Growing Market

22 April 2009

As the Netherlands prepares to host EFMC 2009 next June, Jelle van der Kluit and Ellen Gijsbers examine research by consultants, Twynstra Gudde and FMN that gives insight into trends in the Dutch FM sector

IN THE NETHERLANDS ALMOST *£31.7BN (41.BN) ARE SPENT on facility management, of which £19.9bn is estimated to be currently in outsourced services to FM companies supplying FM services to Dutch organisations. The FM market in the Netherlands is growing. Research showed a decline in the total
market size from 2003 to 2005, but in 2007 this was reversed and the market grew again to its largest ever (see table below).

Concurrent with the increase in turnover in the outsourced market, there is also an increase in the
number of employees, and in 2007, more than 390,000 people were recorded as working for FM
suppliers in the Netherlands. That is more than 16,000 more than in 2005 (378,000), but the total
number of employees is still less than the numbers recorded in 2000 and 2003 when employment by FM suppliers peaked at more than 400,000.

Calculated another way, by taking the total number of employees working for FM suppliers as a ratio of the size of the outsourced market, it can be concluded that the amount of annual turnover per employee is rising from an average of £39,500 per employee in 2000 to turnover £50,500 per employee in 2007 – that’s a 30 percent increase.

Future developments
In addition to the quantitative data of the research project, there has also been a focus on qualitative
information. Working with the Dutch FM association, FMN, Twynstra Gudde invited FMN’s 2,250+ members who work as facility managers, facility management suppliers, students, and FM consultants, to complete an online questionnaire.

The questionnaire asked the respondents both about the latest developments they currently see or experience, and about what kind of trends they expect will be important over the next five years in FM.

Among current key trends identified are:
● Hospitality: There is an increased focus on hospitality concepts in the public sector such as social services and healthcare and in the private sector where corporates are becoming increasingly aware of these concepts.
● Integrated facility management: the trend towards delivery of all FM services including the management function by one FM supplier (known in Netherlands, as Integrated Facility Management) will continue to grow rapidly. Both these developments are a direct result of the growing interest in outsourcing FM services (see table below).
● Internationalisation: This is in line with the trend of business globalization and the emergence of
international FM providers, and cross-border FM organisations within multinational organisations.
● Sustainability: The focus on sustainability reflects the increasing focus on corporate social responsibility and the environment. In many aspects of FM there are developments going on that support a more ‘green’ environment.
Examples can be seen particularly in the fleet management industry (hybrid cars), the building and construction industry (energy saving designs) and in the laundry market (industrial clothes and
linen cleaning).

Dutch FM professionals also expect to see an increase in large suppliers working together by setting up partnerships with other suppliers. Researchers found that 69 percent of in house FMs want collaboration with their FM suppliers on equal terms, but only 56 percent of the FM suppliers felt that collaboration with their clients was equal. In addition, some 73 percent of the Dutch FMs answered that their expectations
regarding FM contracts are only partly met by the suppliers. In other words, we see that suppliers will have to put some effort in their relationship with the facility manager, or upgrade their servicelevel to meet the expectations.

The questionnaire asked in-house FMs what they thought was really important when selecting an FM supplier, and it also asked FM suppliers what they thought the in-house FM client’s selection priorities would be. The issue of pricing demonstrated the largest differences. FM suppliers expect to be more judged on their offered price and less on their ‘professionalism’ - although in fact they wanted the latter to have a higher priority among their potential clients. As a result, FM suppliers expect not to be judged on
their level of professionalism. Conversely, inhouse FMs responded that they do take the level of professionalism as an important selection criteria. So actually, both in-house FMs and FM suppliers agree that the level of professionalism is a very important selection criteria.

Innovation
Some 73 percent of FM suppliers surveyed saidthat the need for innovation was of great importance. The focus of their innovation activities is improving existing products, their services and their marketing/sales approach primarily to meet “The wishes and needs of our current customer group”, adapting to “the major
developments/ trends that influence the customer”, and developing their “own corecompetencies.”

The research also revealed detailed information on 15 individual FM market sectors. A number of FM services show notable revenue increases in their market sectors, the largest percentage growth being in integrated facility management, waste management and security.

The total turnover in integrated facility
management increased from £27m (2005) to £40m (2007) (managed services excluding revenues from operations). The market size of waste management between 2005 and 2007 rose by nearly £1bn, and the growing demand for safety and security gave the security market a boost to its current level of £1.5bn.

FM departments in Dutch organisations are becoming increasingly responsible for managing the real estate and business accommodation. As a result, the researchers also examined statistics from the real estate market, such as the total finance charges for organisations occupying or owning the property in which its business is conducted. Twynstra Gudde estimated that in the Netherlands this amounted to about £25bn.

Taking the total the market size of FM with these real estate and housing costs, then the total market (FM + estates) is over £57bn (2007).
* €/ £ exchange rate used by the author is €1=£0.7774

● Jelle van der Kluit (jvk@tg.nl) and Ellen Gijsbers (egi@tg.nl) both work as FM consultants for Twynstra Gudde, an independent management consultancy based in the Netherlands www.twynstragudde.com. Jelle will present research into the Dutch and British FM markets with Qi Moss at EFMC2009 in
Amsterdam 16-17 June