Corporate Real Estate_2020 Service Delivery and Outsourcing Final Report

FINAL REPORT May 2012

The Future of Corporate Real Estate

and the Workplace

Service Delivery anD OutSOurcing

Principal Author

Kathy Brister

Contributing AuthorsBlake Layda, Jones Lang LaSalle

Kurt Ochalla, MBA, MCR, CEng,

Expense Management Solutions

Contributing EditorsJessica Beers, MCR, Senior Director, UGL Services

Hunter Fleshood, Capital One

Brandon Forde, Studley

Lisa Huls-Fry, Cassidy Turley

Connie Hughes, CCIM, CPM, Cassidy Turley

Sherri Parman, CPA, MBA, Capstan Advisors

Team LiaisonMelissa Securda, CoreNet Global

SERvIcE DEL IvERy AND OuTSOuRcINgFINAL REPORT May 2012

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CORPORATE REAL ESTATE 2020 FINAL REPORT: SERvICE dELIvERy ANd OuTSOuRCINg

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I. Introduction 4

II. Research Methodology 5-6

III. Executive Summary 7-11

IV. Historical Evolution of Service Delivery 12-18

V. Current State of Service Delivery 19-25

VI. Bold Statements 26-39A. Bold Statement 1 27-28 Real Estate business objectives and goals will become more integrated with Procurement and, therefore, more sophisticated and complex.B. Bold Statement 2 29-31 Vendors will become responsible for data access and usage as it becomes more widespread as a means of delivering corporate real estate strategy. C. Bold Statement 3 32-33 Clientele will drive service providers to grow their platforms globally.D. Bold Statement 4 34-35 Due to economic pressures, there will be continued consolidation of service providers, and we expect to see a nontraditional service provider enter the race.E. Bold Statement 5 36-37 With corporate real estate utilizing their service providers as an incubator/training ground for noncore business, human resources and training capabilities will become a heightened requirement.F. Bold Statement 6 38-39 Pricing and performance management models will become more value-based (more strategic and proactive), while less focused on purely financial objectives.

VII. Conclusions 40

VIII. Appendices 41-51A. Corporate Real Estate 2020 Team Leaders and Sponsors 41B. Professional Leaders Interviewed by Service Delivery and Outsourcing 42 C. Corporate Real Estate 2020 Service Delivery and Outsourcing Interview Guide 43-47D. Service Delivery and Outsourcing Summary of Responses to Bold Statements 48E. Corporate Real Estate 2020 Service Delivery and Outsourcing Participants 49-50F. Corporate Real Estate 2020 Participating Companies 51

taBle OF cOntentS


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intrODuctiOnHave you ever tried to imagine what work will be like in 2020? It’s

not easy, but that is exactly what CoreNet Global’s Corporate Real

Estate 2020 initiative is all about – envisioning the future of corporate

real estate (CRE) and the workplace. Corporate Real Estate 2020 is a

research and leadership development program designed and managed

by CoreNet Global members to address the business environment in

the future and to collect and distribute best practices, tools and studies

to meet future business needs effectively. A follow up to Corporate

Real Estate 2000 and CoRE 2010, Corporate Real Estate 2020 has

brought together more than 280 of the industry’s most thought-pro-

voking and leading minds, as well as several other professionals from

areas outside the CRE realm.

Given today’s climate of protracted economic uncertainty, forecasting

has never been more challenging. Predictive modeling is often an in-

exact science, yet considering the outcomes of many of the forecasts

CoreNet Global has made in previous renditions, it can prove to be an

effective tool for setting expectations. Volatility withstanding, compa-

nies, industries, professions and other types of networks need to set

a baseline to gauge and anticipate change as best as current indicators

and history allow.

This report explores the major trends discovered and studied by the

eight research teams to aid corporate real estate executives and pro-

fessionals in becoming the most effective leaders in an increasingly

complex business environment.

Corporate Real Estate 2020 has brought together more than

of the industry’s most thought-provoking and leading minds


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reSearcH MetHODOlOgyCorporate Real Estate 2020 began in August

2011 and continued through May 2012. The

program was launched at the AT&T headquarters

in Dallas, where a group of more than 70 senior

thought leaders convened to discuss the business

environment in the year 2020 and create an overall

vision of the future and what the impact on CRE will

be. From this discussion, it was concluded that the

research would be carried out by breaking down the

profession into eight dimensions unique to CRE.

Following the official launch meeting in Dallas,

each of the eight teams was tasked with defining

its goals and predictions. Using the overall vision of

the world in 2020 and its impact on CRE as context,

each team created a set of Bold Statements.

The Bold Statements were developed, evaluated

and finalized throughout the first months of the

project using recent research findings from a variety

of resources and topic-specific group discussions.

The statements, a prediction of where a typical

CoreNet Global member firm would stand in 2020,

were based on what the teams “thought” would

happen, not what they “wanted” to happen,

reflecting varying degrees of forward thinking.

The predictions were also presented at the CoreNet

Global Paris, Atlanta and Singapore Summits, where

members from the across the globe were given a

chance to provide feedback on the Bold Statements.

These predictions served as the research questions

to be validated based on in-depth qualitative

interviews with CRE leaders and topical content

experts plus a quantitative survey of CoreNet

Global’s end-user members across the world.

Throughout the process, leading organizations and

industry experts were identified for interviews and

further research. Telephone and in-person interviews

that followed a structured interview guide (Appendix

C) were documented and analyzed for patterns to help

the teams understand the current views and future

perspectives of these business leaders. In addition,

case-study materials were solicited as part of the

interview process, and some of those real-world

examples have been incorporated into this report. The

research teams also used articles, books and reports

to ground the theories and compare results.

eigHt reSearcH areaS

EnterpriseLeadership

Service Delivery & Outsourcing

SustainabilityLocation Strategy & the Role of Place

Technology Tools

Partnering with Key Support Functions

WorkplacePortfolio Optimization & Asset Management

Using the overall vision of the world in 2020 and its impact on CRE as context, each team created a set of Bold Statements.


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reSearcH MetHODOlOgyInterview insights, materials and Summit feedback

were synthesized on a number of levels. The research

team met regularly to review the materials collected to

determine emerging viewpoints and implications.

The following diagram illustrates the research

timeline/process. Appendices B and E list the

Service Delivery and Outsourcing team members

and organizations interviewed.

valiDateD anD FinaliZeD

By inDuStry leaDerS

valiDateD tHrOugH glOBal

enD-uSer MeMBer Survey

intervieWS cOnDucteD WitH PrOFeSSiOnalS

evaluatiOn OF BOlD

StateMentS at cOrenet glOBal

SuMMitS

MaterialS analyZeD anD cOncluSiOnS agreeD uPOn

BOlD StateMentS

createD

San DiegO SuMMit reSultS

PreSentatiOn

creatiOn OF eigHt reSearcH

teaMS

rePOrtS DiStriButeD

viSiOning Meeting in

DallaS

FIGURE I.I | Key StePS in reSearcH PrOceSS


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Corporate Real Estate 2020 was established to document the indus-

try’s thinking about the corporate real estate (CRE) environment of the

future; the key characteristics of a successful enterprise; and the im-

plications for the corporate real estate profession, based on the latest

and best ideas from senior CRE and infrastructure leaders.

Looking toward 2020, real estate leaders interviewed and surveyed

identified high-level business drivers they predict will shape the indus-

try’s future. Among these are globalization, technology and data-driven

business intelligence, value- and cost-based metrics, evolving out-

sourcing models, industry consolidation and expansion and access to

well-trained and experienced workers.

Always-on connectivity is changing the perception of the workplace

and redefining “corporate space.” Technology also is changing CRE’s

traditional modes of operation and the expectations CRE executives

place on service providers. The service provider of the future must go

beyond task-oriented accomplishments to become a strategic, collab-

orative partner whose data-driven insights can help end-users make

informed decisions.

This presents a challenge to an industry that traditionally measures

success by the square foot, but it also opens the door to unprecedent-

ed opportunities. To seize upon them, end-users and providers must

rethink the role and function of corporate real estate. The future is less

about space and more about services and strategy.

The Corporate Real Estate 2020 research initiative is focused on how

the many facets of the industry will evolve – technology, the nature

of work, integrated infrastructure resources, leadership and more. As

a key facet of the industry, service delivery must react to and evolve

with the continually changing internal business structures and environ-

ments that are driven by external economic influences.

The research presented in this report indicates new models and roles

will emerge that will allow corporations to better leverage their external

networks to deliver more value and to give them a competitive edge.

For the purpose of this research effort, the service provider includes

eXecutive SuMMaryFOreWOrD

The future is less about space and more about services and strategy.


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eXecutive SuMMaryeverything from the provision of tactical, day-to-day operations support

to the design and delivery of a strategic vision for an organization. This

broad view of the market supports the ever-expanding roles that service

providers are being asked to assume. To some organizations, service

delivery may still only involve the tactical execution of specific tasks, but

at today’s leading-edge businesses, the added value that service provid-

ers can bring to the table goes well beyond that definition.

Through a series of preliminary discussions and industry work ses-

sions, the Service Delivery and Outsourcing team established research

premises based on a perceived expansion of and dependence upon

outsourcing. In the future, CRE executives will look to service provid-

ers not only to deliver more administrative services but also to manage

those services provided by other vendors. A corresponding degree

of risk and responsibility will shift to the service providers: They will

be expected to deliver multi-domain services using highly skilled and

efficient teams. They will be expected to advise on and add to the end

user’s strategic vision. They will be expected to compete on value, as

well as price.

The Service Delivery and Outsourcing team is focused on how the ex-

ternal resource and capabilities network will integrate and organize to

interact most effectively with the evolving internal organizations. As a

part of this research effort, the Service Delivery and Outsourcing team

conducted more than 20 interviews to gain insight into today’s service

delivery models and assess what the future may hold. While many of

the interviewees were CRE or administrative service directors from

major global business entities, other interviewees were representa-

tives from the market’s leading service providers. In addition, the team

also interviewed industry thought leaders.

The findings were used to formulate hypotheses about high-level business

drivers, challenges and opportunities that will shape the future of CRE.

Over the past seven decades, the overall business environment and

the CRE sector have evolved in tandem, with developments in one

driving change in the other. Changing company demands regarding

real estate led first to the creation of centralized internal real estate

Over the past seven decades, the overall business environment and the CRE sector have evolved in tandem, with developments in one driving change in the other.


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eXecutive SuMMarydivisions and to the development of an entirely new external service

delivery industry, which has consolidated and grown in complexity and

sophistication in recent years.

Real estate outsourcing is now modus operandi for most large com-

panies, but one single methodology does not fit all. Desires to meet

the demands of rapid globalization while continuing to manage costs

are universal. But corporations are employing a variety of outsourcing

strategies and structures to achieve these goals – among them best-

in-class, bundled and integrated outsourcing models.

