The First Facility Management Blog

For over two decades, sourcing for services across both IT and business process sectors has gone global, with services providers from various countries offering a multitude of competencies. The globalization of service delivery has caused vigorous debate as industry, government, and the media have argued its impact on the U.S. economy.

In response to this (along with changes in cost structures due to the current economy), many IT service providers have been reconsidering U.S. locations as potential sourcing destinations, including lower cost, mid-sized metropolitan areas and rural communities. Many companies have found that low cost domestic sourcing can offer a key solution, complement global strategies, and help both U.S. and foreign firms expand their reach in the U.S.

“In today’s economic climate, everyone must find ways to work smarter and in a more efficient manner,” said Jeff Lande, executive vice president, TechAmerica. “Companies, governments, and others need the best talent at affordable rates, and many enterprises have moved to a global delivery model to innovate and execute on a 24/7 cycle. Since some of the best resources are right next door, increased attention is being given to sourcing to lower cost, domestic regions as part of an enterprise’s overall strategy.

“It is important to note that when companies are evaluating domestic locations, they are doing so in the context of a global environment,” continued Lande. “Some companies will be looking for a low cost domestic location as an alternative to an offshore location, while others will be looking for a domestic location to complement their global strategy. Foreign based companies may be looking at a U.S. destination to build local capacity, expand services, and gain market access. No matter the reason, the framework and model described in this report can be utilized.”

TechAmerica Foundation’s new report, Low Cost Domestic Sourcing: A Guide To Location Selection, provides a framework to help government agencies and private companies work through the evaluation process. For a pdf summarizing the report, click this link.

Aside from huge bankrolls, new stadiums, and diva players, the Dallas Cowboys and New York Yankees now have another thing in common. They have teamed up to form Legends Hospitality Management LLC;, a Newark, NJ-based food service provider designed to rival more traditional concession outsourcing firms like Sodexo and Aramark. Each team will own about one third of Legends, with Goldman Sachs picking up the remainder.

Despite having little or no experience in this area, the initial focus of the company will be on operating catering, concessions, retail merchandising, and other facility management enterprises for major sports and entertainment facilities. Legends will handle services at the new, state-of-the-art Yankees and Cowboys stadiums (set to open in 2009) on a multi-year basis. The intention is to expand beyond these anchor teams to provide services to professional and college sports teams and other event facilities worldwide.

In a pre-recorded message played during a recent press conference, George Steinbrenner (owner of the New York Yankees) and Jerry Jones (owner of the Dallas Cowboys) chat about the goals of the new venture:

“What this is about,” Jones said.

“Is for the fans,” said Steinbrenner.

“That’s right,” Jones said.

Richard Sandomir of the New York Times writes:

The teams vowed to rewrite the script for serving food to fans in their and other facilities, for those in the regular seats and the better-heeled ones in the luxury suites.

“It’s the nonsuite holders where we hope to see the biggest jump in satisfaction,” said Mike Rawlings, the Legends chairman, and a former Pizza Hut president, who cited research saying only 31% of fans are satisfied with ballpark customer service.

He promised faster service, shorter lines and hot food that will stay hot.

He did not say what a beer would cost the average fan but stressed how sports fans, even in a bad economy, are more concerned with quality than price.

“Franchise owners want happy fans,” Rawlings said.

“They want them at game day.”

In a recent press release, Hal Steinbrenner, co-chairman of the New York Yankees explained, “The old model of stadium concessions is broken. Fans want and deserve a better experience for their sports entertainment dollar. Working with Legends to leverage the talent and experience resident in the Yankees’ and Cowboys’ organizations will enable us to set a higher bar for sports franchises while delivering greater value to fans.”

Said Rawlings, “Our mission at Legends is simple. We want to become the authority on fan experience so that we can provide team and stadium owners, athletic directors, and venue operators with innovative ways to build business value for their sports franchises off the playing field. While we’ll leverage the experience of our leadership team and the Yankees and Cowboys organizations, we also fully intend to broaden and deepen our capabilities in the coming years through a combination of acquisitions, strategic partnerships, and continued internal growth.”

So watch out lunch lady, the Cowboys and Yankees are aiming for your hairnet and meatloaf.

Recruitment Process Outsourcing (RPO) is growing rapidly and has the potential to be a multi-billion dollar market, taking advantage of the trend towards single process deals in human resources outsourcing. This is according to the latest report by independent market analysis firm Datamonitor. The report—”Opportunities for recruitment process outsourcing in a changing HRO market”—estimates the global RPO market in 2007 to be worth $720m and forecasts it will grow by 22% in 2008 to $880m, surpassing the $1bn level in 2009. According to the report, demand is predominately from Fortune 1000 companies in the U.S., but the market is growing rapidly in the U.K. and continental Europe and is beginning to gain traction in the Asia Pacific region.

While RPO vendors claim to reduce costs by up to 40% in some cases, it is the lure of recruiting a higher quality workforce that is driving growth. Although the strategic importance of recruitment means quality will remain of utmost importance, it is likely in an economic downturn that it is those who can deliver on both quality and price that will succeed. “Despite the expectation that outsourcing will thrive as companies search for ways to cut costs, increased unemployment will result in lower business volumes which will be reflected in the variable price nature of RPO contracts. But, this will be mitigated by the increasing demand for RPO from new clients,” says Patrick O’Brien, IT and BPO analyst at Datamonitor and author of the report. “For RPO to continue its rapid growth in the near term, vendors may have to go to market by pricing more aggressively as recruitment will need to be seen as a primary function for easy cost reduction among company processes.”

RPO vendors are split over the use of offshore provision. Many players have little experience or understanding of how to derive the fullest benefits from RPO, while others see it as unworkable in recruitment services which require constant contact with both the client organization and, using the client‚s brand, with candidates.

Approximately half of RPO vendors have some offshore workforce, mainly carrying out tasks around name generation, sourcing, early screening of resumes and other administrative duties. A few have moved tasks which involve contact with the candidate offshore as per customer demand.

“While there is a lot of resistance from vendors, the increasing competitiveness of the market and the growing focus on cost cutting in the economic downturn will push vendors into examining ways in which to begin to increase the use of offshore delivery,” says O’Brien.

The first half of 2008 has seen a wave of acquisitions as vendors attempt to build out their recruitment expertise, technology capabilities and geographic footprint. A number of competing vendors still need to broaden their capabilities, and many of the larger vendors are looking to expand further overseas.

Some companies have put forward global request for proposals (RFPs), but these have subsequently been split into regions and handed to different vendors. The one-vendor global deal has not arrived yet, but a number of vendors believe that a breakthrough will occur in the next 12 months. The key reason for the break-up of global RFPs has been the fact that vendors do not have the capabilities to deliver on an international basis. Many have taken heed and are busy investing in international expansion, acquiring companies, building a global set of processes and forming partnerships with vendors in other regions.