Facilities Management Outsourcing In The UK Information Technology Essay

Facilities Management Outsourcing In The UK Information Technology EssayChapter One served as an entranceway to the dissertation, forming the motivation for the interrogation project on the facility steering outsourcing in the UK, together with a brief discussion on factors embodied in the study. Factors such(prenominal) as the problem, lit geological erature review research methodology and limitations of the study argon discussed.This is the appropriate theoretical paradigm of the study, the main focus of which is to specify the facility steering outsoaring trend in the UK, together with related concepts. In the next paragraphs, As per research literature author discusses the definition of outsourcing, to understand the meaning of outsourcing from different views of various(a) authors, and thus lead to conclusions of what outsourcing means.Outsourcing is the long- status results-orientated relationship with an external service provider for activities tradition everyy performed within the political party. Burn et al., (2002) say Outsourcing usu each(prenominal)y applies to a complete rail line parade and implies a degree of carriageial control and risk on the discontinue of the provider.Aaratunga et al.(2008) is in the favour of FM, according to him FM helps government activitys as well as employees as a whole to get the full benefit by the integration of property and holdr related functions. It provides dynamic facilities policies which help in the coevals of corporate values. It reduces the problems of space allocation and charging. In improving the environmental condition it rump be a great help. Direct and contract employment nookie to a fault be improved by the introduction of FM.Facility troubleis aninterdisciplinaryfield primarily devoted to the maintenance and care of commercial or institutional buildings, such ashotels,resorts,schools,office complexes,sports arenasorconvention centres. Duties whitethorn include the care ofair conditioni ng,electric,power,plumbingandlightingsystemscleaningdecorationyard keepingandsecurity. Some or all of these duties can be assisted by computer programs. These duties can be thought of as non-core or offer function, because they are not the primary commerce (taken in the broadest sense of the word) of the featureer organization (Alexander, Keith, 1996).According to Barrett (1995) in that location are three approaches for opting the whole of FM services or part of it namely out-sourced, in-house or a hybrid of both. The firm can choose any of the approach in order to get the FM services. The approach taken by the firm depends on the concerns or priorities already decided by the firm. In case of support providers some organizations goes for the totally in-house option, period some are in the favour of certain main services which are possible, the third type of organization is the one who uses the combination of both. Many companies take on seduced that in order to add value to its customers, they must single-mindedly concentrate on their core competencies and leave the authorisening of vital, but yet conviction consuming and labor intensive peripheral activities to other more qualified operators confirms Sherratt (2000).2.2. What is outsourcingOutsourcing means to have a contract with another company or individual to do a particular function. Now a solar day al to the highest degree every organization outsources some of its departments in some way. Usually, that function is being outsourced which is considered non-core to the ancestry. Outsourcing takes many an(prenominal) forms. Organizations still hire service providers to handle distinct descent processes (Sourcingmag, 2009).Source MacroTechs business process outsourcing modelA term often used in the context of outsourcing is vertical integration. erect integration refers to the level of ownership of activities either backward into the put up chain or forward towards the customers or end-user of the ware and service. Vertical integration is similar to the outsourcing concept in that it is concerned with the decision on whether to perform an activity internally or source it from an external supplier. Another term that is often used in manufacturing context is make-or-buy. It is arguable at make or buy is most appropriate term in context of outsourcing as it implies that there should be an evaluation of the suitability of either internal or external supply whereas the term outsourcing implies that the decision to use an external supplier has already been do without any consideration whether is it appropriate for the organization. Its necessary for the successful application of outsourcing to analyze whether it is necessary for the organization and how the outsourcing process should be managed (McIvor, Ronan, 2005).2.2.1 Reasons behind outsourcingIn todays business evolution, companies seek to remain strong or gain strength in an ecommerce-enabled marketplace. Likewise th e factors driving outsourcing have evolved from a focus on solving financial problems to IT or certain business processes which contribute to the competitive success of an organization through enhanced capability, improved flexibility, add-ond readiness or enhanced revivify to market. Outsourcing has evolved from a survival tactic to a strategic competitive tool touted by even the most respected prudence consultants says Van Bon (2002249).The areas which have not run on traditional lines can be introduced by the in the raw ideas, technologies and new(a) findings with the help of outsourcing which has a great positional in bringing the sincere approach. It can help in upgrading the system or skills of the workers. It has a potential in bringing the reduced cost technologies by specializations and large scale economies. Outsourcing can help in upgrading the assets (Beitz,1998).Accoring to Heath (2010) outsourcing facilities caution enables an organization to focus on its core business functions. Organization can gain many value-driven and