FMJ Facilities Management magazine providing industry-specific intelligence to FM and property professionals
THE FM BENCHMARKER’S VIEW
MIKE BOXALL,
MANAGING DIRECTOR, SITEMARK
The decision between whether to insource or outsource is an ongoing, complex and dynamic one for businesses to make in 2019’s turbulent times. With the likes of Brexit and government changes, the uncertainty between trade deals and the ongoing repercussions from the collapse of FM and construction giant Carillion, businesses are being influenced by considerable factors before being able to conclude on their decision to in/outsource.
In the UK, according to a Raconteur report, 69 per cent of all businesses that outsource are doing so in order to reduce costs, and 64 per cent is due to business transformation, which involves making fundamental changes to processes and company constructs. So, there are clear-cut reasons to outsource. With this, however, comes the challenges of trusting an external organisation to handle an often-crucial part of a customer’s business. Whether it’s IT, marketing or cleaning, there is next to no constraints on the areas of outsourcing possible to company owners today. And with which, comes further questions around trust, value, and return on investment.
Out of multiple different reasons (budgets, work load and team capacity, for example), the main reason found was to reduce and manage costs, from a survey by Deloitte. Although not always the cheapest option on paper, outsourcing can often be the most cost-effective. By enlisting the help of expert professionals on certain areas of your business, you are drastically reducing the time required to complete the same jobs by potentially less-experienced individuals internally. The process of having to outsource has become second nature to most companies, but with the turbulent recent years of trade and government policy, business owners alike can surely only benefit by consistently questioning and updating their business models, budgets and strategies.
The alternative to outsourcing is focusing these efforts in keeping all practices in-house. Again, there may be several varying reasons for doing so, potentially the most prominent would be for ease of management and time. By keeping all processes internal, management is able to maintain a considerably closer eye on work being carried out. The issues of trust, reputation and reliability can be drastically reduced, consequently allowing for greater flexibility, transparency and capacity within internal teams.
Taking into account the areas that organisations will typically outsource – cleaning, security, catering, etc. – there is great potential for the industry to push the limits of what can be achieved in terms of standards of service, customer satisfaction and bettering the reputation of our so-called ‘Cinderella profession’. Choosing outsourcing can ensure budgets are catered for by industry experts that specialise in the very field you are investing your trust in, and that innovative new solutions are more successfully implemented.
Within FM specifically, the industry’s main players are having to work harder than ever to prove their trustworthiness, smaller suppliers are having to fight to prove their worth in personability and internal teams are feeling the intensifying pressure of delivering against tight budgets from head office.
The argument over insourcing or outsourcing is far from settled. Businesses’ needs will continue to shift; clients will continually challenge their service providers; and the sectors FMs work within will remain a turbulent and uncertain space. To combat this, organisations should abide by these fundamentals: be bold, be honest, and be consistent.
THE PROPERTY SERVICES PROVIDER’S VIEW
ANDREW WOOD,
CEO, DMA GROUP
The insourcing / outsourcing debate has been dominated by assumptions. Before the Carillion fiasco, it was thought outsourcing could be delivered more effectively and cheaply than an in-house provision. Now, though, the tables have turned. The new narrative paints outsourcing as the scapegoat for market failure. Outsourcing is blamed for a loss of direct control and limited flexibility. Is this a fair appraisal? Or is it just a knee-jerk reaction to the failures of the main players that have tainted the trust in FM? We would suggest the latter.
Construction giants that intentionally adopted big cheque book buy-n-build strategies in pursuit of larger, broader, non-core deals (regardless of the associated risk) have played a rather damaging role in diluting the trust in outsourced FM. We believe this to be particularly true in the public sector. In both public and private sector, those introspective customers will be ruing some ruinously weak procurement processes. Perhaps it is not surprising, then, that finance directors are being asked to review the investment case for insourcing.
While offering flexibility, insourcing can provide certainty of supply and allocation of resource. With an in-house team, there’s immediate availability of people. Then you’ve got familiarity that comes with it. Plus it’s easier to drive a sense of culture, a sense of belonging. This, of course, all depends on how the in-house provision is set up and managed. Ultimately, insourcing is the best solution if you can’t find a reliable outsource partner. Those are the pros. But there are cons, too. Firstly, insourcing requires a significant up-front investment, and fixed people costs will naturally soar. Then there’s the abundance of processes and technology that comes with managing a large onsite team. This can be both an administrative and a financial burden. Finally, there still needs to be a contingency for specialist subcontractors and additional labour when things go wrong.
The ‘Rebuilding Capacity’ research explores the growing phenomenon of insourcing in the public sector. The larger contracts spanning the public sector portfolio do seem to go through regular cycles of insourcing/outsourcing, but we’re not seeing this trend in the private sector. If anything, in this period of endemic uncertainty, we see organisations making their cost-base variable, not fixed.
Outsourcing involves a single price, negotiated with a trusted partner – or it’s the outcome of a competitive tender process. The benefits of outsourcing far exceed the smaller up-front investment. If you choose the right provider, one that aligns with your values and your work ethic, then you can enjoy just as much control, flexibility, efficiency and cost effectiveness as you would managing a large in-house team. SLAs and KPIs can be set for the outsource partner to monitor performance. And thanks to smarter tech, coupled with a big appetite for transparent reporting (from both sides), there is scope for standardisation of work methodology and consistent quality. If you get it really right; you won’t even see the provider as a supplier, they’ll just become an extension of the team.
FM provision is at its best when there is a blend of internal and external teams and TRUE partnership between the customer, the FM outsourcer and the supply chain, in specifying and delivering the optimal service solution. As it stands, we’d suggest the insourcing / outsourcing narrative is half baked; the real story is how best in class collaborations with partners across the property service spectrum exist to serve the needs of customers.
