Three Emerging Trends In Facilities Management Sourcing

By: Ryan Lee

For JMB with distributed operations, facilities management can represent 10 to 25 percent of total indirect spending. Several recent developments, including fears of a recession, trade conflicts, tech disruption, and rising wages, have made cost cutting a higher priority in this area.

The evolution of facilities management strategy

When facing ongoing pressure to reduce operating costs, companies tends to look for savings without giving much thought to the long-term repercussions. This dynamic makes facilities management a particularly ripe target. During challenging economic times, companies trim facilities management budgets; once the outlook rebounds, spending levels often remain low. This pattern can lead to deteriorating conditions of buildings and equipment, potentially costing more in the long run.

Over the years, industries have accepted outsourcing as a viable option to non-core operations, including facilities management. JMB typically follow a progression that begins with outsourcing noncore activities at individual locations (Attachment). The consolidation, standardization, and bundling of these tasks across facilities over time results in the outsourcing of a comprehensive set of noncore services and management to third parties.

Facilities management is ripe for disruption: it lags behind other functions such as production equipment maintenance by both digital maturity and penetration of technology. Although technology is available for facilities management, several obstacles have inhibited adoption, such as a lack of digital skills within the function, other priorities for leadership, and a focus on continuous cost cutting. These factors have made the facilities management outsourcing market attractive for leading vendors that were already engaged directly or indirectly with this function. Several incumbents have developed an integrated facilities management offering in an effort to capture a greater market share.

Three emerging trends

We have identified three trends that offer cost savings or productivity improvement opportunities now or could transform facilities management over the next decade. Since the attractiveness of each trend will depend on an organization’s needs and capabilities, the trends are presented in a manner to facilitate evaluation and comparison.

1. Outsourcing facilities management

Organizations are evaluating their operating model to maximize value creation. Before they outsource facility management to third parties, however, they review the appropriate mix of insourcing and outsourcing based on capability, cost, and coverage. Several factors are altering the equation.

• Growth in outsourcing. Outsourcing has now surpassed 50 percent of the total facilities management market in several regions, including Asia Pacific, Europe, Middle East, and North America.
• Industry-based adoption. In manufacturing companies, soft services such as landscaping and janitorial are preferred categories for outsourcing. Hard services such as utility equipment maintenance are typically still insourced. Meanwhile, retail, banking, and other non-manufacturing industries are looking to first optimize their operating model by balancing insourcing and outsourcing. If the benefits they achieved are not significant, some players in these industries have opted to fully outsource facility management.
• Penetration of integrated facility management (IFM). IFMs are capturing increased market share in outsourcing, particularly in Klang Valley. Few Organisations like Purbly.com , CBRE , Cofreth , are penetrating strongly in IFM module to JMB / MC as well as commercial buildings.

2. Integrated value and related services

Companies are exploring the integration of facilities management and related services in an effort to streamline management and improve performance. This offering can include the following functions:

• Real estate. This category includes all services related to transaction management, project management, and other services.
• Facilities management. All of the tasks that are involved in maintaining a facility, such as equipment maintenance and building services.
• Energy management. Activities focus on the conservation of energy, including retrofits and procedural changes.
• Production maintenance. The maintenance of production equipment comprises areas such as assembly stations, process equipment, and testing stations.

3. Internet of Things (IoT) evolution

A number of trends and developments are spurring the adoption of IoT-enabled equipment by facilities management across a range of applications.

• Energy efficiency. The implementation of IoT devices, such as motion sensors for lights and automated temperature controls, enabling more visibility into energy usage and management.
• Occupant experience. This factor could be a contributor to the adoption of IoT.
• Computing. Data transmission costs are determining whether edge, cloud, or hybrid computing approach will prevail.
• Stack ownership. Companies are trying to own multiple layers of IoT stack. Hardware infrastructure and/or software are emerging as preferred ownership models.
• IoT security. Security is lagging behind the development of IoT devices and platforms.

Partner with IFMs and set up a robust governance mechanism.

A JMB/MC can view IFM suppliers as a partner to achieve savings and manage collections, but it must first establish a robust governance mechanism to maintain trust with suppliers. A regular auditing cadence can ensure that any savings are contributing to the bottom line. In addition, JMB/MC should make decisions collaboratively with IFMs on topics such as specification standardization and computerized maintenance management system technology to ensure that savings always stays positive.