For their part, service providers are striving to meet end users’ demands

for strategic global portfolio optimization, workplace mobility, process

improvement, energy management, sustainability and cost reduction –

all while seeking to shift the value proposition of their services from a

cost-based structure to one that pegs success on broader definitions

of “value.”

CRE executives who want these more diverse and sophisticated

services expect true expertise from their providers. A case in point:

End users who contract data management services from providers

want them to deliver not only data reports but also the kind of in-depth

analysis that provides strategic insights. Such expanded requirements

have opened the door to some non-traditional service providers; firms

that once focused exclusively on food services or business processing,

for example, are beginning to move into facilities management.

Current market trends and conditions will propel the CRE service deliv-

ery sector into a future already being imagined by the industry’s best

and brightest decision makers and thought leaders. To capture their

views, the Service Delivery and Outsourcing team interviews centered

on carefully developed hypotheses about what lies ahead. These hy-

potheses were presented to interviewees as Bold Statements:

End users who contract data management services from providers want them to deliver not only data reports but also the kind of in-depth analysis that provides strategic insights.


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eXecutive SuMMaryBold Statement 1:

Real Estate business objectives and goals will become more

integrated with Procurement and, therefore, more sophisticated

and complex.

Experts’ Overview: The collaboration between CRE and Procurement

will yield greater discipline and buying power than the CRE department

possesses on its own, but it also will add complexity to decision making.

Bold Statement No. 2: Vendors will become responsible for data access and usage as

it becomes more widespread as a means of delivering corporate

real estate strategy.

Experts’ Overview: Service providers will own the systems that can

manipulate and analyze data coming from end users, but most companies

will continue to own and house the data, especially if their business is

highly competitive or heavily regulated. Service providers’ ability to glean

insights from shared data will be a core competency and competitive dif-

ferentiator, and this will factor significantly into customer retention.

Bold Statement No. 3: Clientele will drive service providers to grow their platforms globally.

Experts’ Overview: End users will expect service providers to antici-

pate global business drivers and emerging markets and have estab-

lished service offerings before corporate real estate executives request

them. To enable that nimbleness, service providers increasingly will

partner with local providers in key markets.

Bold Statement No. 4: Due to economic pressures, there will be continued consolidation

of service providers, and we expect to see a nontraditional ser-

vice provider enter the race.

Due to economic pressures, there will be continued consolidation of service providers, and we expect to see a nontraditional service provider enter the race.


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eXecutive SuMMaryExperts’ Overview: Nontraditional providers will enter the market to

compete outright with mainstream CRE offerings or to erode the value

proposition of specialty services offered as part of service provider

bundles. Mid-size and small service providers will combine to compete

against the largest firms.

Bold Statement No. 5: With corporate real estate executives utilizing their service providers

as an incubator/training ground for noncore business, human resourc-

es and training capabilities will become a heightened requirement.

Experts’ Overview: End users will require service providers to con-

tractually ensure adequate human resources/training capabilities, and

HR and training capabilities will become competitive differentiators

among service providers.

Bold Statement No. 6: Pricing and performance management models will become more

value-based (more strategic and proactive), while less focused on

purely financial objectives.

Experts’ Overview: Organizations will recognize the potential detri-

mental impact of cost cutting on productivity, which will change the

conversation from cost containment to value creation. Cost control will

move down the list of metrics, but it will remain one of the key mea-

sures of success.

The real estate leaders’ views on these Bold Statements provided

insights into the industry’s future. To achieve success as we move to-

ward 2020, end users and service providers must rethink the role and

function of CRE, these experts say. The future is more about services

and strategy than square footage.

Pricing and performance management models will become more value-based (more strategic and proactive), while less focused on purely financial objectives.


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HiStOrical evOlutiOnOF Service Delivery

a lOOK BacK

Since the end of World War II, the global business

environment has dramatically, irrevocably changed,

and corporate real estate (CRE) has changed right

along with it. Real estate’s organizational models,

roles and responsibilities underwent distinct evo-

lutionary periods. Changes within CRE were both

reactions to and drivers of broader economic trends.

Ultimately, they created an entirely new external

service delivery industry.

Pre-1960s: Setting the Stage After two decades of economic depression and

war, businesses in the 1950s were readjusting to a

peacetime economy with a sense of optimism in a

perceived new world order. For the most part, busi-

nesses picked up essentially where they had left off

before World War II. While the mature industries

of manufacturing and agriculture still dominated

economic activity, few companies served markets

outside specific domestic regions, and even fewer

served a global client base.

With the exception of capital-intensive industries (such

as steel, automobiles and chemical production), busi-

nesses tended to be small, locally based, entrepre-

neurial in approach and homogenous in nature. Many

organizations only supported one line of business,

producing closely related product types. Industries

were highly fragmented, and businesses typically

served specific, nearby markets because the existing

transportation network limited the efficient flow of

finished goods. For the most part, businesses operated

in a decentralized manner, with production and support

functions distributed throughout the organization to

serve specific business units.

A similar mindset was common for administrative

support functions. It is generally accepted that prior

to the 1960s, most corporations had not yet estab-

lished a CRE function and real estate was managed

in a highly decentralized fashion. Each business

unit typically coordinated its own transactions and

managed its own facilities portfolio. Real estate

assets were strictly considered “agents of produc-

tion,” and real estate decisions were not particularly

strategic in nature.

Corporations kept real estate service providers at

arm’s length and did not consider them as valuable

networks that could be leveraged to improve organi-

zational performance. Most organizations were confi-

dent that functional knowledge and industry best prac-

tices should be developed and managed internally.

This limiting approach prevented the development of

relationships with real estate service providers.

In this pre-1960s period, the real estate service provider

function was mostly limited to support for real estate

transactions. Aside from real estate brokerage and prop-

erty management services for investor/owners, few

other services were offered. Real estate firms tended

to be small and were focused on providing transaction

support for specific property types in defined market

areas. Corporations called on service providers for spe-

cific engagements, as the external parties were only

considered to be “order takers.”


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a lOOK BacK

The 1960s to the 1980s: Conglomerates and Centralization In 1956, President Eisenhower created the inter-

state highway system as an integral part of the

national defense system. However, the commercial,

economic and social ramifications of this system far

outweighed its military value. As the system devel-

oped in the 1960s, national markets expanded rap-

idly and a new kind of business model was needed

to serve the increasingly larger and more dispersed

markets. In response to this economic market

expansion, industries consolidated and fewer, larger

corporations emerged.

Consolidation provided better access to capital and

greater economies of scale. The new business models

required the kind of centralized control that was pro-

vided by hierarchical organizational structures. Compa-

nies no longer accepted the inevitability of struggling

through business cycles with a single business line or

product. Instead, they added new product lines or pur-

chased companies with products that complemented

their existing efforts. Mergers and acquisitions prolifer-

ated, conglomerates became prevalent, and these large

companies pursued increased market share.

At the same time, administrative support functions,

such as finance, accounting, personnel, legal and real

estate, were being centralized at corporate headquar-

ters. As businesses became more complex, the need

for access to information and efficient communica-

tions was met by the physical proximity of employees

in centralized locations. The new business environ-

ment forced a change in the way administrative func-

tions were managed within corporations.

In the 1960s, as the structure of organizations’ real

estate portfolios became more complex, centralized

CRE groups started to form within large corporate

entities. While certain services and functions, such

as property management and facilities management,

often still were coordinated at the business unit level,

the management and approval of real estate transac-

tions were undergoing consolidation. In addition, cor-

porations began to out-task some activities based on

internal capacity restrictions and the need to expedite

certain engagements. The volume of out-tasking was

rather limited; only local and regional vendors existed

in the marketplace, and they varied by geography.

Both the real estate group and the vendor organiza-

tions were relatively small.

By the 1980s, centralized CRE departments were

well established within corporations. The CRE de-

partments had grown significantly and increased the

scope of services provided by internal staff, which

now included a cadre of specialists. By the 1980s,

the CRE department was often responsible for site

selection, lease-versus-buy analysis, real estate

Mergers and acquisitions proliferated, conglomerates became prevalent, and these large companies pursued increased market share.


14


a lOOK BacK

transactions, space planning, design and project man-

agement for construction. Compared to the 1960s,

when real estate groups only handled real estate

transactions, a significant amount of complexity and

responsibility had been allocated to CRE departments

by the 1980s. However, the CRE department’s role

was still that of an “order taker,” which carried out the

requests of the business units to build and maintain

physical facilities. The CRE department supported the

organization’s business strategy but had no role in its

strategic-planning efforts.

In the service provider industry, the volume of out-

tasking (when a service provider executes a discrete

piece of work under specific direction from and con-

trol by the corporate end user) was still rather limited,

and only a few vendors had established extensive

positions in the marketplace. Since large corporations

had in-house expertise, they were less likely to pay

the unit-cost premium charged by external service

providers unless significant benefits could be derived

from outsourcing (when a service provider takes over

complete, or near complete, responsibility of desig-

nated operations). It was generally accepted that no

greater efficiency or effectiveness could be gained

by shifting workload to external service providers. In

addition, the service providers’ profit was seen as an

additional cost that would not be incurred if activities

were maintained in-house. As such, the workload

completed by service providers remained task-fo-

cused and was driven by internal capacity restrictions

and the need to expedite delivery.

Toward the end of the 1980s, a few innovative compa-

nies like Baxter Healthcare and Ameritech started

to rethink the CRE function and planted the seeds for

the streamlining of these large and sometimes cum-

bersome internal structures. At the same time, new

concepts were emerging to shift workload efficiently

and effectively from internal resources to external

resources, through large real estate services delivery

contracts with select, top-tier providers.

It was generally accepted that no greater efficiency or effectiveness could be gained by shifting workload to external service providers.


15


a lOOK BacK

The 1990s: Cost Reduction and Outsourcing With the fall of the Berlin Wall and the removal of sev-

eral trade barriers, U.S. corporations were suddenly

exposed to global competition and were at a distinct

cost disadvantage. During the 1990s, Japanese busi-

nesses were ahead of most of the world in terms

of cost efficiency, and U.S. companies scrambled to

restructure and become more cost-competitive. The

efforts to lower costs were supported by a global eco-

nomic downturn of considerable severity and duration.

In this environment, Wall Street began to question the

monolithic structure of corporate America and started

to reward those companies that focused on their core

business activities. Corporations were now focused on

maximizing return on invested capital by establishing

distinct, competitive advantages and by selling off large

portions of their businesses that were considered to be

non-core. Enabled by advances in information technol-

ogy, corporations began to outsource many of the func-

tions that were formerly handled in-house, in an effort

to further reduce costs and enhance focus.

These technological advances significantly reduced

the costs associated with information sharing and

enabled corporations to rapidly coordinate and roll up

financial and operational data across very complex

global organizations using enterprise-wide data man-

agement systems. Highly centralized organizations

were no longer justified or necessary, and technol-

ogy facilitated global expansion.

By the 1990s, out-tasking was more common with

corporations more effectively leveraging external

service providers for many administrative support

functions. New technologies had reduced the trans-

action costs of doing business with external provid-

ers, and the proliferation of personal computers,

data management systems and the Internet made it

easier to manage and communicate across internal

and external networks.

