcing not only provides a company with the opportunity to focus on core business activities, but also relieves the need for back of house activities that would usually support the additional employee head count – such as payroll services, industrial relations management (IR), accounting, rostering and leave planning.
Evolution or revolution?
The industry is quickly changing, shifting its focus from purely operational hard FM, to one that acknowledges the benefit and value-add of including soft services. Adopting an integrated service delivers facility compliance and a comfortable and enabling work environment that is well-presented. Integrated services provide a single point of accountability with a leaner management overlay that negates margin on margin scenarios that are suffered through a subcontractor arrangement.
Now, companies like ISS are increasingly finding they can convert single service customers to an integrated model. In fact, globally, these types of integrated contracts now make up one-third of our revenue. In Australia, organic growth is increasingly occurring through the selling of more services to existing customers. For example, a new integrated contract with BOC for its gas retail sites across Australia and New Zealand sees the delivery of not only cleaning services, but hard FM, grounds, pest, waste and help desk services. Through the proposal, the existing cleaning contract was extended and now provides real value for BOC through combining ‘hard’ and ‘soft’ services under one simplified and cost-effective contract model.
BOC is one of the many multinational companies that are turning to integrated service providers for their integrated FM needs. In today’s global economic climate, many multinationals are relocating their head offices to the US and Europe. With corporate executives looking for cost-effectiveness and efficiency, service providers like ISS that offer a holistic and comprehensive suite of services are an attractive alternative to hiring FM specialists in specific areas.
FM service providers looking to deliver more strategic value to their clients will take on even more aspects of their FM services, including environmental performance and energy management, as sustainability and utility costs become an even higher corporate priority. Hand in hand with this is the management of intelligent buildings and, finally, a cultural shift to workplace management. This kind of strategic thinking can be achieved when FM providers self-employ teams who are based on the customer’s site and take responsibility for all facets of the facility.
With rationalisation of subcontractors being demanded, aggregation and central control of spend is necessary to create efficiencies in service delivery. Consolidation of invoices is attractive to customers; however, the backend supporting documentation must be made available upon request and, therefore, systems and technology are crucial.
One issue constantly raised by customers is the need for them to manage and own the data. Of course, any FM provider who wishes to become a long-term partner would ensure complete transparency via web-enabled software.
Alternatively, many customers prefer their FM provider to have access and raise work orders in their own FM system. However, FM providers that have market leading software can enable customers to leverage robust procurement processes and buying power. The integration of services and the data collected enables FM service providers to evaluate operational demand and be well-positioned to create efficient integrated solutions by applying productivity effort when and where required.
Integration factors to consider
As the services that FM providers offer have evolved, so have the ways in which they are delivered. Delivering integrated services provides flexibility in multi-skilled workforces.
With an integrated model, teams are directly employed by the FM provider and based on-site. Therefore, they can be reassigned easily or asked to assist in an emergency situation, as they act as one on-site team. An example of this may be where there has been a burst water pipe within a building – a quick response by the integrated team enables coordination, resulting in the containment of the situation, thus eliminating further disruption to the facility. Having the ability to direct subcontracted personnel from different providers is limited and comes with a level of risk when capability levels and the authority to proceed are not fully understood.
For this integration to really add value, providers also need to recruit and retain the right people. They need to be empowered and motivated to work together and across different disciplines. It’s important that they are familiar with the building, and with the customer and their purpose, in order to fully understand their role in the services being delivered. ISS delivers a unique training program to all frontline staff in order to engage and motivate. Called Service with a Human Touch, it explains how to be observant, be proactive, keep customers informed and make every experience memorable.
Best practices for FM outsourcing
- Develop long-term vested partnership relationships to capture the best performance and cost savings:
- Use KPIs and incentive models to reward the supplier for delivering added value year after year.
- Identify suppliers that are the right fit for the organisation:Seek experts who can clearly identify any risks and develop risk mitigation plans (Kashawagi, Sullivan, Kashawagi, 2009).
- They should be the right cultural fit and have a complementary company vision, with employees who are motivated and engaged to drive great service.
- Carefully validate unnecessary service requirements that drive increased costs, like over reporting or metrics that are not used as KPIs, but are given equal weight.
- Leverage suppliers who can deliver services across all enterprise sites, with favoured pricing for bundling.
- Establish KPIs early in the contracting phase to ensure a clear governance model.
- Finally, request a demonstration of their ability to self-deliver the range of services, for an understanding of how teams may work together, or any services that are non-core to the provider.
Where we’re headed
Facility management is increasingly being seen as a strategic enabler and, therefore, is being elevated to a higher and higher level in companies, leading to regional and global IFS/IFM contracts. These contracts are integrated into corporate capital plans that are for three to five years or more. These contracts can deliver significant savings and improved workplaces, but require:
- transparency of actual spend
- benchmarking to support and validate service and spend levels
- improved forecasting, and
- enhanced risk mitigation.
The FM marketplace is growing, and service providers must evolve and be flexible to keep up with expanding customer demands. They must have the capability to provide excellence across a wide variety of services and consistent self-delivery on a global scale.
Common customer demands are tangible: ‘clean’, ‘100 percent uptime’ and ‘allow me to focus on my core business’. Implicitly, the requirements are reliability, responsiveness, convenience and cost-effectiveness.
Internationally, customers are concerned about the integrity of their brand, and the FM service provider must fulfil its role in protecting that brand. A major food company cannot tolerate being cited for a breach of hygiene levels in the production area, for example, and a software company cannot afford the fallout from a customer’s IT failure because a server room or data centre was not properly maintained.
Facilities should be seen as an integral part of the strategic and cultural journey of an organisation. The FM provider must be focused on finding new and innovative ways to make facility assets and services not only relevant but critical to enhancing the customer’s employees’ experience and enabling their core business.
This is an abridged version of a white paper from ISS titled: ‘Perspectives on the FM market development’ written by Glenn Hodge (ISS US), Reinhard Poglitsch (ISS AT) and Peter Ankerstjerne (ISS Group) with insights from Shane Baulch (ISS Australia) on the Australian/New Zealand markets.