During the IFMA's World Workplace, we had the chance to drive in to the Perspectives on the FM Market Development. Among others, we presented perspectives on: - The evolution of the Facility Industry - The drivers for growth in the Facility Management Industry - Changes in FM delivery Models - Changing demands require a new way of thinking

1. TITLE (MAIN)
Title (sub)
Perspectives on the FM
Market Development
Glenn Hodge, Vice President – Client Solutions, ISS Facilities Services, Inc.
Peter Ankerstjerne, CMO, ISS World Services A/S

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• TITLE (MAIN)
• Title (sub)
Peter Ankerstjerne
Chief Marketing Officer of ISS World Services A/S
since 2007
With ISS since June 1994
Based in Copenhagen, Denmark
Chair of the IFS Steering Group (Key Business
Development Initiative)
Member of IAOP's Strategic Advisory Board, Fellow
of RICS and former Trustee of IFMA Foundation
VP Clients Solutions, ISS Facility Services Inc
With ISS since 2011
Based in Phoenix, Arizona
ISS sponsor for IFMA – FMCC Council
28 years of experience in Engineering,
Operations and Finance roles both in
manufacturing and facilities
Glenn Hodge

5. Review Session Learning Objectives
The purpose of this session is to discuss the;
• Evolution of the FM industry from the 80’s
to present
• Identify the drivers for growth in the FM
industry
• Changes in FM delivery models
• Changing demands require a new way of
thinking
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6. EVOLUTION OF THE FM INDUSTRY
6

7. Evolution of FM from the 80’s through 2020
7
Copyright © 2014 IAOP. All Rights Reserved.
1980 1990 2000 2010 2020
Single Service
Outsourcing
Soft FM
Outsourcing
Hard FM
Outsourcing
FM Automation
(e.g. CAFM)
Contract
Management
Property
Management
Energy
Management
IT Services
PFI PPP/BTO
Offerings
Waste
Management
Value Driven
Design
Regional/Global
Contracts
BPO
Workplace Change
Management
Environmental
Performance
Sustainable Work
Space
Source; Adapted from Frost & Sullivan, February 2015
The evolution
of FM
Outsourcing
Service
Bundling
Service
Integration
Total
FM
Sustainability
Management
Workplace
Management
Managing
Intelligent
Buildings
Integrated
FM
Smart City
Integration
Business
Productivity
2015
2015 Hot Issues:
• Contract globalisation
• Service integration
• Business efficiency value propositions
• Vested Outsourcing
• Adoption of smart building solutions
• Active energy management services

8. Shift from in house delivery to service provider
• Large shift from in house to service supplier
• Service model moved from single to bundled service delivery
• Integrated service delivery will take more market share in the
future
• WMS (Workplace Management Solutions) and “office hotelling”
concepts are gaining new ground
8

9. Market is growing overall
9

10. IFM as a portion of total FM market
10

11. IFS vs IFM
• IFS: Integrated Facility Services
• IFM: Integrated Facility Management
For the purpose of this presentation:
IFS = IFM
11

12. IFS will continue to outgrow the market
12
• From the customer perspective
– Integration provides one point
of contact
– Increased transparency
through dealing with fewer
vendors
– Reduced points of
accountability
“It’s not part of our core business to take care of services such as cleaning and security. That is why we
choose to outsource them. It’s also more flexible to do so than to have these services in- house.”
- Nordic purchasing manager, Pharmaceutical Co, Sweden

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Tactical Management
Operational Management
Strategic Management
Services&Organizations
Standards&Language
Processes&Procedures
MgmtTools&Systems
Integration is (still) at the top of the agenda
FM and CRE

14. Increased Integration
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15. The internationalisation of the FM business
Drivers for internationalisation:
• Pressure to cut cost
• Int. pains – performance, productivity and retention of key personnel
• Corporate Real Estate IT HR with increased focus on:
- Lifestyle of work/NWOW, - Flexibility
- Collaboration, - Mobility
- Cost of operations - And movement of people
< 2000 2010
30-50 Int. contracts
Avg. turnover $ 100-500 mill
e.g. Motorola, Caterpillar, Shell
Pfizer, CSC, P&G, Kraft, HP
2020
>1,000 Int. contracts
Avg. turnover $ 50-800 mill
e.g. ?
1-2 Int. contracts
Avg. turnover $ 300 mill
e.g. IBM
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16. Market demand for value added services
16
• Generate greater Value
• Retain employees
• Drive the organizations whole
ecosystem –
– Social
– Environmental
– Economical
The market leaders are able to provide the client efficiency gains above mere outsourcing… innovation
is becoming key, and that requires scale.”
- Director General, Facilities Management Association

17. Regulatory changes influence customer behaviour
Cen15221 – 1-7
ISO/TC 267
17

18. DRIVERS FOR GROWTH IN THE
INDUSTRY
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19. Economic and environmental demands
Feeling the pressure:
• Economic pressures and
competition are pushing
companies to evaluate how they
do business
• Higher scrutiny after financial
scandals
• Broader environmental
requirements
• Increasing focus on Corporate
Social Responsibility
Looking for:
• Companies that are vested in the
corporations success
• Facility Leaders to maximize the
value of their corporate assets
• Innovators to deliver new ways of
providing service (increased
value)
• Trustees that will take care of their
employees as their own
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20. Nationalization and internationalization of purchasing
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• Cost pressures
• Drive for increased quality
• Demand for simplification and
standardization of services
• Reduction of internal soft costs
(procurement and finance)
estimated at 5-7%

