Speaking at the 12th annual Shared Services Outsourcing Network Conference in Amsterdam, Claudio Altini (director within KPMG’s shared services and outsourcing advisory practice) suggested that the desire to reduce costs or shrink headcount is no longer the main driving force behind business decisions to outsource key operations, despite the return to recession.
Altini also argued that continued economic uncertainty has forced the outsourcing industry to mature.
He said: “All the evidence suggests that organisations are expanding the services they outsource, but it’s no longer accurate to say that they are turning to third party suppliers just to reduce costs. Today’s challenge is much more about searching for the next level of value, which means ripping up the traditional outsourcing contract and replacing it with guarantees that assure value for money.”
Continuing the theme, Altini stressed: “Too often, outsourcing relationships have broken down in days gone by because of mixed messages around the three Rs – rates, results and responsibilities. Now, however, businesses are no longer prepared to accept standard terms and conditions for outsourcing their core services. They want proof that service delivery arrangements are flexible, can move with the strategic needs of an organisation and will meet the targets demanded by stakeholders.”
In conclusion, Altini explained: “Changing attitudes also mean that the old model of ‘cheapest deal wins’ is unsustainable. The next level of value will see contracts where performance and price are more intrinsically linked and where governance comes to the fore so that there’s no doubt in terms of where responsibilities lie. The key to the future of the outsourcing industry now lies in simplifying agreements and innovation around charging models, not a pricing model where the cheapest deal wins the day.”
Financial savings “the biggest driver” for outsourcing FM
However, Altini’s view of the business landscape is not supported in a survey published only last Thursday by FM World, the official journal and website of the British Institute of Facilities Management.
Of the 130 respondents to the survey, over 80% said financial savings were the reason for outsourcing their facilities management operations. That said, only 67% claimed the savings targets pinpointed were in fact reached.
According to the Interserve-commissioned report, entitled ‘The Changing Shape of Facilities Management Procurement’, the next most important reason for outsourcing was to improve service levels. This was cited by 64% of all respondents. Just over half of respondents said that had already transpired.
Other reasons for outsourcing were apparently less common, among them the desire to achieve better technical expertise, to transfer risk and having the chance to focus on the organisation’s core business.
The survey is the first in a series planned by the Sheffield Business School and, according to Tim Davidson-Hague (head of business engagement at Sheffield Hallam University, Business School), it does tease out some important issues.
You can read more intuitive comment on this issue by accessing FM World’s excellent official website.
- For clarity, half of the survey’s 130 respondents emanated from organisations of between 1,000 and 9,999 employees where facilities management budgets were less than GB pound 5 million
- 20% of respondents were from medium-size organisations of between 250 and 999 employees and 18% were small businesses
- Nearly 80% of respondents have both in-house and outsourced facilities management services and a third choose to outsource more than a third of all FM operations
Current thinking in the security guarding space
The changing nature of procurement models in the security guarding arena was outlined last Monday at IFSEC International 2012. In the IFSEC International Centre Stage Theatre at Hall 5 in Birmingham’s NEC, five of the sector’s foremost practitioners examined the single service route to market, where only security solutions are provided by the services partner, as well as the multi-service/Total FM approach.
Speaking on the day were Geoff Zeidler (md for Securitas Security Services in the UK and Ireland), Peter Webster (CEO at Corps Security), Bob Forsyth (managing director at MITIE Total Security Management), Shaun Cowlam (director of security with the OCS Group UK) and Andrew King, sales and marketing direct for G4S Security Solutions UK.
- Look out for a fulsome report on this session at conference on Info4Security in due course
- In the meantime, access some of the PowerPoint presentations made on the day by clicking on the relevant links below
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