Outsourcing Trends: Help Wanted
By Jillian Ruffino
Published in the June 2007 issue of Today’s Facility Manager
The ability of communication technology to cut across distances and connect people quickly and easily is changing the way many facilities operate. Face to face meetings are becoming increasingly rare.
It is no longer necessary, or even desirable, to make employment decisions based on proximity. Companies do not need workers headquartered in a specific building to complete a task. If there is a more cost efficient and knowledgeable service provider, it is often a wiser decision to have an external entity complete an internal job. This is known as outsourcing.
Economic possibilities on a global scale are also affected by easy communications. There are situations when it might make sense to export a service overseas to save money and time. This is called offshoring.
The world is getting smaller, and now is an exciting time for facilities to take advantage of both outsourcing and offshoring in order to run more cost and time efficient facilities.
Outsourcing is an evolving practice for facility managers. The most commonly outsourced services, according to James A. Hopkins, director, marketing and sales for Greenville, SC-based GreenWood, Inc., are janitorial, landscaping, security, and general services such as maintenance, repair, and renovation.
“There are progressive movements to bundle commonly outsourced services to a single outsourcing provider,” explains Hopkins. “This provider would manage while performing most of the work, with a relatively minor amount of subcontracting of specialty tasks.”
Another trend involves pay for performance contracts with service providers. Bob Woolley is the director of technical quality management for Lee Technologies, a service provider based out of Fairfax, VA, that helps facilities protect technology infrastructure. He claims, “More and more organizations are realizing that the cost of downtime for their mission critical applications is best served by outsourcing to companies that specialize in the people, processes, and systems that are needed to maintain high availability.” Woolley also suggests that these types of contracts ensure service providers’ efforts match the needs of the organization; outsourcing is not warranted if the work is unsatisfactory.
Facility managers are more frequently choosing to outsource services previously completed by in-house teams. Woolley believes that this is due, in part, to the fact that outsourcing allows facility managers to customize the work force to the specific requirements of their facilities. Essentially, they can shop around until they find the appropriate team for a given task.
“In today’s rapidly changing business environment, these options provide greater flexibility and faster response times to meet specific challenges,” says Woolley.
It can also be an efficient choice. Hopkins explains, “Truly progressive companies continue to look in depth at how they can aggressively improve their overall operations and be more lean. Outsourcing has become a more acceptable method to achieve these objectives.”
Before signing any contracts, facility managers should inspect service providers thoroughly and ensure the potential provider has a clear understanding of the organization’s objectives. The nature of the facility must also be carefully considered.
Philadelphia, PA-based ARAMARK provides a host of services, including facilities management. The company’s executive vice president, Joseph J. Tinney, Jr., offers this advice: “Facility managers must have a comprehensive set of clearly defined goals to help determine whether an outsourced relationship is advisable. If a facility does not have these elements well defined, he or she can usually find a service provider willing to lay the groundwork, which could become the base for a strong relationship in the future.”
Also, having a clear sense of an organization’s shortcomings, Woolley asserts, is just as important as understanding its strong points. He says, “For instance, a company that does not have robust maintenance management systems and processes in place should align itself with a vendor that brings this capability to the table.”
It is also advisable to gather the metrics that will be essential to making a good business case and, eventually, the right decision. These metrics will normally include the cost of maintenance in relation to operating output, operating cost, and replacement asset value.
Finally, as Tinney points out, the very nature of an organization should be considered. “Organizational fit is important. Facility managers must be sure the organization they partner with shares their values and goals.”
Offshoring specific critical services is also becoming an increasingly prevalent practice for facility managers. Michael Jansen is the president and CEO of New Delhi, India-based Satellier, an offshore company providing support for computer aided design (CAD) documentation, three dimensional modeling, and building information modeling (BIM) services. In reference to the recent success of this type of offshoring service, Jansen says, “There are a number of reasons to do it. First of
all, there’s a huge cost saving for facility managers. There is also the opportunity to take advantage of an around the clock delivery system mechanism. Working with a firm halfway around the world will provide that competitive advantage.”
Another such company, CADFORCE, provides CAD drafting and BIM from India. This company, based out of Marina Del Ray, CA, is described by its CEO, Robert W. Vaneck, as a “blendshore” company that has offices and employees in both the U.S. and overseas. He explains, “We help architects, engineers, construction companies, and facility managers with two things: production of construction documents and innovating within a BIM model.”
Vaneck believes the appeal of offshoring relates to the freedom it gives American workers to move higher up on the value chain. He views the offshoring of repetitive and less mission critical work to a lower cost and more scalable provider as beneficial to American companies, facilities, and stateside workers.
For example, as Vaneck says, “For managing a collection of drawings and putting them into CAD, you can have your manager do the job and spend a year on it. Or, a company could have its manager innovating and creating a new use of BIM in the same time.”
Many of the countries that provide offshored services (such as India or China) naturally seem distant, and it may appear daunting to decide which companies can be trusted. Jansen advises, “Facility managers should look at the company’s track record. Who have they worked for in the past? Who is running the company?”
Vaneck agrees and also points out the importance of checking out the size of the company. “It’s very difficult to tell the difference between a two man operation and a 20 man operation,” he says. Facility managers should investigate each company’s funding and American presence.
Commonly held perceptions of outsourcing and offshoring may not always have a solid foothold in reality. In the case of outsourcing, according to Tinney, many facility managers worry that service providers will interfere with other operations. Most service providers, however, will go to great lengths to ensure they do not step on any toes.
Woolley points out another concern: “There is a huge misconception that by outsourcing, facilities risk losing ownership of critical knowledge and information needed to run the facility efficiently at the end of the contract,” he says. “In reality, implementing the proper tools and processes that are needed to run the facility will capture that intellectual property and make it available to any service provider.”
With offshoring, many Americans believe it unfairly moves American jobs overseas. In the case of offshoring architecture, engineering, and construction (AEC) functions, this may not be true.
Vaneck states, “We’ve created hundreds of jobs as we’ve worked with our clients. Our clients are able to hire more people and our company hires Americans to work in our U.S. offices.”
In fact, he believes that it may be necessary for companies to take part in this trend or risk extinction. “Any company that does not leverage international labor will be at a distinct competitive advantage because the global talent pool, combined with global communications, makes it almost incumbent upon American businesses to find ways to be the most efficient.”
The future looks bright for outsourced and offshored services. Woolley predicts, “Outsourcing will continue to gain ground as companies focus on their core capabilities and rely on third party service organizations to manage their facility infrastructure.”
Jansen envisions the same type of long-term scenario for offshoring. “It’s a big market which is going to continue to grow and become more sophisticated over time,” he says.
Today, it no longer seems strange to see various companies’ employees throughout a facility, completing tasks formerly performed by in-house teams. With the entire world as a potential service provider, facility managers can run more efficient operations than ever before.
This article was based on interviews with Hopkins, Jansen, Tinney, Vaneck, and Woolley.