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Realty Cos Turn to Outsourcing to Reduce Costs

Tuesday, 20 September 2011, 05:13 Hrs
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Bangalore: Amid intense pressure to reduce costs and stay competitive, global realty firms are looking to hand over facility management operations to third parties and expect to see substantial growth in outsourcing such jobs over the next 12 months, according to a KPMG survey.

Facility management refers to the maintenance and care of commercial or institutional buildings such as hotels, resorts, schools, hospitals or office complexes.

The services include maintenance of electric fittings such as air conditioners and lighting systems, plumbing, cleaning, housekeeping and security. In the challenging economic scenario, the pressure to reduce costs and improve processes is intense, so companies have started looking to outsourcing of services to stay profitable.

According to a KPMG 2011 global real estate and facilities management (REFM) outsourcing survey, conducted among 200 respondents, 44 percent of REFM services buyers plan to increase their outsourcing spend over the next 12 months.

What is more, 72 percent of the service providers surveyed expect outsourcing demand to increase during the same period. The survey said in the near term (a period of three-six months), buyers were more bullish than service providers about the projected increase in outsourcing. It further said 50 percent of the buyers of REFM services said they plan to increase outsourcing over the next one to two quarters. In comparison, just 21 percent of service providers expect demand levels to increase during that period.

"Although some organisations are considering outsourcing REFM services for the first time, others that are already outsourcing are looking for opportunities to outsource more sites and services, as well as consolidate or restructure their current contracts to realise additional savings," said Ron Walker, the Principal and REFM sector leader in KPMG's Shared Services and Outsourcing Advisory group.

As per the survey, 70 percent of buyers and 75 percent of service providers identified reduced operating costs as the primary driver of REFM outsourcing. The second-most common driver cited by buyers (41 percent) was improvement of the performance of REFM processes, which was identified by 32 percent of service providers.

Among companies outsourcing REFM activities, the most common jobs related to workplace services, including cafeteria and amenity services. The second-most frequently outsourced REFM areas related to electrical and mechanical jobs and building repair work.
Source: PTI
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