21. Increased appetite for outsourcing
• Expected growth is 4-5%
• Outsourcing is growing across
– Regions
– Service lines
• Companies focus on core
activities
• Simplification and cost savings
are key drivers
21
“I would prefer moving to an integrated set-up with a single provider. It seems so much more
convenient than our current solution.”
- Purchasing manager, Pharmaceutical Co, India

22. 22
Value Add through outsourcing
A transparent and streamlined value chain makes
management more efficient and creates value:
Drive for efficiency – price, cost, performance and
service level dynamics
Doubled-up functions are easily eliminated
A single point of contact shortens and optimises
lines of communication
Risks are eliminated by transferring them to a
(reliable and sound) partner
Someone who mitigates these risks
Someone who protects the brand you are building
22

23. Market’s demand for increased value added
• The decision to outsource is moving beyond the traditional core vs.
non-core and cost reduction parameters
• Customer’s are demanding providers with e.g.
– knowledge and competencies to address the customer’s specific needs
– the ability to comply with CR and health, safety and environment standards
– (credible) risk transfer
– the ability to deliver a uniform set of services internationally
– The ability to integrate facility services
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24. 24
Key points when outsourcing
• Finding partners who can provide support in achieving strategic
goals and reaching overall success criteria
• Transfer financial and operational risks
• Strive for Management and Operational Excellence by outsourcing
processes and not only tasks
• Performance based on balancing quality & cost
• Ultimately striving for a Vested Partner
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24

25. 26
1
2
3
4
5
Quality Reputation Price Range National
coverage
International
coverage
Companies with > 354.1M USD in revenue Companies with < 354.1M USD in revenue
Source: Global customer interview program undertaken by a third party
Large customers care
as much about
reputation as they do
about price
Reputation is a more
important parameter
for large customers
than it is for small
customers
How important is each of the following criteria when purchasing facility services? (1-5)
4,6 4,4 4,3 4,3 4,2 4,1
1
2
3
4
5
Matching
geographic
scope
HSE/CSR
reputation
Price Ability to self-
deliver
Quality Matching
range of
services
IFS buyers rate self-
delivery criteria highly
How important are the following criteria in purchasing IFS for Multinational companies?
Service
range
Key drivers of outsourcing

26. CHANGES IN FM DELIVERY MODELS
27

27. Move from service delivery to service performance
• Integrated vs Independent
delivery
• Self delivery vs sub contracted
• People & process vs supply-
chain
– Managing service
– Output vs input specifications
• Value vs cost
28

28. Focus for Industries
• Focus on the key market drivers
• Determine what are your core
competencies
• Determine what makes you successful
• Determine what is core to your products
and services
– what is a prerequisite for you to be
competitive in your market
• Liberate resources by outsourcing of
“non-core” services
29

29. 30
The competitive landscape is changing
The FM/CRE market is big and continues to grow
Competition comes from many places and
continue to drive the development
Everybody is fighting for the same market
Strong need to develop the market and a shared
interest to define the industry
New entrants are re-defining the market
NWOW as a disruptive technology?
WeWork
Liquid Space
Regus
2’nd Home
Project
Management
New Ways
of Working
Assets (CRE)
Management
Technical
Management
Service
Management
Integrated
Facility
Management
30

30. CHANGING
DEMANDS
REQUIRE A NEW
WAY OF THINKING
31

31. Service Management 3.0
• Fostering a culture of Service
• Creating a sense of purpose
within the organization
• Engaging employees
• Leading instead of managing
32

32. 33
0%
20%
40%
60%
80%
100%
Time
Workload
Actual Workload
“Staffing to Peak Demand”
Efficient base organization
“Service on Demand”
Potential
Synergies
Services must become significantly more efficient
Efficient base organization
From “staffing to peak demand” to “service on demand”
at the same quality level or better!
Efficient base organization (on-site)
Self-delivery is a fundamental requirement:
Ability to integrate services and multi-task employees
Ability to take-over outsourced staff as new core
employees
Going from input to output specifications
Empowering front-line employees and provide them with more responsibility
Become more purpose-oriented and empower the frontline to deliver
CUSTOMER EXCELLENCE
Demand for increased ”service” experience
33

33. 34
Optimizing the Service Delivery System

34. Service delivery must be based on….
• What value the customer is getting from the service
• How total quality is perceived in customer relationships to facilitate
value creation
• How an organization will be able to deliver the perceived quality
• How the service delivery system should be developed and managed
• Empowering frontliners to meet customer value expectations
35
Excellent Service = Customer Perception minus Customer Expectation

35. Understanding Workplace Management
0 20 40 60 80 100
Hospitality services
Internal signage
Leisure facilities onsite or nearby
Health and safety provisions
Mail and post-room services
Reception areas
Atriums and communal areas
Access (e.g. lifts, stairways, ramps etc.)
Security
Parking (car, mororbike, bicycle)
General tidiness
Restaurant/ canteen
Washroom facilities/ showers
General cleanliness
Tea, coffee and other refreshment facilities
% of respondents 'very satisfied' % variance vs. 'Top 15 average'
Workplace Facilities Satisfaction Survey
Source: Leesman
Supporting customers
to win their war on
talent
Assisting to drive up
productivity and
efficiency
Supporting the brand
and reputation of the
customer…
…all at the right cost
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THANK YOU!
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