In response to a big out-tasking push on the part of

CRE, internal departments began to downsize, and the

real estate service provider industry grew significantly.

However, while there was a substantial increase in

the number of vendors, the organizational maturity

profile of these vendors had not changed much. As

was true in the 1980s, real estate service providers

were offering multiple service or product lines to their

customers, but the services were not being delivered

in an integrated fashion. At best, services were being

“bundled” or “packaged” in an effort to sell multiple

services to the same customer and increase profits

through overhead efficiency gains.

As was true in the 1980s, real estate service providers were offering multiple service or product lines to their customers, but the services were not being delivered in an integrated fashion.


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a lOOK BacK

The continued downsizing of internal administrative

support functions – often coupled with the adoption

of an administrative service organization structure that

integrated and aligned functions like human resources,

information technology and CRE – led to an increased

reliance on external providers. As a result, the service

provider industry engaged in major expansion ef-

forts throughout the 1990s. Mergers and acquisitions

between the larger American and European providers

fueled consolidation. Examples include the merger/ac-

quisition activity between CB Commercial and Richard

Ellis, Jones Lang Wootton and LaSalle Partners,

and Cushman & Wakefield.

These new, larger service provider firms also began

adding higher-value services to their core capabilities,

including financial re-engineering for portfolio cost

structures, balance sheet impact analysis and platform

alignment to better address issues that were most

relevant to senior corporate executives. The corporate

services approach was well on its way to acceptance

by the mid-1990s, and the relationships between CRE

departments and external providers transitioned from

a vendor focus to a partnership focus.

Service providers began to offer greater efficiency,

cost effectiveness and flexibility. United Systems

Integrators was a prime example. Established in 1991,

real estate service firm USI was founded on the belief

that corporations would increasingly improve return

on invested capital and obtain higher valuations by

outsourcing non-core functions. Jones Lang Woot-

ton’s merger with LaSalle Partners in 1997 was largely

driven by the corporate client need for creative and of-

ten integrated approaches to manage their real estate

portfolios and meet their complex occupancy needs.

In the early 1990s, outsourcing of corporate real estate

at Baxter Healthcare demonstrated to the industry that

the corporate real estate function could be managed in

new and different ways. Baxter was the first company

to outsource many services, and thereby reduce the

size of its internal CRE department. It was the first time

that management of many of these functions was taken

outside a large company. Ameritech soon took a similar

course. Then other corporations, including Microsoft

and Sun Microsystems, followed the example in

an effort to realize similar benefits. These companies

began to see that all-encompassing, large internal CRE

departments made them less nimble and too rigid, and

burdened them with unnecessary exposure. Change

was cumbersome and difficult to implement.

It was the culmination of a trend that had been devel-

oping for some time, as the out-tasking or outsourcing

of commodity activities such as transaction implemen-

tation, project management and facility management

gave corporate real estate groups more flexibility to

respond to business unit requirements and to maxi-

mize return on invested capital. The larger real estate

service providers expanded their service portfolios to

include the complete life cycle of real estate services,

adding valuation analysis, mortgage banking, project

management, and real estate consulting and property

development services. These “bundled” services

were sold as packages to corporate clients.


17


a lOOK BacK

In addition, corporations established single-source

contracts or preferred vendor arrangements with

large real estate service providers to achieve volume

discounts. This “one-stop shopping” concept allowed

corporate real estate departments to reduce the

number of vendors required to provide services. In the

new model, the role of the remaining CRE department

staff was to manage the outside vendors, negotiate

pricing and ensure accountability.

The 2000s: Globalization and Strategic Alignment In the 2000s, four major business drivers – glo-

balization, information technology, administrative

organizational structure and labor – combined with a

high degree of economic fluctuation to reshape and

redefine internal and external real estate service de-

livery. Enabled by technology and trade liberalization

agreements and driven by an intense drive to cut

costs, organizations outsourced back-office admin-

istrative and support functions to third parties, not

only to more cost-effective domestic markets but

also to third parties in other countries – so called

“off-shoring.” This trend, combined with develop-

ing markets’ phenomenal growth – which increased

even during a deep recession that hobbled many

developed economies – led to increased globaliza-

tion of major corporations.

During this time, several organizations, including Nortel

Networks, American Express, United Technologies

Corp. and Bank of America, emerged as best-practice

operations in integrating and leveraging external provid-

ers for strategic CRE service delivery. As opposed to

allocating limited internal staff resources to the hands-

on implementation of non-core activities, the CRE

departments at these organizations focused on devel-

oping and managing long-term outsourcing strategies

to deliver these non-core activities. This reflected an

evolution of corporate real estate’s role from taskmas-

ter to business strategist.

This “one-stop shopping” concept allowed corporate real estate departments to reduce the number of vendors required to provide services.


18


a lOOK BacK

Meanwhile, U.S. companies increasingly off-shored

work to countries like India and China. And, as these

developing economies grew, major corporations be-

gan to view them not only as suppliers of cost-effec-

tive goods and labor but as markets in their own right.

Corporations began to seek real estate solutions that

would allow them to set up manufacturing and cus-

tomer contact operations to serve customers in North

America and Europe and also would enable them to

sell goods and services to ever-richer businesses and

consumers in these emerging markets.

As end users’ needs changed – often rapidly – service

providers honed their relationship management skills,

working to align service and delivery structures to the

needs of customers. Providers realized understand-

ing their customers’ needs and monitoring how well

they delivered against those needs while being able

to measure performance and deliver sophisticated

reporting was a competitive differentiator.

Between the first major implementation at Baxter

Healthcare in 1990 and the close of the 2000s, CRE

and facilities outsourcing became commonplace at

major corporations. Large, established companies

such as General Motors and Bank of America were

now out-tasking multiple real estate functions and

wholesale outsourcing of the entire real estate func-

tion was an option on the table. Many endeavors

started small, by outsourcing the most tactical func-

tions, such as food service. As CRE departments real-

ized benefits and became more confident that quality

of service would not be compromised, other functions

were outsourced.

As outsourcing evolved it also changed the responsi-

bilities of in-house CRE. Internal staff that had once

spent their time completing transactions and man-

aging projects and facilities instead were managing

the work of external service providers who assumed

day-to-day responsibilities. However, most of these

outsourcing relationships still focused on tactical

services. The development of strategic plans for the

real estate portfolio and the CRE organization were

still typically internal activities.

The development of strategic plans for the real estate portfolio and the CRE organization were still typically internal activities.


19

tHe current StateOF Service Deliverya Picture OF tHe PreSent

In today’s Corporate Real Estate (CRE) market

outsourcing is a given, but one single outsourcing

methodology does not fit all. Trends toward cost-

containment are universal, as exemplified by

the increasing collaboration between CRE and

Procurement. But corporations are employing a

variety of outsourcing strategies and structures to

achieve such efficiencies.

For their part, providers are striving to meet end-

users’ demands for strategic portfolio optimization,

workplace mobility, process improvement and

optimization, energy management and sustainability

and cost reduction. Key service providers have met

these end-to-end CRE demands by consolidating

with former rivals in an effort to increase

capabilities and reach.

Among end users, CRE leaders are concerned

with aligning assets to meet local market needs

amid increasing globalization. Globalization is one

of the key trends causing some CRE executives to

move away from single-source “bundled” services

toward “best-in-class” (also called “best-of-breed”)

options for multiple markets. A few CRE executives

are outsourcing the management of these various

vendors to “integrators.” Corporations whose

business is well suited to the “bundled” model say

they continue to benefit from volume buying and

the efficiency of coordinating and collaborating with

a limited number of vendors. Other firms find the

administrative burden of managing several different

suppliers to be risk laden and cost prohibitive.

End users are requiring increasingly diverse and

complex capabilities from service providers – turning

to them for everything from food service to data

management. That diversity of requirements has

opened the door to some nontraditional providers;

firms that once focused exclusively on cafeteria

management or business processing, for example, are

beginning to move into facilities management.

CRE professionals who want more of these diverse

and sophisticated services expect true expertise. For

example, end users who contract data management

services from providers want them to deliver not only

data reports, but also the kind of in-depth analysis

that provides strategic insights. End users increasingly

understand that these offerings require a level of

training and experience that cannot necessarily be

delivered by the lowest bidder, and their RFPs are

evolving to become value and outcome oriented

rather than strictly focused on cost.

“The transactional model is not the future of where outsourcing is going. It needs to be a partnership.”

– Donna Inch, Ford Motor Land Corp.


20


The Integrator Model: A Hybrid Sourcing Strategy

Over the past decade, CRE decision mak-ers had two main outsourcing choices: Achieve consistency and simplicity but reduce granular flexibility with a “bundled” model linked to one primary service provider. Or opt for a “best-in-class/best-of-breed” model that enables high-quality, local-level services but requires juggling multiple vendors in multiple markets.

Today, however, a single company is testing a new model – the integrator – that com-bines some aspects of bundling and best-in-class. The integrator is, in essence, an outsourcing hybrid, and a major corporation views it as offering the best of both worlds.

What makes this model different is that a CRE executive gives a single partner – the integrator – responsibility to oversee and measure the performance and consistency of multiple vendors. The integrator shares accountability for the performance of these service providers.

The integrator is responsible for: • Driving consistency of process and service delivery across multiple vendors to create a uniform experience for the end user

• Sourcing, managing and tracking vendor work allocation and the quality of service delivery

• Developing and managing a formal control structure for mitigating risk

• Establishing a data system capable of managing and reporting on vendor work performed across the portfolio

• Developing continuous improvement plans at strategic and tactical levels

• Managing a budget that supports capital and operating expense plans

The integrator model can be adapted to match the degree of responsibility and control

the integrator exerts over other service part-ners. For example, the integrator may man-age with a light touch and simply oversee and report on work completed. Or the integrator may take a hands-on approach, acting more as a prime contractor who dictates exactly how work should be completed and has 100-percent accountability for the quality of the work and outcomes.

As a still-emerging model, the integrator is a question mark for many end users and service providers. While it conceptu-

ally solves for many weaknesses of the bundled and the best-of breed sourcing models, the integrator model does create unique issues of its own, including the potential for management duplication and the necessity to have a robust and transparent governance structure in place to foster success.

Clearly it is up to each CRE organization to determine whether the integrator fits with its desired roles and responsibilities, needs, risk tolerance and corporate culture.

Differences Among Outsourcing Models

Source: CoreNet Global’s The Leader, March/April 2011


21


Deliberate Approach to Outsourcing: State Street Bank Case Study Background

State Street Corporation (SSC), a financial holding company, is one of the world’s leading investment service providers, focused solely on serving institutional investors worldwide. State Street has operations in 29 countries, serving clients in more than 100 markets, with more than 29,600 employees worldwide. State Street serves some of the most sophisticated institutions through a flexible suite of services that spans the investment spectrum, including investment management, research and trading and investment servicing.

