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 o en-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 di erent 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 o en be the most
cost-e ective. 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 e orts 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 o ice.
The argument over insourcing or outsourcing is far from settled.
Businesses’ needs will continue to shi ; 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 e ectively 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
22 SEPTEMBER 2019
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 o ering 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,
e iciency and cost e ectiveness 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.
Do you have a question that you’d like
answered by the FMJ Clinic?
Email: sara.bean@kpmmedia.co.uk
FM CLINIC
Andrew Wood
ADVICE & OPINION
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