many slight visible benefits including-Flexibility Increase and decrease staffing levels as demand, without having to interview, hire, or train a new employee or be forced to lay off employees when business s baseborn-spiriteds.Productivity Because you are tapping into a pool of well-trained paids who have access to the best processes, you immediately increase your productivity.Expert Assistance Rely on experts in facilities focusing to ensure that your company is operating efficiently and cost in effect.Better Service By having the right personnel addressable to handle your facility management issues, your customers bequeath benefit as well.The cost-savings alone can make outsourcing management an attractive idea instead of paying salary, bonuses, benefits, and taxes, as well as the administrative cost associated with those items, organization willl simply pay a flat rate that makes it easy to budget and pla n.2.2.2 Outsourcing relationship management process (the modern outsourcing model)In the new era of outsourcing, the customer regards the seller as a long-term asset that is a source of ongoing value to the company. An asset, time and resources are dedicated to the management of a relationship, thereby maximizing its value. The customers resources are held accountable for extracting value from the outsourcing relationship. This is a more strategic approach.Good relationship management requires thought, planning, coordination and dedication of resources to be successful. Management cannot pass by the importance of this structure and its supporting processes. Good relationship management can be used to fix many ills inherent in a sourcing transaction. small-arm this area of expertise is relatively immature, it is nonetheless important if the promise of outsourcing is to be realized concludes Van Bon (2002).Often a person called the knob contract manager of an outsourcing deal is le ft to determine what was just negotiated after the outsourcing contract is signed. Van Bon (2002 258) has shown that in a lot of situations this is a recipe for disaster, when it comes to realizing the benefits of outsourcing. Fortunately in todays world, organizations realize the importance of processes and a sound governance model by the time the deal is finalized. The big questions to be asked is how does one go about building into the process and how does one operate the process after an outsourcing deal is done?When an outsourcing deal has taken place, interdependency exists between the devil companies. Both the vendor and the customer hence change, as the one affects the other. Therefore both parties must understand the cost drivers of the two infrastructures and coordinate changes so as not to introduce additional be into the process. Both the customer and the vendor must behave as an integrated supply chain rather than as win or lose adversaries.MTW (2010) open in this research that the FM market has become increasingly characterized by closer relationships between suppliers and contractors, as greater efficiencies and lower procurement costs are sought. During 2009, several FM companies established programs specifically designed to improve supplier relationships to ensure that material and equipment suppliers were aligned with customer relationship principles and accountable for their own supply chains.2.3. Types of outsourcingFor the purpose of this study and base on the area of study on which the author is focusing, there are two types of outsourcing models identified by Greaver, F. Maurice (1999)-Total outsourcing In this type of outsourcing, organizations outsource all of their activities. It is easiest way to in the easiest way to get good results with less effort. Service provide so same things but they ready better results, mostly organization choose it as it saves money.Selective outsourcing Some times organization does not want to outs ource all the activities of an individual, function or process. In Facility Management industry if an organization wants to outsource its whole building control but keeps automated entry exit control in their own system to make sure who come in and leaves the building and when. Most successful experiences were associated with a reasoned, incremental and selective approach to outsourcing which is increasingly reflected in the structure of the market confirms Willcocks and Fitzgerald (1994).Table 2.1 Types of Outsourcing and the risks associated with them.In-houseCommitmentSelective OutsourcingTotal OutsourcingTotalAttitudeCore strategical AssetMixed PortfolioNon-Core Necessary Cost homo ClassProvisionProvidersIT Employees Loyal to Businessthe Horses for CoursesVendorStrategic PartnerEmphasisValue focusValue for MoneyMoneyAdded Value?Dangers superior Cost Insular UnresponsiveManagementOverheadExploitation bySuppliersUnbalancedRisk/Reward InnovationSource Alexander (1996)This table 2 .1 shows that all ar governments have inherent risks associated with them, in addition to the above types of outsourcing, Other types of outsourcing services as defined by Glomark-Governan (2006) include Business Process Outsourcing (BPO) which involves the transfer of management and execution of one or more complete business processes or entire business functions to an external service provider.Research done by Currie and Willcocks (1997180) concludes that most companies chose selective outsourcing. In the United States only 8% has gone total outsourcing and in the United Kingdom only 2%. This figure as low since total outsourcing is very risky. Data collected on total outsourcing indicates a 35% failure rate. With total outsourcing, vendors build in a high shift attain cost. Total outsourcing should be done on a joint risk-reward basis and never on a fee-for service (time and material) contract. It is recommended that re-negotiation stages be included in the pilot burner contra ct of big deals.2.4 Advantages of outsourcingTurban et al. (2002) describes pursuance advantages of outsourcingFINANCIALAvoid heavy capital investment, thereby releasing funds for other