This sector of the financial services industry is highly competitive and the real estate services group is expected to provide a high level of service in an efficient and cost effective manner. Back in 2005, State Street had a global footprint of approximately six million square feet (557,418 square meters), with 93 percent of the integrated facilities management (IFM) functions being self-delivered through an in house staff. The challenge was to take an IFM service delivery model that was self-performed, with extensive out-tasking, and consolidate all of the services under one IFM service agreement.

The Approach State Street took a very structured approach to its first-generation outsourcing initiative, implementing segments of the portfolio in a methodical manner. Since the organization had a heavy presence in the Boston area, in 2005 they decided to consolidate the IFM services being

provided in Eastern Massachusetts first with a single provider. The portfolio under consideration in the first phase included approximately four million square feet (371,612 square meters), excluding their one-million-sq.-ft. (92,903 sq. m.) corporate headquarters.

State Street also realized that for the first outsourcing initiative to be successful, it needed to allocate sufficient resources to the project, so it engaged Expense Management Solutions (EMS) to manage the sourcing process. EMS helped State Street develop a best-practices master services agreement, a comprehensive set of IFM service level agreements and an enhanced pricing structure.

Based on the quality of proposals, State Street selected a single provider, CBRE, to deliver the IFM services across the Eastern Massachusetts portfolio. A comprehensive performance management program was developed and implemented to continually rate the supplier’s performance and determine the amount of “at-risk” fees to award on a quarterly and annual basis. The final negotiated pricing also represented a significant savings over the company’s current costs.

Upon realizing the success of its first outsourcing initiative, in early 2006 State Street decided to competitively bid their one-million-sq.-ft. corporate headquarters in Boston. This second phase was also won by CBRE. Not resting on their laurels, in late 2006 State Street initiated the third phase of its outsourcing plan by adding 1.3 million square feet (120,774 square meters) that included the balance of its North American portfolio. In this round, State Street chose to pursue negotiated pricing with the existing provider, utilizing EMS to develop an abbreviated RFP and pricing model, rather than a full market bid. At the conclusion of this phase, State Street had effectively centralized the management of its entire North American portfolio under a single provider.

Going Global Following the success of the sourcing consolidation in North America, State Street looked to pursue opportunities in the global portfolio. In late 2006, the Global Realty Services team put the EMEA portfolio out to a full market bid, and Serco was awarded the contract for approximately 94,000 square meters (one million square feet) in 35 sites. The

CASE STudy: State Street Bank


22


Asia Pacific region went to bid next in 2008, consisting of a dozen assets and over 360K SF. CBRE once again won the assignment, and over the years State Street has continued to expand its relationship with CBRE as indicated in the table above.

By mid-2011, the State Street global footprint had grown to 7.4 million square feet (687,482 square meters), and its outsourced relationships had grown as well, with 65 percent of the IFM services managed by outsourced providers. The key responsibilities that SSC maintained in house included asset management,

project management, engineering strategy, lease administration, transaction management and space strategy and metrics. EMS was brought back in 2011 to take the existing North American IFM relationship with CBRE and negotiate an expanded scope of work to include the entire APAC portfolio. The negotiated pricing resulted in further reductions in supplier costs under a consolidated contract.

Looking Back Reflecting back on the approach taken over the seven-year period, State Street has realized that despite its success,

there were some things the company might have done differently. First, it would have been more aggressive on initial outsourcing scope and not taken as many interim steps with the portfolio. This phased approach was partly because of the fact that the team over-estimated its customer’s transitional concerns. State Street also would have redefined the roles and responsibilities between internal GRS employees and the service provider in a more direct manner to avoid ambiguity. Other lessons learned include being less restrictive on CBRE’s ability to change the model more quickly. Finally, it is important to understand there is dual responsibility for success in the outsourcing process, with both the internal CRE team and the service provider sharing equal responsibility to ensure that the transition is smooth.

Going forward, State Street will continue to evaluate additional outsourcing opportunities that make sense in the overall business model. They will also pursue global consistency in the delivery of services and roles and responsibilities. Given State Street’s track record and deliberate approach, there is no doubt it will be successful in achieving the desired results.

CASE STudy: State Street Bank (continued)


23


Faced with significant changes to its business following a 2009 merger with Schering-Plough, Merck & Co. engaged Jones Lang LaSalle, one of their three regional service delivery partners to help its Global Real Estate Services (GRES) team increase customer focus while reducing costs. The need to find financial and operational efficiencies—even in the high-stakes R&D function—was a high priority. Significant location overlap created a milestone opportunity for the corporate real estate function to play a leadership role in realizing the $3.5-billion overall merger synergy targets.

Working under a bundled outsourcing model for facility and real estate management functions enabled close collaboration and support of an extremely complex global initiative with an equally complex goal: achieve $200 million in occupancy cost savings within three years, while creating a highly effective workplace for the combined organization.

Several objectives were established at the outset:

1. Rationalize the portfolio. Following the merger, Merck establish a primary goal, “… to create a real estate footprint that enables a high-performance workplace in as efficient a manner as possible,” and a commitment to consolidating the portfolios by reducing operational costs rather than other factors such as write-offs or geographic preference. Determining which locations to expand, consolidate or close was a complex decision involving many factors and required detailed analysis.

2. Maintain core facility operations and evaluate third-party suppliers. With significant ongoing change

and corporate mandates to reduce expenses, Merck was seeking to engage a third-party supplier manager to evaluate and manage suppliers and to protect and enhance Merck’s facilities. The net result has been an increase in the level of service and improved overall appearance of the facilities, as well as cost savings and an increase in the amount spent with diverse suppliers.

3. Ensure people care. Merck places high value on its people, so the team wanted its employees to land with a service provider that could absorb them and offer long-term opportunity. More than 250 staff were interviewed and hired by Jones Lang LaSalle, and all but one leadership position was filled with existing long-term Merck employees. Today, management leaders remain in place and overall employee retention exceeds 95 percent.

Making it work Having a seat at the table was critical to the team’s success. During the most intense period of operational planning, sometimes site selection and consolidation strategies were confirmed in less than a week – a process that would typically require months. What made such rapid movement on consolidations and other value-creation strategies possible was GRES’ confidence in those decisions, despite real estate portfolio data gaps. M&A regulations block the free flow of portfolio information before a merger deal is closed. To fill in some of those gaps, the external alliance relationship proved its value, as local market teams were able to provide real-time market intelligence that was not available through internal channels. This on-the-ground information was used to inform

critical consolidation, move management and real estate portfolio strategic moves, establishing a strong, if never all-encompassing, foundation. Confidence in the data they did have, in the in-house and outsourced team, as well as in GRES processes, made it possible to avoid getting mired in red tape.

Informed partners, informed real estate strategies External and internal teams must share an understanding of an organization’s corporate culture and business objectives to work together effectively under ambitious timeframes. The fact that a centralized integrated facilities management and real estate relationship was already in place kept the focus on the merger goals, not on team ramp-up. Also, the leadership role the corporate real estate and facilities function played on the integration team meant senior management backing for the tough decisions.

CASE STudy: Merck


24


The Integrator Model in Action at Microsoft

Microsoft was an early adopter of outsourcing and has been an innovator in adapting outsourcing to the company’s changing needs. The technology powerhouse has begun a next-generation plan that combines the best-in-class and bundled approaches into a hybrid outsourcing model: the integrator.

The Outsourcing Challenge Microsoft Corp. operates in 107 countries around the globe, which makes outsourcing both the right solution for the software giant and one of its top corporate real estate challenges.

“For many years, we had global service providers for things like project management or transaction management,” explains Bob Kaplan, Director of Global Resources for Microsoft Real Estate and Facilities. “What we found is while those global service providers were great in lots of places; there was no service provider out there who was great everywhere we operate.”

Microsoft considered various options, and then decision-makers settled on an outsourcing model that combines bundled and best-in-class approaches to aim for a higher level of service quality in every market and for every task. This hybrid model is managed by a single provider, called “the integrator.”

The Integrator Solution The next step was to figure out who that integrator would be. “We needed someone – and it could have been either us internally or an outside vendor – to manage across all those different service providers and drive consistent processes, best practices,

CASE STudy: Microsoft

Microsoft’s Integrated Governance Plan

Snapshot Headquarters: Whitehouse Station, NJ

Industry: Pharmaceuticals

Geography: Global

Portfolio type: Corporate and sales offices, research and development centers

CRE Portfolio: 100 million SF/600 sites globally (global RE services and 32 million SF/30 sites (U.S. and Canada) under IFM with Jones Lang LaSalle)

Dedicated CRE employees: 250

Outsourced CRE services:

• Integrated facilities management

• Occupancy planning

• Move management

• Project management

• Strategic consulting

• Transaction management

CASE STudy: Merck (continued)


25


reporting and data management,” Kaplan explained.

After looking at various service providers – including business services companies like Tata and Accenture – as well as mainstream providers such as Jones Lang LaSalle and Cushman & Wakefield – Microsoft chose real estate firm CBRE as its integrator. “The conclusion we came to was to really manage brokers, or project managers or facilities companies well, you need people with deep knowledge of real estate. So that’s why we went to market to CRE providers, and ended up with CBRE.”

“They build the strategy. They do the procurement around it. They do the contracting around it. They manage the service providers. They do the reporting around it. They do the onboarding and training around it,” Kaplan said. This integrated approach gives Microsoft the benefits of a single-source “bundled” provider and the benefits of best-in-class service in all of its key markets, he said.

The Role of Governance Getting ready for the integrated model required significant internal preparation, Kaplan noted. Microsoft had to carefully define governance policies and procedures for supplier contracts that fit under the integrator’s purview. For example, because CBRE is the integrator, the governance structure prohibits the integrator firm from competing for any projects that fall under the integrator’s scope. “None of the other project-management vendors would be willing to work in the model if they knew they were competing against the people who were managing it,” said Kaplan.

“We had to build a governance structure that allows that to work and that allows our people to have interaction with those project-management vendors, as well as with the CBRE people who are responsible for procuring them and managing them and paying them,” he said. A governing organization now sits at the center of Microsoft’s integrated outsourcing structure.

Initial Results of The Integrator Model Kaplan said it is too early to assess the overall integrator model’s success – such as any significant upticks in local market service quality or any potential savings – but the approach already has had an effect on seeing competition for service, quality of staff and choice of providers; all things they wanted to accomplish, as well as change how CRE operates within Microsoft. “It has shifted the importance [of CRE functions] to relationship management with our business units – to understanding their needs on a much higher level,” he added.

Snapshot Founded in 1975, Microsoft is a worldwide leader in software, services and solutions for businesses and consumers.

Headquarters: Redmond, Wash.

Employees: 92,303 worldwide

Fiscal 2011 Revenue: $69.94 billion

CRE Portfolio: • Owns approximately 16 million square feet (1.5 million square meters) at 105 sites

• Leases approximately 17.6 million square feet (1.6 million square meters) at 532 sites

Outsourcing Model: The Integrator and stables of tier 1 providers for real estate, project management and facilities management.

