The Womens Institute notwithstanding, both Government and opposition like to use Europe as their favourite political football. But to the facilities management industry — -like most other industries — Europe is simply an opportunity waiting to be exploited.
The trouble is that FM has, after a promising start in the mid-1990s, gone a bit quiet on the development of a European-wide industry. When, in 1996, computer giant IBM appointed Johnson Controls to take over the management of its 26m sq ft of European, African and Middle Eastern facilities it was hailed, in some quarters, as the harbinger of a pan-European trend towards outsourcing of facilities management. It did not quite work out that way.
There are, with hindsight, perfectly understandable reasons for this. But crucially, some of these reasons are disappearing and other factors are coming into play that may see the FM business come into its own as a European — and perhaps global — industry.
There are probably two main supply side reasons that FM has not previously developed a fully rounded European dimension. David King, managing director of Sodexho Facilities Management, part of the French group best known for its contract catering, says: ‘The period between 1992 and 1996 was fairly fertile ground for the development of FM, but there were a variety of styles.’ Some were, in effect, sophisticated managing agents, while others were service providers. As a result the discipline itself was never clearly defined.
Also, says, King, ‘Until fairly recently FM has been seen very much as an Anglo-Saxon concept.’ It was not easy to convince prospective clients in, say, France of the benefits.
A myriad of political, regulatory and — perhaps crucially — cultural differences across Europe made impressive statements of intent devilishly hard to deliver. To take an simple example from Sodexho’s original core business, contract catering, how easy is it to imagine an English style works canteen being implemented in a French or Italian workplace?
But over the past year or two, several factors have emerged that could change all this. Ron Adam, director of operations and projects at HQ Global Workplaces and chair of the UK chapter of IDRC says that one has been consolidation in the chartered surveying sector. ‘Many FM people came from a property management background. Until recently, many of the "dots on the map" [showing offices] were affiliations. It was a tenuous chain,’ he says. Consolidation has created a credible global network. As a result of this consolidation something else emerges: firms that have previously be used to transaction based work are learning to broaden their focus beyond doing a deal.
Add to this wider changes in the economic envirnment. Several years of management textbooks waxing lyrical about shareholder value have concentrated the minds of prospect customers on the need for focus on core operations much more effectively than previously. Then consider some of the huge mergers of the recent past. Vodafone and Mannesman may have been the most spectacular, but virtually every business sector has seen the creation of genuinely global, businesses.
And something else has happened. Guy Holden, UK director of marketing at Johnson Controls says that ‘We now have a well established global processes, but its application does vary locally.’ Those cultural sensitivities are more closely integrated into FM thinking. ‘That’s not something you can learn overnight,’ says Holden.
In short, the core FM industry has been on a very steep learning curve. ‘The one thing we’ve learned,’ says Holden,’ is that there is no "vanilla" version of FM.’
Running parallel to these changes, a series of deals have re-ignited awareness of opportunities available on the Continent. The creation of Trillium, Citex and Mapeley started the ball rolling, taking their cue from the Private Finance Initiative. The PFI idea, combined with pressure to deliver shareholder value, has spawned a corporate version, with many large corporations seeing property as a key item from which to release cash. It is that released cash which attracts the investment banks.
Anything that attracts backing from serious US investment banks gains credibility by default. Crucially US banks, like other US investors, see the UK as part of a much wider European market.
More recently new players have entered the field. In May US real estate service provider Trammell Crow and FPDSavills launch a joint venture, Trammell Crow Savills, to provide pan-European FM services. Swedish construction giant Skanska created a new FM division, bought Ericsson Real Estate & Services and declared its intent to enter the broader service market. In its annual report it was said it was seeking a UK acquisition.
A combination of a steep learning curve and the entry of serious new players is at the root of the regained attraction of Europe as an FM marketplace. There are now service firms with well developed infrastructure, with greater experience of the opportunities and limitations that market holds. Johnson Controls’ Holden says ‘We’re seeing organisations with the ability to deliver [in multiple markets].’
There are still challenges to address. Not least is the need to drive home the cultural lessons. Holden agrees with Sodexho’s King on the Anglo-Saxon nature of early FM practice. ‘Well established processes in the UK needed steep learning curves to adapt elsewhere,’ he says. The trick is to apply consistency to leverage the benefits of outsourced FM, while being sensitive to local preferences. ‘You need to share and compare to deliver best practice,’ he says.
Changes to supply side attitudes and organisation, combined with the desire to release resources on the occupier side, then, are at the root of modern development of pan-European FM. Ron Adam says: ‘From the IDRC viewpoint, the global service provider is very much a hot topic.’
So, if FM firms have climbed significantly up the learning curve, what next?
Adam believes that consultants will lead the way. ‘They will help people put in place policies and procedures,’ he says. Then a key role will be to educate local managers, because, just as the discipline is relatively young even in the UK, it is in its infancy in many other countries.
It is likely that more players will enter the market. ISG — formerly Interior plc — is establishing Eurica [correct] as a service provider in the UK. Although its immediate focus is on consolidating the UK operation, Julian Barlow, group marketing director, says the group aims to be pan-European in the mid-term, but adds ‘It’s opportunity driven. If customers want it [now] we’d help.’
And as the European market develops, it could well broaden. At Sodexho, David King observes: ‘In the UK an organisation may have had years of in-house delivery. Changing that culture can still be hard. In other countries it is more difficult. But then, in former Soviet Union countries you are going from the 18th century to the 21st. You are starting from scratch and they are very open to clever ideas. There are very good development opportunities.’
But possibly the most important development to watch for — a potentially enormous opportunity on a European scale — is the development of asset based outsourcing as the coporate PFI concept takes hold. The large multi-disciplinary FM firms may yet find themselves parts of even larger consortia. It is more than conceivable that large corporations governments and perhaps European institutions will generate deals which make the Department of Social Security’s Prime project, in its third year of operation by Trillium, look small beer.
If such deals develop, the hiatus of the 1990s in which FM firms discovered the subtleties needed to operate across borders, will have been well spent.
© 2000 Ian Cundell