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Understanding the 5 Major Growth Drivers of Facilities Management (FM)

Worldwide, the Facilities Management (FM) outsourcing market is evolving. It is not just expanding but evolving. The industry is transforming from a predominantly single service local outsourcing model to an integrated services delivery model.

The changing demands in the market now require a new way of thinking about the delivery of FM. Facilities Management must learn to keep up with the revolutionary changes if it has to remain competitive.

Understanding the Evolution of Facilities Management and its Impact

The evolution of Facilities Management is a development journey of a dynamic Facilities Management model.

The 1980’s was the Single-source Outsourcing Era. During this time, Facility Management (FM) transitioned from a soft FM outsourcing to hard FM outsourcing. By 1990, FM automation started integrating Contract Management and Property Management. This was the start of the Service Integration Era.

By 2000, FM expanded its integration to include Energy Management and Value driven Design. And, in 2010, Facilities Management (FM) took on a strategic initiative to increase delivery of value to clients.

Come 2020’s, Facilities Management (FM) is expected to take on sustainability enhancements in the delivery of increasing value to clients.

Each evolution showed the progressive trajectory growth of Facilities Management (FM). At the same time, each phase reflects the increasing demand of customers for value and efficiency in service delivery.

However, for companies to better manage the changing dynamics of Facilities Management, companies must have a good understanding of the 5 Major Growth Drivers essential in Facilities Management.

The 5 Major Growth Drivers Essential in Facilities Management

The 5 Major Growth Drivers serve as a guidepost in the transition of FM suppliers from mere service providers to strategic partners.  These are the driving force that will continue to push FM to reshape to take advantage of evolving customer requirements.

1. Regulatory & Economic Development

Economic pressure from regulatory requirements and increased competition have been pushing companies to look at how they conduct business. Strategic partners are now selected based on their ability to deliver and manage facility services while taking on associated risk.

In effect, organizations are looking for partners that will take on certain FM responsibilities. Likewise, clients are now looking for additional value-added services, improved cost performance, and mitigated risk in delivering cost certainty.

2. Outsourcing

In the 2000s, penetration of outsourced facility has increased considerably resulting in expected growth of Facilities Management by 4-5%.

Outsourcing has increased dramatically in the emerging Asia Pacific market. Yet, the size of the markets participating can offset the increased rate of penetration in the Pacific market. In fact, more than 50% of the market growth (revenue) within the Integrated Facilities Management (IFM) is linked to demand in North America and Europe.

This increased demand for outsourcing and service integration is driving growth in the global IFM market.

3. Service Integration

Service Integration necessitates specific contract standards and language that differentiates ot from a single service contract. Service Integration contracts are more performance based. It sets a standard and requires the IFM provider to maintain the standard without prescribing how.

With the growth of Service Integration, the revenue generated by the global IFM market is predicted to expand at a growing rate of 6-8%. North America is positioned to remain the largest IFM market. For now, more than 50% of the predicted growth is attributed to North America and Europe. But by late 2020s, it is predicted that China’s outsourcing culture will start accepting modern IFM solutions.

4. Contract Procurement

Service providers will now be required to perform on a broader scope both geographically and across multiple lines of services. Greater value is now being derived through reduced contracts by centralized procurement.

In 2000, just a couple of international contracts exist industry wide. By 2010, the industry boasted in increase to 30 or more contracts with an average revenue of $100 – $500 million. By 2020, this is still expected to increase again and again.

5. Value-added Services

Customers are increasingly demanding that FM service providers have an intimate knowledge of their corporate mission and the competence to address the company’s specific needs. The decision to outsource is moving beyond the traditional core vs non-core and cost reduction parameters.

Facilities Management is now expected to have the ability to comply with internal and external regulations. They must have the financial stability to assume the responsibility and cover the risk of non-compliance. Further, FM providers must have the ability to deliver and integrate a uniform set of facility services internationally.

Companies now expect Facilities Management providers to deliver solutions that help drive corporate initiatives.

  • Social: Have concern for their staff, their customers and their communities.
  • Environmental: Be a good corporate citizen that focuses on the impact of its environmental footprint.
  • Economical: Must ensure shareholder value currently and in the future.

Customers are now more demanding. They expect Facilities Management to continue to be more efficient. In fact, today’s customers demand FM service providers to benchmark their quality of output against recognized best practices in the Facilities Management industry.

Interested in gaining more understanding on the 5 Major Growth Drivers of Facilities Management?  You can learn more and download an editable PowerPoint about 5 Major Growth Driver of Facilities Management here on the Flevy documents marketplace.

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About Joseph Robinson

Joseph Robinson is the Vice President of Strategy at Flevy. Flevy is the marketplace for best practices in business management. Learn how the Fortune 100 and global consulting firms do it. Improve the growth and efficiency of your organization by leveraging Flevy's library of best practice methodologies and templates. The documents at Flevy (https://flevy.com) are of the same caliber as those produced by top-tier management consulting firms, like McKinsey, BCG, Bain, and Accenture. Most were developed by seasoned executives and consultants with 20+ years of experience. Flevy covers 200+ management topics, ranging from Digital Transformation to Growth Strategy to Lean Management. You can peruse a full list of management topics available on Flevy here. Prior to Flevy, Joseph worked as an Associate at BCG and holds an MBA from the Sloan School of Management at MIT. You can connect with Joseph on LinkedIn here.

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