CRE Hierarchy: CRE sits within the finance organization. The head of real estate and facilities reports to the chief administrative officer, who reports to the chief financial officer.

CRE Operational Structure: Four regional divisions (Headquarters campus; Americas; Europe, Middle East and Africa; and Asia-Pacific) and two center of excellence teams (Global Workplace Strategies – responsible for workplace design, research and productivity and Global Resources – responsible for best practices in real estate, design and construction, facilities, employee services, sustainability, technology, communications, supplier relationship management, reporting and customer satisfaction measurement).

Organizational Domains: CRE is closely aligned with Procurement, which also sits under the same organization in finance. HR and IT are in separate areas. IT, in particular, has a unique design at Microsoft as it is considered a product testing ground for Microsoft software and technology and is tightly linked to product development and delivery.

Key CRE Skill Sets: Ideal CRE employees not only have real estate and facilities knowledge, but also strong customer relationship and integration skills.

CASE STudy: Microsoft (continued)


26

BOlD StateMent reSearcH HyPOtHeSeS

The future of corporate real estate (CRE) will be

shaped by today’s visionary leaders. To capture and

present what they see on the horizon, the Service

Delivery and Outsourcing team conducted more than

20 interviews centered on service delivery industry

issues of today and tomorrow. These issues were

presented to interviewees as six Bold Statements,

essentially hypotheses about what lies ahead.

Bold Statement No. 1: Real Estate business objectives and goals will become more integrated with Procurement and, therefore, more sophisticated and complex. Bold Statement No. 2: Vendors will become responsible for data access and usage as it becomes more widespread as a means of delivering corporate real estate strategy.

Bold Statement No. 3: Clientele will drive service providers to grow their platforms globally. Bold Statement No. 4: Due to economic pressures, there will be continued consolidation of service providers, and we expect to see a nontraditional service provider enter the race. Bold Statement No. 5: With corporate real estate utilizing their service providers as an incubator/training ground for noncore business, human resources and training capabilities will become a heightened requirement. Bold Statement No. 6: Pricing and performance management models will become more value-based (more strategic and proactive), while less focused on purely financial objectives.

Many of the interviewees were CRE or

administrative service directors from major global

business entities. Other interviewees were

representatives from the market’s leading service

providers. In addition, the team also interviewed

industry thought leaders and conducted a survey of

CoreNet Global’s end-user members worldwide.


27

BOlD StateMent 1

Source: CoreNet Global End User Survey December 2011

FIGURE .I | BOlD StateMent 1 Survey reSultS

2%

6%19%

Strongly Disagree

Neutral Strongly Agree

50%

22%

Disagree Agree

End Users Foresee More Real Estate and Procurement Integration by 2020

Procurement plays an ever-larger role in CRE

transactions, an outsourcing-related trend that can

be attributed to a continuing push for lower costs,

increasingly sophisticated client demands for bundled

offerings that combine space with services and a

desire for more discipline around real estate contracts

and related spending.

The latter is what Richard Chalker, Managing Director

at financial services firm Morgan Stanley, sees as

a primary driver. “An effective procurement system

gives a check and balance to the process, especially

in project management and property operations,” he

said. “Procurement gives best practices around vendor

management and managing the relationship between

the service provider and the functional owner.”

At production-oriented companies like Ford Motor

Co. and MillerCoors, the partnership between

CRE and Procurement is not a trend but a tradition.

“Procurement support is integrated into the CRE

group; there has been this tight linkage historically,”

said Donna Inch, Chairman and Chief Executive

Officer of Ford Land, which provides real estate,

construction and facility services to many tenants,

including automobile manufacturer Ford Motor Co.

The business advantages of the CRE-Procurement

structure are increasingly apparent as Ford Land aims

for rapid but efficient and economical growth in the

post-recession environment, said Inch.

At MillerCoors, Director of Real Estate Pat Crumley,

MCR, also sees Procurement’s traditional role in CRE

gaining importance for the beer maker. “Real estate

goals and objectives are more sophisticated and

complex because they have to be woven into the

business objectives and goals of the corporation,”

she said. “That sophistication is being driven by

markets that are much more competitive.”

Real Estate business objectives and goals will become more integrated with procurement and, therefore, more sophisticated and complex.


28

BOlD StateMent 1

Wayne Taub, Vice President of Real Estate for media

and entertainment company Time Warner, agrees but

cautions that a Procurement approach will not work for

every aspect of CRE. “There’s a strategic piece around

real estate decisions that probably will not be part of

any Procurement efforts, which are more financially

driven than strategic in nature. Procurement has an

opportunity to play the biggest role in tactical areas

of real estate,” he said, “such as supplies, facilities

management services, engineering and energy.”

Procurement brings rigor and fairness to the process,

but as subject matter experts, CRE owns the

decision. A recent CoreNet Global survey of CRE

end users around the world showed that nearly

three-quarters of respondents believe that real estate

objectives and goals will become more integrated

with Procurement by 2020, driving a higher degree

of sophistication in how outsourcing is done.

A View of the Future

Looking ahead, several real estate experts

interviewed by CoreNet Global see evolutionary

trends for real estate-related procurement:

• Procurement’s focus will move from a

commodities-driven, cost-centric approach

to focus on multiple criteria that can drive

total value.

• To that end, real estate-related RFPs will broaden

to concentrate on wider goals and objectives

rather than on a laundry list of cost-based

deliverables. How the service providers will get to

the end game – the goals and objectives – will be

what distinguish them during the bidding process.

• Procurement professionals will specialize in CRE-

related spend, becoming part of a dedicated team

that understands the ins and outs of real estate

transactions.

• The combination of CRE and Procurement

will yield greater buying power than the CRE

department possesses on its own, but it also will

add complexity to decision-making.

• Rigor will increase around CRE-related vendor

selection. Decision-makers will have to justify

choices.

Chalker said Morgan Stanley already has discovered

that the key to successfully combining real estate

and Procurement efforts lies in creating harmony

rather than discord. “If you have an adversarial

relationship with Procurement,” he said, “then it’s a

constant battle.”


29

BOlD StateMent 2

Data-backed insights and business intelligence are an

increasingly important component of business plan-

ning and strategy in every sector, including CRE. But

CRE’s legacy and structure creates challenges for

fully leveraging data, real estate experts say.

“Today, data is the big gaping hole for most real

estate functions,” said Christopher Staal, MCR,

Vice President, Global Head of Real Estate and

Facilities Management for financial information and

media company Thomson Reuters. The problem is

two-fold: The CRE department traditionally has not

been at the forefront of technology innovation, and

the industry’s structure of service providers and us-

ers can add complexity to the already tricky task of

determining who owns data.

Nonetheless, most experts interviewed by CoreNet

Global say that by 2020, data access and usage

will be essential to both making real estate-related

decisions and to the services that end users expect

service providers to offer.

The December 2011 CoreNet Global survey of CRE

end users indicated 80 percent of respondents fore-

see a future in which:

• Data streams from different parts of an organization

are integrated into cross-functional dashboards to

better support real-time decision making.

• Service providers not only collect and report on data

but also analyze it properly to guide CRE strategy.

• CRE providers and end users easily share non-

proprietary information.

• Standardized portfolio metrics enable side-by-side,

value-based comparisons across global operations.

All this means that the critical importance of data is

not in dispute. What is in question is whether the

tug-of-war over data ownership will hamper the CRE

department’s ability to get the most out of the avail-

able information.

“Some larger, risk-averse and heavily regulated compa-

nies have data and systems highly insourced, secured

and protected from service providers,” noted Thomas

McCarty, Managing Director of Strategic Consulting

for commercial real estate firm Jones Lang LaSalle.

Pharmaceutical, health care and financial services firms

are among the most cautious about their data.

Morgan Stanley’s Chalker said competitive advan-

tages and confidentiality and regulatory concerns

Vendors will become responsible for data access and usage as it becomes more widespread as a means of delivering corporate real estate strategy.


30

BOlD StateMent 2

will ensure that end users like banks maintain tight

control over data. “I do agree that companies will get

more sophisticated about the data they share with

service providers to drive better partnerships,” he

said. But he added, “The company will ultimately

maintain full control of the data.”

Nonetheless, technological innovations like cloud

computing already are changing companies’ posi-

tions on the exclusivity of and protection around

their data, said an interviewee responsible for leas-

ing and construction projects in North America.

“You would expect that by 2020 service providers

will take a more active role in both systems and

data management [for clients], assuming they can

meet all the security and expertise requirements,”

continued the interviewee. “I think between now

and 2020, the biggest investment for many service

providers is going to be their technology platforms

because many of their clients are going to demand

it, expect it and call them to task on it.”

Data management requirements already are becom-

ing an increasingly important requirement on RFPs,

and end users want more than reports. They want

analytical, insightful analysis of what the data shows.

Data usage will become more widespread as a

means of setting corporate real estate strategy and

vendors will take a more active role in the manage-

ment of the data stream.


All of the real estate experts interviewed by CoreNet

Global say data will be an integral part of the service

provider/end-user relationship going forward. By

2020, they envision:

• A tiered structure for determining which pieces of

data get shared and how the data is controlled.

The less critical the information is to a company’s

competitive advantage, the more likely it is that

the end user will hand it off to a service provider

for management and/or analysis.

• Vendors will have access to some data, but most

companies will continue to own and house the

data, especially if their business is highly competitive

or heavily regulated.

FIGURE .2 | BOlD StateMent 2 Survey reSultS

2%

6%19%

Strongly Disagree


50%

22%

Disagree Agree

Data Will Play an Essential Role in Corporate Real Estate Operations by 2020



31

BOlD StateMent 2

• Service providers will own the systems that can

manipulate and analyze data coming from end-

users. The systems will need to be easy to use and

flexible – for example, “dashboard” portals that

plug into enterprise resource planning systems like

SAP and Oracle.

• Service providers’ ability to glean insights from

shared data will be a core competency; end users

will expect service providers to be able to deliver

this kind of business intelligence.

• Providing these technology solutions will become a

competitive advantage for service providers, whose

data-rich bundle of services will tether them to

clients – making end users less likely to move

business elsewhere.

McCarty of Jones Lang LaSalle predicts companies

will increasingly desire the efficiencies to be gained

from using service providers’ data management and

analytics capabilities. End users will look to service

providers to “manage processes and make decisions

for them or in conjunction with them.”


32

BOlD StateMent 3

The industry catchphrase of 2012 may be “global,”

but saying it and achieving it are two different

things, real estate experts contend. The pressure on

service providers to increase the geographic scope

of offerings will intensify as we march toward 2020.

But even in 2020, a truly “seamless” global CRE

environment will not be a reality, warn some of the

industry players interviewed by CoreNet Global.

End users want providers to offer global real estate

services that will allow them to scale quickly over-

seas to meet growing demand and seize emerging-

market opportunities. But end users need to realize

that the challenges they face in growing their own

global operations also create obstacles for their real

estate service providers, said Crumley of MillerCo-

ors, who formerly worked on the service provider

side in positions at Cushman & Wakefield and

Jones Lang LaSalle.

