Strengthening real estate management - Outsourcing as an option. Structuring the outsourcing decision making process

In the Finnish real estate sector, new perspectives have been emerging, partly due to international influences. A structural change towards outsourcing can be seen as well: the interest to outsource FM, PM and AM related services is increasing rapidly. The culture of procuring and producing real estate management services is developing. The possibilities and challenges of outsourcing are examined in a two-year research project Strengthening real estate management - outsourcing as an option. The project is carried out by VTT Building and Transport and KTI Finland, and it is a part of Rembrand (real estate management and services) -technology programme financed by Tekes. In the first phase of the project, the outsourcing decision-making process for real estate management related services was modelled. The outsourcing decision is a strategic alignment of an organisation: it's about finding an optimised boundary between core business and activities to be outsourced. The aim of the study was to define the strategic starting points of an outsourcing decision, how the activities to be outsourced are identified, how the decision-making process proceeds and what are the critical success factors in the process. Outsourcing decision-making processes within some companies acting in the real estate sector were studied, in order to assess the decision-making as carried out in the companies. As a result, an outsourcing decision-making model was sketched. The phases of the decision process are: 1. Real estate management outsourcing strategy. In the first phase, the processes that could be outsourced are identified. The outsourcing strategy is based on the organisation's business strategy. 2. Setting up the decision process. In the second phase, it is decided whether to initiate the sourcing evaluation. If the evaluation is initiated, the decision process is set up: the decision making team is formed, personnel and communications strategies are designed, the factors that influence the process are identified. 3. Assessing outsourcing. This is the key activity in the decision-making process. The outsourcing goals, risks, risk mitigation are analysed. Different sourcing options are evaluated based on the analyses. 4. Designing the outsourcing relationship. The aim is to design a relationship that will deliver the goals that are set. The organisations should define how to evaluate the outsourcing arrangement and the relationship in the future. The model can be used by the functionaries of client organisations making decisions on the sourcing of the real estate management services. The service providers can also use the model to develop marketing strategies and service concepts.