Regional Market Outlook on Facilities Management 

  • The trend observed in the industry is to move towards one or two contracts for most of the FM spend categories
  • Total FM and IFM are the most suitable and beneficial sourcing models that strikes a right balance between cost effectiveness, savings and quality
  • Typical savings in IFM could range from 5% to 20% depending on category maturity
  • As an alternative, bundled strategy can be followed for one contract period before moving towards an IFM model
  • Services bundle can be selected based on supplier’s self-performance capability. Typical bundles are soft and hard FM bundle

Market Drivers and Constraints 

  • Subcontracting of services is avoided by buyers as much as possible because it invariably leads to variation in service quality delivered and also makes it difficult to manage the multiple suppliers involved

Drivers

Tactical Benefits

  • By outsourcing FM services  to a single supplier, buyers can leverage the synergies within various services based on the service provider’s capabilities. For instance, synergies can exist within soft services, hard services, and between soft and hard services

Transfer of Operational Risk:

  • Outsourcing allows buyers to transfer the operational risk to their service providers. The legal responsibility for regulatory compliance would still be the buyer’s, but risk can be transferred to suppliers through contractual clauses

Operational Benefits:

  • Large buyers have a very complex portfolio of property including office space, warehouses, manufacturing units, etc., which lead to issues related to managing and standardization of services. Outsourcing to a single FM player would allow buyers to standardize the level of services across various locations.

Constraints

Subcontracting Practices:

  • Subcontracting, a common practice in the FM industry, indirectly affects the buyer since subcontractors charge a margin to the service provider, which is eventually passed onto the buyer. This margin-on-margin increases the spend of the buyer, which is essentially a trade-off for exploiting local synergies at a tactical level.

Emerging Innovations in Facilities Management – Smart Buildings

  • Service requests and work orders, which are traditionally raised by people, will soon be raised by equipment themselves
  • As an example, HVAC systems can be fitted with sensors that can send out signals, when their efficiency or performance is on the downward road, before an actual problem occurs; similarly, a security camera can be programed to send alerts where its lens is dirty and needs a clean to get better images
  • This kind of technology will help buyers rectify equipment before a major problem occurs, thus saving lots of hard dollars

Single/ Task Oriented Service Sourcing 

The client can go for a task oriented sourcing when there are certain services, which may be:

  • Strategically very important to the organization (e.g. hard services of labs, security, etc.)
  • Higher priority in terms of the output and quality delivered (e.g. providing healthy food to employees)
  • When certain operating sites (such as Latin America/Africa) where an existing IFM contractor does not operate, in which case local contracts may need to be taken for individual services