“The local laws and the local practices are really going

to dictate how things happen,” she said. “I think it’s a

big responsibility of corporate real estate executives

to truly understand how the business works. … There

needs to be recognition of the realities of what it takes

to do these things internationally and a willingness to

figure out how to work through that.”

For service providers to grow their platforms globally,

they must employ what Crumley calls “workarounds,”

partnerships with local real estate vendors that allow

a service provider to offer space and services in many

markets but that may not ensure adequate control

over all operations.

“Standards vary from country to country,” agreed

Koo Stengle, Strategic Planning Manager for bank-

ing firm BB&T. “To be a true international platform,

service providers will need to integrate locally.” That

integration takes place through partnering with,

merging with or buying local providers. That already

is happening, and the trend will gain momentum –

and sophistication – in the future, experts say.

Inch of Ford Land foresees service providers doing all

of the above to create the global platform that end-

users will expect. “Global reach will continue to be a

part of the selection criteria for the CRE department

because it is easier from a global account standpoint

to be operating with one vendor,” she said.

Tom LaDue, Senior Director of Real Estate Relation-

ship Management at health care technology and prod-

ucts supplier McKesson, agreed and added that the

end-user also has high expectations. “We want the

same level of service in Ireland or Belgium that we

get here [in the U.S.].” The demand will only increase

for this consistency and standardization, he says.

Taub of Time Warner said the push for global real

estate offerings from existing service providers is

Clientele will drive service providers to grow their platforms globally.


33

BOlD StateMent 3

a matter of necessity, but also convenience. “It is

easier for corporations to have two or three one-

stop shops versus six or seven,” he noted. “It’s

great to be able to rely on the same service provid-

ers … domestically and globally.”


The move toward increased global offerings will be

constant, but the realities of cobbling together of-

ferings from diverse local markets will mean steady,

rather than speedy, progress, say the experts inter-

viewed by CoreNet Global. They predict:

• Clients will expect service providers to show

capabilities in markets around the world before an

agreement is signed. That means service providers

must anticipate the business and set up offerings

before end users request them.

• Partnerships between large service providers and

local providers in key markets will increase in

number and sophistication.

• Companies will want single-source vendor

relationships for global markets.

• Globalization will increase standardization of facilities,

especially those used for world-wide collaboration.

The bottom line, says Staal of Thomson Reuters, is

service providers will be expected to lead the way

in enabling global operations. “They should be do-

ing some heavy investing,” he said.


0%

6%18%

Strongly Disagree


46%

30%

Disagree Agree

Service Providers Will Expand Globally to Meet Increased CRE Demand



34

BOlD StateMent 4

The advent of nontraditional providers entering the

market already is upon us, real estate experts say,

and it’s not only driven by economics but also by new

opportunities. They cite a few recent examples of non-

traditional firms carving out space in the CRE space:

• Food service vendors Compass and Sodexo are

offering facilities management services.

• Regus, which built its business around supplying

as needed meeting space and services for small

operations, has entered the corporate space.

• Business processing firms like Xchanging and

Wipro are competing against the value proposition

of CRE providers’ full-service offerings.

Additional niche-based nontraditional providers

could alter the landscape, experts said, with end-

users choosing providers who offer specialties that

are of critical importance to their operations. What’s

more, traditional technology or consulting firms

could enter the space with new, broader solutions.

Experts list several possibilities: Cisco, SAP, IBM,

Hewlett-Packard, Accenture, PricewaterhouseCoo-

pers and Ernst & Young.

Staal of Thomson Reuters predicts such new en-

trants would create significantly disruptive change:

“The brokerage side of the business may be im-

pacted uniquely.”

There will be continued consolidation of the service

provider industry with the appearance of stronger,

more viable regional partners and nontraditional

service providers emerging in this space.

Consolidation among traditional service providers

already has transformed the market, and several

experts question how much bigger the largest players

can get. But they do foresee a number of smaller ser-

vice providers consolidating to form an operation large

enough to compete with the service provider giants.

Another possibility, they say, is that smaller providers

will join together to create deal-specific consortiums –

perhaps rich in regional expertise – that put them on a

level playing field in highly complex bids.

John Jordan, who heads the Global Workspace

Association and is President of BusinesSuites, said

consolidation itself may create competitive oppor-

tunities: “Perhaps a smaller boutique firm will find

Due to economic pressures, there will be continued consolidation of service providers, and we expect to see a nontraditional service provider enter the race.


35

BOlD StateMent 4

creative ways to address the gaps in the market-

place created by consolidation.”


• Nontraditional providers will enter the market to

compete outright with mainstream CRE offerings

or to erode the value proposition of specialty

services offered as part of service provider bundles.

• Mid-size and small service providers will combine

to compete against the largest firms.

• Consolidation may open new doors for smaller

providers who can fill resulting gaps in service.

“Consolidation is a natural evolution,” said Chalker of

Morgan Stanley. “It’s the survival-of-the-fittest model.”

FIGURE . | BOlD StateMent 4 Survey reSultS

1%

5%

20%

Strongly Disagree


58%

16%

Disagree Agree

Consolidation and New Entrants Will Reshape the Corporate Real Estate Marketplace. There will be continued consolidation of the service provider industry with the appearance of stronger, more viable regional partners and nontraditional service providers emerging in this space.



36

BOlD StateMent 5

End users are asking service providers to deliver increas-

ingly complex and operationally essential offerings, and

that has increased awareness of how well the service

providers’ employees are prepared to do their jobs.

This is an area of extreme focus, said Maxine Hewer,

Global Category and Supplier Manager for technology

equipment maker Cisco, and it presents challenges

today and tomorrow. Do service providers have the

skilled employees that end users expect? Are they

hiring and training strategically to ensure they will have

the manpower to meet end users’ future needs?

The reality, noted Crumley of MillerCoors, is that real

estate services have melded into domain-oriented

corporate services, and that changes the needs and

expectations. “Yes, [service providers] are doing the real

estate, but they’re also managing the mail room or the

fleet or running the cafeteria,” she said. “There needs to

be some serious employee training and development to

help people expand into these broader responsibilities.”

McCarty of Jones Lang LaSalle says the heightened

needs and expectations have changed the nature of

CRE outsourcing. “It is no longer a default practice

to simply ‘re-badge’ the outsourced team,” he said.

“Service delivery capabilities are now much more

sophisticated – integrated with and dependent on

technology, and that requires more advanced skills

and training.”

Corporations want to know service providers’ human

resources divisions are up to the task, said Stengle of

BB&T. “We want to see what the training looks like,

and we want to make sure that if a service provider

has a particular core function that they are doing it well.

They need to be trained.”

At McKesson, LaDue said he wants to know details

about service providers’ preparedness. “We’re very

interested in understanding how they train and man-

age staff because, essentially, these teams end up

being dedicated to us full time as though they are

our employees,” he said. “We’re definitely interest-

ed in what kind of support they get and how they’re

being continually educated and trained. We want

them growing and not becoming stagnant.”


The experts interviewed by CoreNet Global see train-

ing as an essential component of any future success-

ful supplier/client partnership. They forecast that:

With corporate real estate executives utilizing their service providers as an incubator/training ground for noncore business, human resources and training capabilities will become a heightened requirement.


37

BOlD StateMent 5

• End users will require service providers to

contractually ensure adequate human resources/

training capabilities.

• HR and training capabilities will become competitive

differentiators among service providers.

• Recruiting, training and retaining top talent will

become increasingly important for service providers,

heightening the pressures on and requirements for

HR divisions.

• Successful managers and employees frequently

will move back and forth between service providers

and end users and be tasked with training others

for success.

• Service providers’ succession plans will get more

attention internally and externally.

• A talent gap looms unless the industry does more

to recruit young workers and make training both

relevant and required.

Jay Bechtel, Project Executive for Google, said

service providers’ human resources capabilities

will become increasingly critical to end users as

2020 approaches. “As we outsource more to ser-

vice providers, the quality of their people is more

important, and thus, HR and training plays a critical

role,” he added. “Absolutely, the service providers

are an extension of us as they interface directly

with our users.”

“We will see more fluidity of people working for corporations and service providers, and a greater acceptance of the movement between the two. … In the future, the focus will be more about being a professional in the industry.”– Christopher Staal, MCR, Thomson Reuters


4%11%

30%

Strongly Disagree


41%

14%

Disagree Agree

Human Resources and Training Will Gain Importance Service providers’ HR and training capabilities will become more essential to clients.



38

BOlD StateMent 6

During the recession of the late 2000s, cost cutting

was everyone’s mantra. Now that a slow but steady

economic recovery has taken hold, companies are

beginning to move away from a reactionary focus on

costs and move toward requirements and assess-

ments that are based on quality-oriented metrics,

say most of the real estate experts interviewed by

CoreNet Global.

“[Key performance indicator] contracts are more

prevalent,” said McCarty of Jones Lang LaSalle. In a

related trend, he noted, end users are shifting to the

service providers the responsibility for ensuring that

quality. “The service providers now must manage

performance requirements down through the supply

chain to their suppliers and subcontractors.”

It’s a risk-and-reward structure, he explained, in which

providers get penalized for poor performance by the

companies they hire and rewarded for performance

that exceeds time, cost or performance expectations.

LaDue of McKesson predicts that trend will continue.

“We’re already envisioning something different in the

future that’s much more outcome-based. What was

the value brought at the end of the day? We’re moving

toward less emphasis on how a service provider gets

it done, as long as we get a good outcome,” he said.

“Are they being proactive in how they attack issues,

with different alternatives and creative solutions?

That’s what we should be measuring and reward-

ing them for,” LaDue said. The process an end user

requires the provider to follow is important, he said,

but it is the means to the end, not the measure of

success. The outcome is the end. “If they’re not fol-

lowing the process, they they’re probably not going to

have good outcomes. So you’ll still be able to reward

and penalize around process, but you’re not spending

a lot of time watching and measuring it,” he added.

An interviewee based in Asia-Pacific agreed that a

value-based standard is gaining momentum among cor-

porate real estate executives. But, the interviewee said

that the challenge is how to measure “value.”

“We’re struggling ourselves to measure even what

we deliver internally,” the interviewee noted, despite

access to technology tools and databases theoreti-

cally designed to gauge performance on real estate-

related objectives. “If we can’t get that right, how

are we going to track providers helping us deliver.”

This interviewee would like to see an accurate,

relevant value-tracking system developed for the

industry by 2020 but is not optimistic. “People have

been trying to sell that for 10 years,” continued the

interviewee. “I haven’t seen real success.”

Barry Varcoe, Global Head of Corporate Real Estate

and Facilities Management for Zurich Insurance

Group agrees that it’s a worthy goal, but also fore-

sees problems with tracking something amorphous

like “value” compared to tracking something easily

quantifiable, like cost. “Attempts to measure value

that I have seen included productivity … and reten-

tion,” he said. “Those are tough to prove.”

