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Evolutions in next-generation integrated facilities management (IFM) outsourcing contracts: Implications for corporate real estate, facilities management and procurement executives

Trascent’s global corporate real estate advisor, Monte Marcum shares his expert perspectives in an in-depth article, exploring what companies are doing in their next-generation IFM outsourcing effots and how these strategies both influence and react to developments in IFM suppliers’ service offerings.

ABSTRACT

As companies continue on the integrated facilities management (IFM) outsourcing journey, corporate real estate (CRE), facilities management (FM) and procurement executives must evolve their sourcing strategies from first-generation approaches to accommodate shifts in internal goals and objectives and respond to changes in the supplier industry. This paper explores what companies are doing in their next-generation IFM outsourcing efforts and how these strategies both influence and react to developments in IFM suppliers’ service offerings. Characterized by multi-regional approaches and simplified versions of their first-generation contracts, cornerstones of these shifting strategies include addressing innovation and a broader view of total facility operating costs. Practical insights drawn from companies’ experiences and lessons learned in overcoming issues will offer guidance to firms that are either considering starting the IFM journey or enhancing their existing program.

NEXT-GENERATION IFM OUTSOURCING

The outsourcing industry as a whole uses the term generation to describe a company’s outsourcing maturity and divides it into first-generation and next- generation contract terms — whether the function is information technology (IT), human resources (HR), financing and accounting or facilities services.
First generation refers to the initial time a company outsources facilities management (FM) using an integrated model. These deals usually include some degree of transferring internal client staff to the supplier whose duties are primarily related to FM. Existing contracts and internal staff are shifted to an integrated facilities management (IFM) supplier who combines an integrated self-delivery model with subcontracted services. Next-generation clients are those in any subsequent contract term beyond the first contract. The new contract could be a transfer from one supplier to another, a re negotiated contract extension or renewal with the incumbent supplier. As companies progress the maturity of their outsourcing practice, their objectives typically follow a commensurate level of sophistication, as outlined in Figure 1.

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