According to the 2018 Global Facilities Management Market Report by the Global FM Association, the global outsourced facilities management market was valued at approximately $548 billion. That is over fifty percent of the total global facilities management (FM) market revenue for that year.
Outsourcing is gaining momentum and it is important to understand why companies are seeking total integrated FM solutions from service providers outside of their organisations. In this article we’re going to explore key challenges faced by companies self-managing their facilities management services, and why these factors are leading to the growth of the outsourcing market.
Market Changes and Rising Cost
In any business, cost management is a priority to ensure profitability and survival in the market. Budgets for non-core business operations, like FM, continues to be tightened while demands on the facilities department increases. At the same time the future of FM is moving towards data-enabled decision making, with technology advancements driving innovation and sustainability. We’re also seeing an integration of transaction, advisory and project services with facilities management.
This means companies managing their FM in-house are increasingly faced with the challenge of keeping up with global FM industry standards. While outsourcing doesn’t necessarily result in reduced cost, a well-crafted outsourcing strategy can benefit buyers by giving them flexibility to scale and vary purchased services depending on the demand of their facilities.
Losing Focus on Core Business Operations
Resources equate to cost. Unless there is a competitive advantage to running FM services in-house, managing the myriad facilities and property functions can take away resources from your core business activities, causing you to lose focus on your customers and vision.
Alternatively, when a company fails to allocate enough management time to strategically oversee and improve its in-house FM operations long-term, it risks disruption to operations. This in turn can mean increased spend from breakdowns and loss in market competitiveness and reputation. In a worst-case scenario, business can grind to a halt. The challenge is to align FM services with the business and maintain the highest level of operational excellence to support core business functions.
Human Resources Issues
Facilities management is still a labour-intensive industry and managing an in-house team of FM practitioners brings challenges in retaining talent and sufficiently qualified staff. There is less flexibility and scalability of resources and organisations are limited to its in-house talent pool and benchmarks to improve service performance and quality. Specialised FM training for a labour-intensive department can stretch financial budgets and lead to compromises.
If an organisation introduces new assets or technology to enhance its FM operations, investment must go into training it’s in-house team to equip them with the right skillset to be effective. Otherwise, the organisation will fail to reap benefits on its capital investment. High turnover risks also mean the potential for repeated cost in training new employees.
Risks and Increased Regulation
When managing FM services in-house, responsibility for quality performance, compliance, legal, regulatory, and risk management related to labour, repair and maintenance, health, safety, security, and environment comes solely under the organisation. The risk of non-compliance can lead to severe consequences and the FM department must work overtime to ensure it has met all regulatory requirements.
In Singapore, for example, the Building and Construction Authority (BCA) is tightening the facade maintenance regime, requiring building owners to conduct façade inspections every seven years (for buildings that meet certain criteria). This means hiring a team of qualified personnel to conduct a facade inspection.
In addition, there are now new ISO standards in facilities management, which although not compulsory, showcases an organisations’ commitment to high standards and consistency of service. Additional resources for trained and qualified personnel, such as a Workplace Health and Safety (WSH) Officer, will mean more investment in acquiring and training labour resources.
Asia Pacific is predicted to be the largest regional facilities management market in the world by the year 2025, with the global outsourced FM market revenue reaching close to $1 trillion. Outsourcing will continue to transform the way facilities and property management services are delivered, with contract globalisation and service integration. Organisations who outsource can expect greater focus on value creation and a move away from labour resources to productive resources.
Outsourcing doesn’t mean giving away control of your facilities. At C&W Services, we partner with our clients to determine the right scope to outsource to manage risk, retain control and knowledge. We advise on the best commercial model and practices for cost visibility while driving innovation and cost savings. It’s about helping you resolve issues to positively impact your business.
To find out more, download our 6 Reasons Facilities Managers Outsource Their Services report.