Real estate executives from financial services firms say

quantitative measures will continue to be an important

Pricing and performance management models will become more value-based (more strategic and proactive), while less focused on purely financial objectives.


39

BOlD StateMent 6

criterion when compared to qualitative ones in their

industry. “Price is always an issue,” says Chalker of

Morgan Stanley, “but one must take into consideration

the quality of the service as well.”

Kendall Bateman, Senior Vice President of Bank

of America’s West Region, said, “Heavily regulated

industries like banking and financial services have a

tougher time” moving away from quantitative metrics.


Many real estate experts interviewed by CoreNet

Global say a focus on value is gaining momentum but

warn that challenges with tracking and measuring

value-based metrics hamper change. They predict:

• Organizations will recognize the potential detrimental

impact of cost cutting on productivity, which will

change the conversation from cost containment to

value creation.

• End users will expect service providers to take on

responsibility for ensuring quality measures are met.

• Cost control will move down the list of metrics for

many CRE executives, but it will remain one of the

key measures of success.

• Some business, such as financial services, will stick

to straightforward, quantifiable metrics, even if the

broader real estate industry focuses more on value-

based measures.

Staal of Thomson Reuters proposes that one way to

measure value is to gauge how much service pro-

viders enhance strategic decision-making and the

outcomes of executing that strategy. “If the service

providers play a part in the strategy,” he said, “then

you’re paying for value.”

“CRE and service provider relationships are still adversarial and will need to be more collaborative. … There needs to be better alignment between the goals of the corporation and the goals of the service provider for the industry to move forward.”– Kendall Bateman, Bank of America


3%

5%

26%

Strongly Disagree


44%

23%

Disagree Agree

Pricing Models Will Become More Value Based



40

cOncluSiOnS

The Corporate Real Estate 2020 Service Delivery and

Outsourcing team documents the industry’s thinking

about its past, present and future.

Interviews with more than 20 corporate real

estate (CRE) and service provider executives and

results from a survey of global end users indicate

globalization; technology and data-driven business

intelligence; value- and cost-based metrics;

evolving outsourcing models; industry consolidation

and expansion; and access to well-trained and

experienced workers will shape corporate real estate

as we head toward 2020.

To meet evolving business demands, corporations

are employing a variety of outsourcing strategies

and structures – among them best-in-class, bundled

and integrated outsourcing models. For their part,

service providers are striving to meet end users’

increasingly sophisticated and varied demands

while shifting the value proposition from a cost-

based metric to one that measures success using a

broader definition of “value.”

Based on the Service Delivery and Outsourcing

team’s hypotheses about what lies ahead, industry

leaders offered these insights:

• A combination of CRE and procurement will

yield greater discipline and buying power than CRE

possesses on its own, but it also will add

complexity to decision-making.

• Service providers will own the systems that

can manipulate and analyze data coming from

end-users, but most companies will continue to

own and house the data. Service providers’ ability

to offer data-rich business intelligence will be a

competitive differentiator.

• End users will expect service providers to

anticipate global business drivers and emerging

markets, and to set up service offerings before

CRE requests them.

• The CRE sector will be reshaped by continued

consolidation and by nontraditional service

providers entering the market.

• End users will require service providers to put in

place skilled workers who benefit from the

providers’ high-quality human resources and

training capabilities.

• Organizations will begin to shift from cost containment

toward value creation as a contractual metric, but

pricing will remain a key measure of success.

As we move toward 2020, experts say, end users and

service providers must re-envision CRE, putting the

emphasis on services and strategy, rather than space.

Service providers will own the systems that can manipulate and analyze data coming from end users, but most companies will continue to own and house the data. Service providers’ ability to offer data-rich business intelligence will be a competitive differentiator.


41

cOrPOrate real eState 2020 | ParticiPating cOMPanieSaPPenDiX a:

cOrPOrate real eState 2020teaM leaDerS anD SPOnSOrS

Enterprise LeadershipMark Schleyer, AT&T

Michael Creamer, Cushman & Wakefield

Location Strategy and the Role of PlaceMary Jane Olhasso, MCR, County of San Bernardino

Partnering with Key Support FunctionsCraig Robinson, Cassidy Turley

Portfolio Optimization & Asset ManagementJack Burns, Cresa

Keith Keppler, Cresa

Russ Howell, MBA, Jones Lang LaSalle

Service Delivery & OutsourcingBlake Layda, Jones Lang LaSalle

Scott Bumpas, Cresa

Lisa Huls-Fry, Cassidy Turley

SustainabilityLeigh Stringer, HOK

Technology ToolsLarry Sweeney, AT&T

Robin Ellerthorpe, HOK

WorkplaceAnne Nathe, Johnson Controls, Inc.

Chris Mach, MCR, AT&T

Cindy Beavers, Steelcase Inc.

Margaret Gilchrist Serrato, PhD, MBA, AIA, ASID, LEED AP, Herman Miller

Michael Leone, Regus

Patricia Roberts, Jones Lang LaSalle

Rob Wright, Johnson Controls, Inc.

Russ McFadden, AT&T

Steve Hargis, MCR, LEED AP, HOK


42

cOrPOrate real eState 2020 | ParticiPating cOMPanieSaPPenDiX B:

PrOFeSSiOnal leaDerS intervieWeD By tHe Service Delivery anD OutSOurcing teaM

Corporate real estate and workplace leaders who were

interviewed as part of the study Service Delivery and

Outsourcing included:

Bank of AmericaKendall Bateman, MCR, Senior Vice President, West Region

BusinesSuites and Global Workspace AssociationJohn Jordan, President

BB&TKoo Stengle, Strategic Planning Manager

Cisco Systems, Inc. Maxine Hewer, MCR, Global Category and Supplier Manager

Google Jay Bechtel, Real Estate and Construction Project Manager

Ford Motor Land Corp.Donna Inch, Chairman and Chief Executive Officer

Ericsson Ed Buckley, Director, Facilities Management

Infrastructure OntarioToni Rossi, Executive Vice President of Real Estate Management Henry Chow, SVP Asset Management

Jones Lang LaSalleThomas McCarty, Managing Director of Strategic Consulting

Lam ResearchRandall Knox, Senior Director, Worldwide Facilities and Real Estate, formerly with Adobe Systems

McKessonTom LaDue, Senior Director of Real Estate Relationship Management

Morgan Stanley Richard Chalker, Managing Director

Microsoft Bob Kaplan, Director of Global Resources for Microsoft’s Real Estate and Facilities

MillerCoorsPat Crumley, MCR, Director of Real Estate

Standard Chartered BankSimon Wise, Head of Regional Project Management, Southeast Asia

State Street BankBanc Winsor, SVP and Director of Realty Services, State Street Bank

Thomson ReutersChristopher Staal, MCR, Global Head of Real Estate and Facilities Management

The Travelers Companies, Inc.Jim Scannell, SVP Administrative Services

Time WarnerWayne Taub, Vice President of Real Estate

Zurich Insurance GroupBarry Varcoe, Global Head of Corporate Real Estate & Facilities Management


43

cOrPOrate real eState 2020 | ParticiPating cOMPanieSaPPenDiX c:

Service Delivery anD OutSOurcingintervieW guiDe

The purpose of this document is to assist the

research teams in setting up the interview

by providing consistent information on the

background of the project, research areas,

purpose of the interview, timeline, deliverables

and expectations. Some of the people being

interviewed may be very familiar with the

project, while others may not. Reviewing this

information prior to the formal interview can

help to insure that all interviews are conducted

in a consistent manner and the people being

interviewed have a clear understanding of the

overall project and their role in the process.

Background

CoreNet Global is the world’s leading association

for corporate real estate (CRE) and workplace

professionals, service providers and economic

developers. Nearly 7,000 members, who include

70% of the Fortune 100 and nearly half of the

Forbes Global 2000, meet locally, globally and

virtually to develop networks, share knowledge,

learn and thrive professionally.

Program Description

• Corporate Real Estate 2020 is a research and

leadership development program designed

and managed by CoreNet Global to address

the business environment in the future and to

collect, package and distribute state-of-the-art

best practices, tools, models and case studies

to help our members prepare to meet future

business needs.

• To achieve this objective, we are interviewing a

number of senior industry leaders to validate a

new vision for the industry and develop a series

of transition strategies to assist corporate real

estate organizations in transforming themselves

to meet the challenges ahead as the economy

changes and new business models evolve.


44



Research Areas

We have also developed a number of key Research

Areas to assist our members in migrating from their

current real estate practices to the new skills and

strategies needed to survive and grow in the years

ahead. These include strategies for the following areas:

Research Process

There are numerous steps in the overall research

process including the development of a research

premise, goal and hypotheses for each of the above

research areas – which are, in turn, validated through

one-on-one interviews with industry leaders and

experts, industry surveys and other techniques.

Deliverables

Deliverables from this project will include research

reports; web-based white papers; learning seminars;

workshops and panels at Summits; material and

speakers for chapter programs; articles in LEADER

Magazine and industry and business press; and

topics and speakers for other learning events.

Timeline

Corporate Real Estate 2020 was officially launched

in August 2011 in Dallas. Since then the teams

have been refining their research hypotheses and

synthesizing input from members obtained at the

Paris and Atlanta Global Summits. Our goal is to

complete the interview process by the end of January.

Research teams will make their final presentations

at the CoreNet Global Summit in San Diego in April

2012, with final research reports due in May.

Intellectual Property

Before we begin, I also want to explain the

intellectual Property Guidelines for Corporate Real

Estate 2020.

Please do not share any confidential or proprietary

information with any member of the research team.

If we use any specific information or materials from

this interview that refer to you or your Company,

we will offer you the opportunity to review that

information prior to publication.

eigHt reSearcH areaS

EnterpriseLeadership

Service Delivery & Outsourcing


Technology Tools

Partnering with Key Support Functions



45



Background Information

Note: Interviewers are encouraged to review the Annual Report and 10K form for the firm prior to the interview.

1. What is the primary industry classification for your organization? (check one)

Energy

Engineering / construction

Financial Services / Insurance

Food / Beverage

Healthcare

Heavy Manufacturing

High Tech Manufacturing

Pharmaceuticals

Retail / Wholesale

Telecom

Transportation

Other (please specify)

____________________________________________

Purpose of the Interview

The purpose of this interview is to capture your

knowledge and thoughts on Service Delivery and

Outsourcing in the year 2020.

Do you have any questions before we get started?

Interview length approximately 1 hour

Validate the correct spelling of your name and

official title:

Name:

Title:

Company:

Date of Interview:


46



2. What was the annual revenue for your firm last year? Please specify ________ or check one of the following:

Less than $1 Billion

Equal to or more than $1 Billion but less than $5 Billion



Equal to or more than $25 Billion

3. In how many countries do you operate? Please specify ________ or check one of the following:

The US only

The US and less than 5 countries

Equal to or more than 5 but less than 25

Equal to or more than 25 but less than 100

Equal to or more than 100

4. What is the approximate number of employees in your firm?

Please specify ___________ or check one of the following:

Less than 5,000

Equal to or more than 5,000 but less than 10,000



Equal to or more than 100,000

5. What is the approximate size of your company’s portfolio in square feet (or square meters)? __________ .

For which of these is the CRE group responsible?