uses make better cash be given and cost accountabilityRealize cost benefits from economies of scale, and from sharing computer housing, hardware, software and personnelRelease extensive office spaceTECHNICALBe withdraw to chose software due to a wider range of hardwareAchieve technological improvements more easilyHave greater access to technical skillsMANAGEMENT brook on developing and running core business activityEliminate need to recruit and retain competent FM staffHUMAN RESOURCES depict on specialist skills, available from a pool of expertise, when neededEnrich career development opportunities for staffQUALITYCl archaeozoic define service levelsImprove performance accountabilityEarn quality accreditationFLEXIBILITYRespond right away to business demands2.5 Disadvantages of outsourcingIn spite of the numerous advantages mentioned above, there can also be less desirable consequences. Most concerns are explored further (Bucki, James. 2010).Availability The external provider is not always available full time and may be committed to other clients.Confidentiality The vendor will probably need to keep some of the customers records off-site while simultaneously working with competitors.Cost The customer may perceive that unit costs for the external provider are high. Termination costs of an agreement can also be very high.Perceived neediness of accountability and commitment There is a possibility that a customer can end up with a provider that does not share the risks of the client and is committed to the agreement.2.6 Outsourcing decision makingResearch done by Caruso (1996) ground that the decision to outsource non-core competencies takes place at corporate level in 50% of the cases. A third takes place at the divisional level and 15% at operational level. Normally other dep artments such as finance, Marketing and compassionate Resources are also involved in the decision. These departments play a significant role in the selection process. The final decision on which vendor to use is done at corporate level.Glomark-Governans (2006) also found that the finance department is involved with the cost calculations and the human Resources department concentrates on the smooth transition of employees. The Human Resources department is also responsible for manageing employee moral throughout the company before, during and after the outsourcing transition has taken place. The Marketing department would then explain the new strategic relationship of the company with the vendor customer and concentrate on the benefits the customer will reap from the outsourcing arrangement.Vendors should be selected based on their total capabilities, not just price or a single aspect of what they can do. References and reputation are only two of the criteria that should be used w hen making the final decision on which vendor to contract. A reasonable price should be negotiated and performance measures put in place. When selecting a vendor, close attention should be remunerative to how candidates measure up in the areas of financial strength, business experience, business development, support services and business arrangements.Willcocks et al., (1997) also found that assessing outsourcing intangible benefits also requires a heedful investigation of links between the technical, the operational, and the economic effects of the benefit. The result provides a sound framework for identifying the measurable variable needed for the economic quantification. As a simple exampleTechnical benefit an on-line sales force Web service enables sales professionals ina company to produce reports with key content designed for executives in their accounts.Operational benefit with the new reports available, the sales representatives can increase the number of meetings with se nior managers in their accountsEconomic benefit an increase in meetings with senior managers will increase the close rate.The close rate (number of orders closed as a percent of proposals presented) is the measured variable that can be used to define the benefit formula (means of economic quantification).2.7 Facilities management outsourcingSince cresting as a trend in the middle-to-late 80s, the outsourcing of facilities management has now simply become a way of doing business. In the last decade, many facilities managers have exchanged the traditional carts and hard hats for seats in boardrooms with titles like VP of capital assets or VP of real estate. At meetings, they build strong cases for maintaining existing facilities persuading their brethren that buildings which hold their value are as important to the core mission of their organization as developing a new product or pouring millions into new research (Helene, McEntee, 2000).Facilities management has changed significant ly since the early 1990s. In the early days, such tasks were decentralized. Store or district managers made service vendor selections and managed repair decisions. Often, those providing services were relatives or friends. The corporate headquarters usually had no view into facilities issues at the store level (Barrett, P.,Baldry, D., 2003).By the mid 1990s, centralization became the norm. Major tasks, such as procurement and new construction, became centralized at the home office to achieve buying power. Centralization also found its way to facilities management. Facility maintenance departments began to grow, adding headcount to manage the needs of multiple locations while offloading tasks from onsite managers (Barrett, P. Baldry, D., 2003).By the late 1990s, web-based management solutions emerged, known as computerized maintenance management systems (CMMSs). The promise of a CMMS was the connection of all interested parties, including the store manager, facilities manager and se rvice vendors. Unfortunately, service providers often did not have computers and the malls were not connected to the lucre, conduct to system inefficiencies (Nakayama, M. Sutcliffe, N. 2005).By about 2002, affordable Internet access and the proliferation of broadband connections led to the