Magazine article Journal of Property Management

Scoring in the Outsourcing Game

Magazine article Journal of Property Management

Scoring in the Outsourcing Game

Article excerpt

As corporations face ongoing pressure to score big in the productivity game, outsourcing remains as a way to give real estate departments that extra boost. Real estate managers with the right moves and know-how to play on the corporate team may find outsourcing a continued source of new management business.

According to a recent Delphi study on the future of corporate real estate conducted by NACORE and the American Real Estate Society (ARES), the need or desire to outsource is not driven primarily by cost savings. Instead, the corporation may need higher quality or faster delivery of the product or service, or it may need expertise that it doesn't have in-house.

Says Tim Taylor, director of corporate real estate and corporate procurement, AT&T Capital Corp.: "We outsource [real estate business] not to reduce cycle times and to improve the skills of its real estate personnel. In addition, many firms outsource those activities that are not its core competencies.

In another study conducted for NACORE last year by Deloitte & Touche LLP, only 51 percent of the companies surveyed believed that outsourcing had generated cost savings for their company. However, 68 percent said they were getting better service by outsourcing.

Both studies agreed that more and more companies are turning to outsourcing. Moreover, this upward trend is not expected to diminish when firms become more profitable. The NACORE/ARES study concluded, "If it makes sense to 'outsource' a task or activity today when profits are lower, it will make sense to outsource these same tasks when profits increase."

The ongoing availability of outsourcing business is the good news for real estate service providers. The bad news is that the competition is fierce, particularly in the area of property management. The study by Deloitte & Touche found that property management is relatively low on the list of activities being outsourced [ILLUSTRATION FOR FIGURE 1 OMITTED], although corporations are doing it.

In addition, the most common way corporations are reducing costs is by using less space to get the same amount of work done. The result for property managers, says Mark Klender, practice leader for Corporate Real Estate Consulting at Deloitte & Touche, is that "the pie is getting smaller in terms of what's out there to be managed."

Moreover, many corporations are doing what they call "out-tasking" rather than outsourcing. In out-tasking, the firm hires contractors to do specific tasks, but retains managerial control. "No one is going to look after your corporate interest better than a corporate employee," says Taylor.

With the competition for out-sourcing business so fierce, a group of corporate real estate executives tell what gives a real estate service firm the edge in obtaining assignments.

Relationships Count

In today's market, many corporations are looking to create an ongoing partnership with their service providers. They are looking for companies that recognize this and act accordingly.

* Do your homework. "What turns us off is that people put us into categories without doing any homework," says James J. Delaney, senior vice president and director of real estate for Johnson & Higgins. "They'll say, 'you're just like insurance companies' as opposed to insurance brokers, and that's quite a different world." Although Johnson & Higgins is a private company, "you can find out enough about us if you go to the effort of doing so," Delaney says. "We want people to have investigated the company they're asking to work with."

* Build a relationship. Be willing to take on the jobs that are not very glamorous or profitable in order to build or maintain that long-term relationship where you pick up the good assignments.

Johnson & Higgins looks for another type of relationship. Says Delaney, "One of the qualifying factors from our point of view is we'll deal basically with people who are insurance clients of our firm. …

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