Rising costs combined with a talent shortage poses numerous challenges for many organizations to maintain operations, let alone grow. Nearly 70 percent of companies report a shortage of skilled workers, which puts additional burdens on staff members to pick up the slack. For many companies, the solution is outsourcing management. Whether it’s IT, facilities management, or business process operations, outsourcing provides a way for companies to fill in the talent gaps and augment their workforce. By turning to outside experts in functional areas, companies get a cost-efficient way to leverage specific expertise while keeping in-house resources focused on core business operations.
So, is outsourcing right for you? In this white paper, we’ll examine:
- The growing use of outsourcing
- Which industries are benefiting
- The benefits and challenges associated with outsourcing
- Outsourcing challenges with brokers or maintenance groups
- How the right technology can overcome outsourcing challenges
The growing use of outsourcing
As companies look to reduce costs and streamline operations to maximize profitability, they are increasingly turning to outsourcing. Outsourcing certain aspects of their business allows companies to focus on what they do best.
The movement toward outsourcing IT has grown exponentially in today’s always-connected world. Technology has made working with third-party IT providers and outsourcing partners simpler, especially in a time where remote and distributed workflow has become common.
With a tight labor market, many organizations are finding they can fulfill their needs by outsourcing and using resources located outside their geographical constraints. Whether it’s IT, facilities maintenance and management, asset management, or other areas, outsourcing is the future in the corporate world.
Spending in the global market for outsourced facilities management is expected to reach $3 trillion by 2027, and that’s just one area that organizations are outsourcing. Outsourcing is growing significantly year-over-year at a rate of more than 6 percent. At the same time, he industry needs new solutions.
As companies evaluate their operating model, they are looking for any efficiency they can get to impact the bottom line. More than half of all companies in North America, Europe, and the Middle East are now outsourcing facilities management and maintenance.
While there are plenty of benefits to outsourcing, the major driver is cost. An analysis by McKinsey showed outsourcing facilities management can reduce spending by an average of 15 percent. Today, outsourcing is less about task completion and more about multilayered partnerships to support a company’s core business.
Which industries are outsourcing facilities management?
As consolidation happens across industries, facilities management becomes even more complex. Even companies that have outsourced in the past find that they may be working with a mix of local providers that require management at the local level and negate any synergies created at the corporate level.
For smaller organizations, outsourcing may be a simple way to lower costs and relieve administrative burdens. For larger companies, outsourcing is a way to consolidate and streamline operations. Here are just a few of the industries finding benefits from outsourcing their facility management and maintenance.
As consolidation continues in the residential market, organizations found disconnected and scattered site providers. Pricing, availability, and quality were all over the place. It also required a lot of hands-on management. Site managers had to hire vendors, manage quality control, negotiate prices, and manage third-party networks.
As companies grow, they need a better way to centralize their outsourcing to manage costs efficiently and reduce the burden on management units. The right outsourcing partner can eliminate the burden, improve workflow, and allow residential companies to focus on the revenue side of the business.
Whether it’s routine maintenance or turns and rehabs, outsourcing is an efficient way to streamline operations.
When people are choosing where to invest their money, banks must present a professional image at all times to engender trust and stability. This means taking care of routine maintenance and focusing on the appearance of both the interior and exterior of the facility. Financial institutions can’t afford to have their business appear poorly maintained. Whether it’s landscaping, snow and ice removal, or general building maintenance, outsourcing helps control costs and maintain a pristine appearance. It also helps keep facilities accessible to customers.
By outsourcing necessary, but non-strategic resources, financial institutions can focus on their core business and reduce operational risk. Optimizing facilities management can lead to significant savings as high as 8 percent annually.
In retail, consistent brand experience is a crucial part of establishing and maintaining customer trust. When customers know what they can expect at each locations, they’re more likely to keep coming back for more. The flip side is true, too. Just one bad experience can sour them on a company. After three bad experiences, nearly three-quarters of customers say they’ll likely never return.
Retail operations are increasingly outsourcing accounting, marketing, IT, and logistics in addition to facilities management, including snow and ice removal, landscaping, floor care, and reactive and preventative maintenance.
Differences in climate, property layout, and municipal codes can make maintaining exterior brand standards across hundreds of sites stressful and time-consuming. The right outsourcing partner can help to maintain brand consistency across locations.
Food service and restaurants
Downtime in the foodservice industry is a profit-killer. Restaurants are outsourcing preventative maintenance to ensure maximum uptime. This also helps reduce emergency maintenance needs, reducing average ticket costs, the number of trouble tickets, and work order frequency. Recurring maintenance translates to lower overall maintenance costs, fewer expensive replacements of assets, and fewer disruptions.