% of Assets Location of Assets

_______ % Office

_______ % Retail

_______ % Laboratory

_______ % Manufacturing

_______ % Warehouse

_______ % Call Center

_______ % Fleet Facilities

_______ % Other


47



Research Questions

Context on your business and the Corporate Real Estate (CRE) group

1. What business strategies or strategic initiatives are currently being deployed by the company’s core

business to improve its competitive position (e.g. cost reduction, market share, M&A, etc.)?

2. Describe how your CRE group is organized, and how it reports up into the corporate organization.

3. Describe your current model for Service Delivery / Outsourcing.

Research Hypotheses developed by the Service Delivery and Outsourcing team

Please respond to each of the following research hypotheses regarding Service Delivery and Outsourcing in

2020. Do you agree? Disagree? What are your thoughts?

1. Real Estate business objectives and goals will become more integrated with procurement and therefore

more sophisticated and complex.

2. Vendors will become responsible for data access and usage as it becomes more widespread as a means

of delivering CRE strategy.

3. Clientele will drive service providers to grow their platforms internationally.

4. Due to economic pressures, there will be continued consolidation of service providers and we expect to

see a non-traditional service provider enter the race

5. With CRE utilizing their service providers as an incubator / training ground for non-core business; HR and

training capabilities will become a heightened requirement.

6. Pricing and performance management models will become more value based (more strategic and

proactive) while less focused on purely financial objectives.

Final Questions

1. How do you see your current outsourcing model changing by the year 2020?

2. What other thoughts do you have about successful Service Delivery and Outsourcing practices in the year 2020?


48

cOrPOrate real eState 2020 | ParticiPating cOMPanieSaPPenDiX D:

reSPOnSe tO tHe 2020 Service Delivery anD OutSOurcing BOlD StateMentS

The Service Delivery and Outsourcing team tested six Bold Statements, or research hypotheses, through interviews with senior executives, Summit education sessions and the results of the Corporate Real Estate 2020 End-user Survey. A summary of results to the specific hypotheses is provided below:

1. Real Estate business objectives and goals will become more integrated with Procurement and, therefore, more sophisticated and complex.

Finding: Seventy-two percent of survey respondents

agreed or strongly agreed with this statement. The

role of Procurement is becoming more aligned with

real estate. Study participants noted that real estate

RFP’s need to encompass wider goals and objectives

and move from a commodities-driven, cost-centric

approach to one that drives total value.

2. Vendors will become responsible for data access and usage as it becomes more widespread as a means of delivering CRE strategy.

Finding: Seventy percent of survey respondents

agreed or strongly agreed with this statement. Data

access and usage will be essential to both making

real estate-related decisions and to the services that

end users expect service providers to offer. This will

drive a more interdependent relationship between

CRE and IT.

3. Clientele will drive service providers to grow their platforms internationally.

Finding: Seventy-six percent of survey respondents

agreed or strongly agreed with this statement. Service

providers will need to take the lead and anticipate the

business need for global service delivery capabilities.

Local integration of the service provider platform will

become increasingly more important.

4. Due to economic pressures, there will be continued consolidation of service providers, and we expect to see a nontraditional service provider enter the race.

Finding: Seventy-four percent of survey respondents

agreed or strongly agreed with this statement. Senior

leaders interviewed noted the recent consolidation of

service providers and expect this trend to continue,

especially among smaller service providers and

those with regional expertise.

5. With CRE utilizing their service providers as an incubator/training ground for noncore business, human resources and training capabilities will become a heightened requirement.

Finding: A slight majority, 55% of survey respondents

agreed or strongly agreed with this statement. End-

users will require service providers to contractually

ensure adequate human resources/training capabilities,

and HR and training capabilities will become

competitive differentiators among service providers.

6. Pricing and performance management models will become more value-based (more strategic and proactive), while less focused on purely financial objectives.

Finding: Sixty-seven percent of survey respondents

agreed or strongly agreed with this statement. The

focus on value is gaining momentum but there are

challenges with tracking and measuring value-based

metrics. Cost control will move down the list of

metrics for many CREs, but it will remain one of the

key measures of success.


49

cOrPOrate real eState 2020 | ParticiPating cOMPanieSaPPenDiX e:

cOrPOrate real eState 2020 Service Delivery anD OutSOurcing teaM ParticiPantS

Francisco Acoba, MCR, SLCR, Senior Manager, CRE Transformation, Deloitte Consulting LLP

Jeremy Amin, RPA, Regional Head of Business Services, Macquarie Group

Jay Bechtel, Real Estate & Construction Project Manager, Google

Jessica Beers, MCR, Senior Director, UGL Services

Douglas Beers, MCR, Director, Supplier Governance, Johnson & Johnson

Linda Breymeyer, Director Business Operations, Verizon Communications Inc.

Ann Brown, Sr. Director, Global Real Estate, Medtronic, Inc.

Edwin Buckley, SLCR, Director, Facilities Management, Ericsson Inc.

Scott Bumpas, Executive Managing Director, Corporate Services, Cresa

Joseph Candella, Director, Senior Project Manager, Vanguard Construction & Development

Steven Chon, MSc, Associate Director, Global Corporate Services, CBRE

Michael Christian, Regional Vice President CRE, The Travelers Companies, Inc.

Frank Cuevas, MCR, RE & WP Portfolio Leader-Field Ops, Deloitte Services LP

Alexander Darragh, Senior Managing Director, CBRE

William Early, SIOR, CCIM, MBA, Senior Vice President, Copaken Brooks

Karen Ellzey, Executive Managing Director, CBRE

David Endelman, Managing Director, Studley

Hunter Fleshood, LEEDAP, Corporate Real Estate, Retail Facilities Management, Capital One

Brandon Forde, Executive Vice President, Strategic Portfolio Solutions, Studley

Kim Fuchs, B.A., MBA, LEEDAP, Operations Director, Cushman & Wakefield

Jamie Harvey, National Business Development, Lead Move Management, Jones Lang LaSalle


50

cOrPOrate real eState 2020 | ParticiPating cOMPanieSaPPenDiX e:

cOrPOrate real eState 2020 Service Delivery anD OutSOurcing teaM ParticiPantS

Connie Hughes,CCIM, CPM, Senior Managing Director, Principal, Cassidy Turley

Lisa Huls-Fry, Executive Managing Director, Cassidy Turley

Anthony Korvessis, CCIM, MCR, Regional Real Estate Manager – NA, Procter & Gamble Co.

Ashok Kumar, Principal & Managing Director, Cresa India

Blake Layda, Executive Director, Jones Lang LaSalle

John Leddy, Senior Vice President, Jones Lang LaSalle

Robby Lowe, Director of Business Development, Balfour Beatty Construction

Kurt Ochalla, MBA, MCR, C.Eng., Director, Real Estate Services, Expense Management Solutions

Sherri Parman, CPA, MBA, Partner, Capstan Advisors

Elizabeth Parry, MCR, Real Estate Manager, Cisco Systems

Robert Reilly, Senior Vice President, Fidelity Investments (HQ)

Kenneth Rudy, Managing Director, Jones Lang LaSalle

Al Stabile, Managing Director, Studley Gravitas Real Estate Solutions

Sheena Stone, Business Development Manager, Studley

Greg Trujillo, PMP, Project Manager, Operations, Turner Construction Company

Yannick Villar, M.Sc, Business Development Director, Sodexo

Kent Wiegel, MCR, Managing Partner, Capstan Advisors

Michael Wolff, PE, President, Project Solutions Group, Inc.

Ronald Zappile, MBA, Principal, The Zappile Group, LLC

James Boyle, Chairman & CEO, Sustainability Roundtable Inc.


51

cOrPOrate real eState 2020 | ParticiPating cOMPanieSaPPenDiX F:

cOrPOrate real eState 2020ParticiPating cOMPanieS

AccentureadidasAdobeADPAedasAir New ZealandAllsteelAltisourceAmerican AirlinesAmerican ExpressAmerican Medical SystemsANZAssociated British FoodsAstraZenecaAT&TAtmos EnergyBank of AmericaBank of New ZealandBASFBB&TBMC SoftwareBoston ScientificBrenau UniversityBusinesSuitesCarnegie Mellon UniversityCASP-RCBRECBSChevronCienaCiscoCitigroupCoca-Cola RefreshmentsColonial First StateCornell UniversityCorporate Portfolio AnalyticsDEGWDelft University of TechnologyDeutsche BankDow ChemicaleBayEli LillyEMCEquifaxEricssonErnst & YoungFidelity InvestmentsFischer & CompanyFord LandFuture of Work…unlimitedGenentechGenslerGeorgia Institute of Technology, School of Building Construction

Global Workspace AssociationGoogleHarvard Business SchoolHaworthHewlett-PackardHilton Hotels and ResortsHindustan Unilever LimitedHOKHoneywellIA Interior ArchitectsIMC OctaveInfineraInfrastructure OntarioING BankIntelInterfaceinVentiv HealthiOpener InstituteIron MountainJacobs EngineeringJDS Uniphase CorporationJohn DeereJohnson & JohnsonJohnson ControlsJones Lang LaSalleKraft Foods Lance Capital LLCLiberty Mutual GroupLockheed MartinMarsh & McLennan CompaniesMartin Prosperity Institute, University of TorontoMary Kay Inc.Massachusetts Institute of Technology McCarthy Consulting GroupMcKessonMetLifeMichelin MicrosoftMicrosoft IndiaMillerCoorsMorgan StanleyNetAppNokiaNokia Siemens NetworksNorthern Trust Novellus NVIDIAOraclePacific Gas & Electric Pan-European HR Network Parsons PfizerPhilips International

PolycomProcter & GamblePrudential FinancialRaytheon Red HatRegusRoyal Dutch Shell plc.Salesforce.comSAPShell Oil CompanySiemens AGSiemens Building TechnologiesSony ElectronicsSouthern California EdisonSprint NextelStandard Chartered BankStaplesSteelcaseSybaseTargetTD Bank GroupTeknionTelstraTenet HealthcareTexas InstrumentsThe HartfordThe Occupiers’ Journal LimitedThe Sage GroupThomson ReutersTIGNUMTime WarnerTimkenT-MobileTravelersU.S. General Services AdministrationUnileverUnilever UKUnitedHealth GroupUniversity at Buffalo SUNYUniversity of California, BerkeleyUniversity of MichiganUniversity of Texas at AustinVerintVirginia Polytechnic Institute and State UniversityVirtual PremiseVisaVodafone Vodafone NZWestpacYahoo!Zurich Insurance Group

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Date post:	01-Nov-2014
Category:	Business
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