Branching out

The Womens Institute notwithstanding, both government and opposition like to use Europe as their favourite political football. But to the providers of outsourced facilities management services, Europe is an opportunity waiting to be exploited.

The trouble is that after a promising start in the mid-1990s, talk of the development of a European-wide market for facilities services went rather quiet. When in 1996 computer giant IBM appointed Johnson Controls to take over the management of its 2.5 million m2 of European, African and Middle Eastern facilities it was hailed, in certain quarters, as the harbinger of a new pan-European trend towards outsourcing of facilities management. It did not quite work out that way.

There are, with hindsight, perfectly understandable reasons for this. But crucially, some of these reasons are disappearing and other factors are coming into play that may see the market for facilities management services come into its own as a European – and perhaps global – phenomenon.

There are probably two main supply side reasons why facilities management contracting has not previously developed a fully rounded European dimension. David King, managing director of Sodexho Facilities Management, part of the French group best known for contract catering, says: ‘The period between 1992 and 1996 was fairly fertile ground for the development of facilities management, but there were a variety of styles.’ Some suppliers were, in effect, sophisticated managing agents, while others were service providers. As a result the market discipline was never clearly defined.

Also, says, King: ‘Until fairly recently facilities management has been seen very much as an Anglo-Saxon concept.’ It was not easy to convince prospective clients in, say, France of the benefits of outsourcing.

A myriad of political, regulatory and – perhaps crucially – cultural differences across Europe made impressive statements of intent devilishly hard to deliver. To take a simple example from Sodexho’s original core business, contract catering, how easy is it to imagine an English style works canteen being implemented in a French or Italian workplace?

But over the past year or two, several factors have emerged that could change all this. One, according to Ron Adam, director of operations and projects at HQ Global Workplaces and chair of the UK chapter of international property managers’ body IDRC, has been consolidation in the chartered surveying sector. ‘Many facilities management people [consultants and services providers] came from a property management background. Until recently, many of the “dots on the map” [showing offices] were affiliations. It was a tenuous chain,’ he says.

Consolidation has created a credible global network. As a result, something else emerges: property firms that have previously been used to transaction-based work are learning to broaden their focus beyond doing a deal.

Add to this wider changes in the economic environment – several years of management textbooks waxing lyrical about shareholder value have concentrated the minds of prospective customers on the need to focus on core operations much more effectively. Then there are the the huge mergers of the recent past. Vodafone and Mannesman may have been the most spectacular, but virtually every business sector has seen the creation of genuinely global businesses.

And something else has happened. Guy Holden, UK director of marketing at Johnson Controls says: ‘We now have well established global processes, but their application does vary locally.’ Those cultural sensitivities are more closely integrated into facilities management thinking. ‘That’s not something you can learn overnight,’ says Holden.

In short, the core outsourcing industry has been on a very steep learning curve. ‘The one thing we’ve learned,’ says Holden, ‘is that there is no “vanilla” version of facilities management.’

A combination of a steep learning curve and the entry of serious new players is at the root of the regained attraction of Europe as a marketplace.

Ian Cundell

Running parallel to these changes, a series of deals have re-ignited awareness of opportunities available on the Continent. The creation of Trillium, Citex and Mapeley started the ball rolling, taking their cue from the private finance initiative. The PFI idea, combined with pressure to deliver shareholder value, has spawned a corporate version, with many large companies seeing property as a key item from which to release cash. That entices the investment banks.

Anything that attracts backing from serious US investment banks gains credibility by default. Crucially US banks, like other US investors, see the UK as part of a much wider European market.

More recently new players have entered the field. In May US real estate service provider Trammell Crow and the UK’s FPDSavills launched a joint venture, Trammell Crow Savills, to provide pan-European facilities management services. Swedish construction giant Skanska created a new facilities division, bought Ericsson Real Estate & Services, and declared its intent to enter the broader service market. In its annual report it said it was seeking a UK acquisition.

A combination of a steep learning curve and the entry of serious new players is at the root of the regained attraction of Europe as a marketplace for facilities management services. There are now service firms with well developed infrastructure, with greater experience of the opportunities and limitations that the market holds. Johnson Controls’ Holden says: ‘We’re seeing organisations with the ability to deliver [in multiple markets].’

There are still challenges to address. Not least is the need to drive home the cultural lessons. Holden agrees with Sodexho’s King on the Anglo-Saxon nature of early practice. ‘Well established processes in the UK needed steep learning curves to adapt elsewhere,’ he says. The trick is to apply consistency to leverage the benefits of outsourced facilities management, while being sensitive to local preferences. ‘You need to share and compare to deliver best practice,’ he says.

Changes to supply side attitudes and organisation, combined with the desire to release resources on the occupier side, are at the root of the development of a pan-European market. Adam says: ‘From the IDRC viewpoint, the global service provider is very much a hot topic.’

So, if facilities management providers have climbed significantly up the learning curve, what next?

Adam believes that consultants will lead the way. ‘They will help people put in place policies and procedures,’ he says. Then a key role will be to educate local managers, because, just as the discipline is relatively young even in the UK, it is in its infancy in many other countries.

It is likely that more players will enter the market. ISG (formerly Interior plc) is establishing Eurica as a service provider. Although its immediate focus is on consolidating the UK operation, group marketing director Julian Barlow says the group aims to be pan-European in the mid-term, but adds: ‘It’s opportunity driven. If customers want it [now] we’d help.’

And as the European market develops, it could well broaden. At Sodexho, King observes: ‘In the UK an organisation may have had years of in-house delivery. Changing that culture can still be hard. In other countries it is more difficult. But then, in former Soviet Union countries you are going from the 18th century to the 21st. You are starting from scratch and they are very open to clever ideas. There are very good development opportunities.’

But possibly the most important development to watch for – a potentially enormous opportunity on a European scale – is the development of asset based outsourcing as the corporate PFI concept takes hold. The large multi-disciplinary facilities management firms may yet find themselves parts of even larger consortia. It is more than conceivable that large corporations, governments and perhaps European institutions will generate deals that make the the groundbreaking Department of Social Security’s Prime project, in its third year of operation by Trillium, look small beer.