emergence of powerful new facility management solutions. Leveraging portals and email, facilities management was embracing modern technology to improve communication theory and accountability (Nakayama, M. Sutcliffe, N. 2005).Blumberg (1998) presents new viewpoint to explain the FM outsourcing in terms of its positional benefits. FM outsourcing provides the organization many benefits. It helps in reducing the cost of the organization that opt it as the service provider company provides high quality services with the comparatively low cost. It is useful in improving the operating competency as the workload is shared. The net effect will be on the returns, they will increase andIn contrast to Bloomberg (1998) and Kotabe (1992), if organization outsource its FM sector it will lead to the loss of overall market performance. He says that innovation will be overleap in case of reliance on outsourcing. When outsourcer does not want to be innovative he outsources its FM as it is much easier in contrast to bollocks in innovations. The end result is the decline in the technological advancements which is the base in the innovations in the product and process.According to Nutt (1999) FM is improving the overall efficiency of the organization. It is a huge deportment in establishing values for all the facilities seekers. Corporations, individual employees, clients, operating units are the chief facilities seekers. FM is growing day by day and because of its increasing demand this market has created a much more competitive marketplace. Different types of FM companies has been established to fulfil its increasing demand such as FM contractors, professional FM institutions, FM suppl iers, FM consultants and in-house FM teams.2.8 Developing a facilities management structureAtkin, B. Brooks, A (2009) states that for the efficient and effectively management of facilities, hardy strategies must be demonstrable in the framework of organizations strategic business plan and accommodation strategy. These strategy should include development of strategic objectives and a business plan for the FM function. The process of developing a Fm strategy is demonstrated in Figure 2.2, which shows three main stages with their elements.These three stages are-Strategic analysisDeveloping solutionsStrategy implementationFigure 2.2Source Atkin, B. Brooks, A (2009)There is no single formulation of facilities management that will fit all situations. Nonetheless, the concept of the informed client function is common to all situations. Most buildings represent substantial investments for organisations and usually have to accommodate and support a range of activities in the organisation s core business, for which an appropriate environment must be created in buildings that may not have been designed for the purposes for which they are now used. Yet, no issue how well focused on organisation might be on its core business, it cannot lose sight of the supporting services the non-core business. The relationship between two is shown in the figure 2.3.Organisations may have already considered the distinction between their core business and non-core business (such as security, payroll or cleaning) as part of the drive to deliver customer satisfaction and achieve best value (Atkins, Brian Brooks, Adrian, 2009).Figure 2.3Source Atkins, Brian Brooks, Adrian (2009).2.9 Facilities management Information TechnologyHistory of computer-aided facilities management (CAFM) dates back to the early 1960s when space foremold and inventory applications were first run on expensive mainframe computers by people writing their own programming codes. With the enactment of time architect ural planning and construction project management were added to the suite of applications running on the systems shown in figure 2.4. The number of people writing their own code based on office automation software increased dramatically with the advent of smaller computers. Islands of automation introduced in the market during 1970s and 1980s, CAFM began to be used for other applications such as furniture inventory, lease management, aqsset management, and building cost accounting CMMS application such as maintenance management, cable management and security began during late 1980s and 1990s during the end of 1980s internet was introduced and it was revolution in the automated system. Many firms created their own softwares those fits in their organization ( subject area research council, 2001).Figure 2.4Space Asset CMMS (Computerized MaintenanceInventory Management Management System)1960s1970s1980s.1990s...2000sMainframe PC Islands CAFM InternetSource National research council (2 001)Today facilities managers use several software tools. Each of these tools processes and stores only specific information. Only FM specific tools are included in the following list, general tools like email, workflow, word processing belong to underlying IT base support (Redlein, Alexander, 2004).Computer Aided Facility Management Systems (CAFM)Geographic Information Systems (GIS) endeavor Resource Planning Systems (ERP)Building automated Systems (BA including security systems)Management Information system (MIS) (Business Data Warehouse Systems)As mentioned above, all of the tools are engaged in the day to day objective process. Even in one field one toll alone cannot handle or support all the needed processes. The following table 2.1 shows how the main basic processes of FM can be supported by the software systems (James, R. Watson, R., 2009)-Table 2.1Main processes and IT supportSupport ofCAFMERPBAMaintenanceDrawing, equipment locationMaintenance contracts, cost accounting, a ccusationTechnical data, status of equipmentSpace ManagementDrawing, current userCost accounting, transparencyTechnical dataTenant managementCurrent userTenancy agreement, rental feeTechnical resourcesSales / MarketingVisualization, adaptation to customers needsInformation systems, calculation uncommitted technical resourcesSource National institute of building sciencesComputer-aided facilities management