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European FM report predicts cleaning market of the future20th of January 2015
Dutch reporter for ECJ Nico Lemmens of ISS Facility Services looks at the findings of a new European FM report.
During the last few decades multi or integrated facility services contracts have made their entry into European markets, although there are variations in different countries’ markets. It undoubtedly would have serious consequences for the position of single service suppliers like cleaning companies, should these market shares become substantial.
Cleaning companies would then become subcontractors to the multi or integrated service companies, unless they would transform themselves through diversification into such companies. The question is: is such a development to be expected?
To find an answer, we take a look at the findings of a Frost & Sullivan report on the European Integrated Facility Management (IFM) Market, published in August of 2014.
The key findings in short. With some variation by country, growth in the European IFM market hovers between three and eight per cent, driven by more outsourcing and service integration. The penetration of IFM is far from its saturation level. Support service and building operations and maintenance are the cornerstones of an IFM contract, while environmental services (especially energy management) are gaining importance most significantly.
IFM providers from various backgrounds venture into offering energy management and property management services.
The need to save costs and to focus on core operations pushes further externalisation of FM services. To maximise cost savings, end users have accepted integrated solutions quickly.
Demand for IFM will grow across all major end-user sectors, with offices retaining the dominant position.
Through a revised and comprehensive facility management programme, organisations can save significant amounts of money, specifically through improved productivity from human assets. Organisations are seeing the reduction of secondary spending through the outsourcing of FM operations as a way of dealing with squeezed profit margins, especially in times of economic difficulties.
Many procurement departments of large organisations are seeking to reduce the number of suppliers. Companies with several sites in a country have increasingly been demanding one supplier across all their sites to ensure further economies of scale and to standardise service performance. In 2013 there was a continuing demand even for multi-country contracts. These are often large-scale contracts, which can include just a few countries or span across the globe.
On the other hand, there are also some restraints in the development of the IFM market, the most important of which are the lack of culture for IFM and the relative unpopularity of subcontracting. Moreover, the number of IFM suppliers which can independently deliver an IFM contract is still relatively low. Subcontracting is often negatively regarded and despite investment of IFM suppliers to widen their service portfolio, most of them are still perceived as weak on either soft or hard services.
Therefore end users still see single service as likely to deliver a better quality. The conclusion seems to be an ambivalent one: IFM will not sweep the market, but the single service supplier’s business environment certainly is changing through a developing demand for services and the entry into the market of new providers from different backgrounds.