For Facilities Management Service providers entering the market
In this two-part series, Ryan Darnell, Executive Director-Services, Khidmah, blogs about FM service providers entering the market and how FM departments are reviewing to outsource or deliver in-house services…
With the Facilities Management market in the Middle East estimated at $892 billion it is no wonder that many companies view FM as a potential complimentary and lucrative business. But why do so many companies seemingly fail to deliver on self-delivering in-house FM services and where do new service providers go so wrong? While the market may have huge potential for stable returns, so many companies underestimate just what it takes to succeed in FM and how to best structure the service in their Organisation.
FM is high revenue but also a low margin business which relies on leveraging of investment, management and equipment over specialised and large contracts. Many new companies entering the market see the potential market revenue and attractiveness of a stable income to complement their existing business but fail to understand the investment required and just how low the margins can be when competing in an outsourced market where many clients still only award proposals to the lowest bidder without any qualitative analysis.
The FM market has some of the tightest margins across the Real Estate sector and coupled with the investment required to setup a new company, it can be sometime before providers are able to break even and begin paying dividends back to investors. Leveraging computer aided Facilities Management systems, equipment and support functions in a developing market means that providers must either build size and scalability to offset this investment. But the investment does not stop there. Training of staff, building a health and safety culture and ensuring the highest qualities in procurement all require additional reinvestment back into the business if an FM provider seeks to continue to differentiate themselves.
In more developed markets FM providers gear themselves towards a target market or niche area while forming strategic partnerships to allow them to focus on their core business.
This could be as niche as only carrying our data center cleaning through to providing Facilities Management to only corporate clients while outsourcing all direct labor. With the market still not maturing and many FM’s struggling to maintain quality on strategic partnerships, many service providers continue to build their inhouse service offers and having to reinvest back into the business.
With new FM providers continuing to enter the market and others requiring growth to offset investment in the business and survive, the FM market is not set to get easier for service providers competing across the Middle East. If there was one piece of advice I could give to any organisation looking to enter the Facilities Management market it would be this – Facilities Management is has its own unique business model and should not be added as an additional business line to an existing business. The investment in systems, people, quality and the speed in which we operate does not bode well inside other business models.