system (CAFM)There are many Computer Aided Facility Management (CAFM) tools available today. They have become an essential tool for increasing and maintaining the efficient use of space in your buildings. As a planning tool, CAFM can help by creating trial layouts and comparing space efficiencies. CAFM helps vestige and control the use of assets like furniture and equipment. CAFM can help allocate asset costs to operating units and track employee movements. Many CAFM applications have options to aid in scheduling the use of shared space or maintenance routines like landscaping or snow removal. CAFM also enhances the effectiveness of facility safety and security. Following benefits could be achieved by implementing CAFM system (Teicholz, Eric, 1995)Increased Efficiency of Asset UtilizationAutomates space charge-backs based on your billing and reporting requirementsLink architectural drawings with facilities and infrastructure data, ensuring information is always accurateAllocates space usage and reports charge-backs with accuracy to avoid external or inter-departmental billing disputes. enterprisingness Resource Planning system (ERP)ERP is back office software which focuses on the key business functions of manufacturing, supply chain management,CRM, financial management andProject Management. A well implemented ERP solution will improve the efficiency of the enterprise, reduce money tied up in stock/work in progress, and run a Just in Time inventory system (BBC, 2005).Building automated system (BA)Building automationdescribes the functionality provided by th e control system of a building. A building automation system (BAS) is an example of adistributed control system. The control system is a computerized, intelligentnetworkof electronic devices, designed to monitor and control the mechanical and lighting systems in a building (Redlein, Alexander, 2004).BAS core functionality keeps the building climate within a specified range, provides lighting based on an occupancy schedule, and monitors system performance and device failures and provides email and/or text notifications to building engineering staff. The BAS functionality reduces building energy and maintenance costs when compared to a non-controlled building. A building controlled by a BAS is often referred to as an intelligent building system (Daintree Networks, 2009).As it mentioned in the section 2.7 that in around 2002, affordable Internet access and the proliferation of broadband connections led to the emergence of powerful new facility management solutions. Leveraging portals a nd email, facilities management was embracing modern technology to improve communications and accountability (Nakayama, M. Sutcliffe, N. 2005).2.10 The evolution of outsourcing in the FM marketCompanies have become more efficient at reducing costs, and this is sometimes difficult to do effectively through in-house facilities managers. They are often constrained by internal political pressures and vested interests, and often they lack the expertise to manage change. Change within a company is a major challenge to any chief executive. By outsourcing to professionals, the outsourcing company becomes the change agent and a company is able to re-engineer and reposition itself more quickly and efficiently says Jackson (1997).Figure 2.1 Trend in FM outsourcingSource Holzhhauzen 19999From traditional in-house facilities management, the trend moved towards contracting certain non-core competencies. It then developed into outsourcing non-core competencies to a number of outsourcing firms. Th e trend is now developing further to full facilities management, which takes the risk away form the customer and places it on the shoulders of a single vendor (Holzhhauzen 1999).Since the early 1990s FM has shows the tremendous growth, as different sectors and organizations are interested in control of operational efficiencies and cost. Now a day there is a trend in private companies to focus on the core competencies. So these companies are interested in adopting the outsourcing in order to increase the efficiency as well as output of a company (AMA Research, 2009).FM sector has shows tremendous success over the last 25 years. Many professional bodies are supporting the growing number of FM practitioners all over the world to establish this market as a worldwide brand. It has been controlled by the international network of FM educational providers who worked jointly with the professionals related to this field, they also have collaboration with the academic community which provides them with the unique and challenging ideas to develop this market. According to writer there is variety in the practice of FM but the main idea of its establishment remains the same which helps in maintaining its distinctiveness (Grimshaw, 2001).The back casting exercise provided an opportunity of reflecting on the short history of Facilities Management, charting its development and evolution. At the europiuman Facilities Management Conference in Manchester (EFMC08) the vision of a new oscillate of Facilities Management was proposed in response to the context of post-industrial cities. A leading role for FM in urban sustainability was envisaged, with an emphasis on innovation and creativity, community based planning and open sourcing (EFMC, 2008).1970s 1G Managed services, outsourcing Operationaltotal facilities management, CAFM1980s 2G Quality management, management agency Tacticalbenchmarking, FM processes, FIMS1990s 3G Partnering, re-engineering processes, Strategicknowledge m anagement, product innovation,sustainable facilities management2000s 4G Business processes, open innovation, usability, Transformationalservice excellence, transformational outsourcing,As Facilities Management enters a fifth decade and, perhaps a fifth generation in the development of Facilities Management, what will the next generation be like? (EFMC, 2008).2.10.1 Facilities management outsourcing trend in the worldEurope is now the worlds biggest market for outsourcing. In 2004, Europe accounted for 49%