Healthcare and doctor’s offices
Many healthcare providers and facilities managers for groups of doctor’s offices are outsourcing backend functions and facilities maintenance. Rather than handling tasks internally or hiring staff, outsourcing provides an efficient way to keep facilities looking clean and well-maintained without having to take on the burden of hands-on management.
In healthcare, the conditions of your facilities can have a significant impact on how patients feel about the quality of care. It sets the stage for expectations and impacts the patient experience, which has a direct effect on patient satisfaction.
Logistics and warehousing
Property managers in logistics and warehouses are often dealing with their own facility and managing tenants by outsourcing reactive and recurring maintenance for both. This is another industry that’s going through significant consolidation and growth, buying portfolios, and becoming aggregators in the industry. With a larger portfolio, the focus is on growth. Outsourcing lets them maintain that focus without having to worry about their facilities.
The benefit of outsourcing facilities management
Why are so many industries finding outsourcing beneficial? Here are some of the top reasons organizations are outsourcing their facilities management and maintenance.
Reduce the internal management burden
Whether you are managing a single location or a portfolio of real estate, facilities management and maintenance takes time. Procuring, vetting, scheduling, and managing quality assurance can be time-consuming. In today’s tight labor market, it can sometimes be difficult to even find quality service providers. Outsourcing takes this burden off a team, so they can redirect resources to focus on core business activities and revenue-generating activities.
Flexibility and scalability
When jobs start to mount up, in-house teams may be stretched too thin to get everything done at once. With outsourcing, you can scale on-demand to fulfill your needs. This can be especially important for seasonal maintenance of cyclical demands.
This can be a lifesaver during new acquisitions or when major projects come up. Outsourcing can help you handle as much as you need whether you are augmenting your in-house team or outsourcing entire projects.
Access experienced, skilled workers
Not every company has a team of skilled workers that have deep expertise in every area of maintenance and facility management. Outsourcing provides access to specialists with the experience to get the job done right. Because they specialize in certain areas, they will be familiar with best practices, safety and compliance regulations, and innovative approaches.
Clear focus on priorities
When you outsource, your team can focus on company objectives rather than dealing with maintenance and facilities management issues. At the same time, your service providers focus on your priorities with minimal involvement needed from your staff.
Outsourcing Turnover Concerns
Turnover is a problem for nearly every company, especially over the past few years. If you have staff turnover or you’re unable to fill every position, outsourcing provides the continuity you need to get the work done. Turnover is outsourced to someone else, so they worry about it and not you. Your outsourcing partner takes on the risk.
The challenges with outsourcing
When considering outsourcing for various aspects of a business, it's essential to weigh the advantages against potential drawbacks. While outsourcing can offer several benefits, including cost savings and access to specialized skills, there are certain challenges that come with it. Each of the factors below play a role in determining whether outsourcing is the right fit for an organization's specific needs and goals.
Unlike a staff person, an outsourced worker’s schedule isn't directly managed. If they are already tied up on other jobs, it may require waiting to get something taken care of.
Without a contract and significantly large volume, there might not be the ability to get sufficient volume discounts. With markups, management, and administrative fees, it may be difficult to outsource jobs at an affordable price.
Lack of transparency
It might not be easy to know exactly how dollars are being spent and whether the level of service is reflected in the price. Getting a single monthly invoice might seem to make things easier, but it might not provide the level of detail needed to effectively gauge the ROI. Without the granular detail from an in-house employee, it can be more challenging to know whether the service is truly cost-efficient.
Loss of control
Without visibility into data, it can also be more difficult to monitor what’s happening across locations and implement best practices. Depending on your outsourcing agreement, multiple providers might come into a facility. This might mean staff needs to bring new contractors up to speed every time they come to the facility.
Lack of localized resources
With continued consolidation in multiple industries, many companies are entering new markets and may lack the localized resources for efficient outsourcing.
Outsourcing challenges with brokers and maintenance groups
Many companies turn to brokers or maintenance groups, such as integrated facilities management companies, to overcome these challenges. This does reduce the burden to find and manage providers separately and allows you to consolidate your efforts in one place to streamline operations.
However, it also comes with its own set of challenges.
Working with Traditional Brokers
Even if the broker or facilities management company has moved into a more digital solution for management, there is still likely cost for an increased overhead to manage many parts of the process manually. The right tech solution, however, can overcome the challenges associated with outsourcing so you can realize the benefits.
Today, so much of the process can be automated to save you time and money. With the right tech solutions, you have greater visibility and access to the entire process. Here are some of the ways this benefits you. Let us show you what we can do for you and how we can solve your property management challenges. Contact SMS today for a product demo.