Best Practices in Outsourcing Building Automation Systems Management

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Best Practices in Outsourcing Building Automation Systems Management
Many manufacturing companies are outsourcing non-core activities including
Building Automation Systems (BAS) management. Whether it is outtasking
specific operation/maintenance activities or forming a strategic alliance
with a total facilities management provider,
BAS management outsourcing is a trend that will
impact nearly every company. That does not mean,
however, that outsourcing BAS management is the
right strategy for every company. This insight is designed
as a guide for companies considering
outsourcing their BAS management to a third party
service provider.

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Best Practices in Outsourcing Building Automation Systems Management

  1. 1. THOUGHT LEADERS FOR MANUFACTURING & SUPPLY CHAIN ARC INSIGHTS By David Clayton INSIGHT# 2003-37M SEPTEMBER 3, 2003 There are many benefits afforded to companies that make an informed decision to outsource BAS management for the right reasons including reduced operating costs and higher employee productivity, which lead to lower overall costs. Best Practices in Outsourcing Building Automation Systems Management Keywords Best Practices, Building Automation Systems, Facilities Management, Out- sourcing, Key Performance Targets Summary Many manufacturing companies are outsourcing non-core activities includ- ing Building Automation Systems (BAS) management. Whether it is out- tasking specific operation/maintenance activities or forming a strategic al- liance with a total facilities management provider, BAS management outsourcing is a trend that will impact nearly every company. That does not mean, however, that outsourcing BAS management is the right strategy for every company. This insight is de- signed as a guide for companies considering outsourcing their BAS management to a third party service provider. Analysis The decision to outsource BAS management is not always clear cut and should not be considered trivial. There are many benefits afforded to com- panies that make an informed decision to outsource BAS management for the right reasons including reduced operating costs and higher employee productivity, which lead to lower overall costs. There are, however, a number of potential pitfalls waiting for companies that make the decision before fully understanding the impact it will have on their employees and operations including lower employee productivity and reduced effective- ness of core business units, which lead to higher overall costs. Below are some rules of thumb to follow when considering outsourcing BAS man- agement. Define Clear Achievable Goals The obvious goal of outsourcing BAS management is to allow increasingly limited resources to focus on the “core competencies” that separate your
  2. 2. ARC Insights, Page 2 ©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com company from the competition. To truly benefit from BAS management outsourcing, however, you must take a closer look to quantify and priori- tize realistic goals you hope to accomplish. Is your top priority to reduce operations costs or improve employee productivity? It is crucial to choose a clear, achievable set of goals that can be easily defined and measured to ensure your company’s most important needs are taken into consideration. Defining a clear set of goals at the onset of the project is the only way to measure the future success or failure of the outsourcing project. Carefully Analyze In-house Costs vs. Outsourcing Bids Once you define the company’s goals, you should conduct a financial analysis of current BAS management costs against the anticipated cost of outsourcing BAS management. At this point, you should request bids from a number of potential service providers and begin evaluating the bids against current BAS management costs. Care must be taken to ensure you are comparing apples to apples during this step as some bids may include hidden fees such as charge backs or transaction fees and your in-house fa- cilities group may carry overhead costs service providers would not. You should ask potential service providers to include performance guarantees in their bids and evaluate those guarantees against the in-house facilities’ current performance. This is an extremely im- portant step because it often turns out the current in-house facilities management group is actually competitive in terms of cost and performance. Choose a Compatible Service Provider Once you have decided outsourcing is the best way to achieve your com- pany’s specific goals, it is time to choose the most appropriate service provider. As you evaluate potential service providers, it is important to truly get to know each company. The service provider’s financial stability and corporate culture should be of particular concern. The importance of the service provider’s financial stability is obvious: you want to make sure they are going to remain in business for the length of the contract. The ser- vice provider’s corporate culture, however, is just as important. It is important to choose a service provider that has a corporate culture com- Define Clear Achievable Goals Carefully Analyze In-house Costs vs. Outsourcing Bids Choose a Compatible Service Provider Define Clear Measurable Performance Targets Actively Manage the Relationship Best Practices in Successful BAS Management Outsourcing
  3. 3. ARC Insights, Page 3 ©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com For a BAS management outsourcing agreement to succeed, facilities executives must identify clear, measurable performance targets that can be used to actively track the service provider’s performance in reaching these goals. patible with your company’s to ensure both companies can agree on an ap- propriate approach to solve the inevitable problems as they arise. Define Clear Measurable Performance Targets Once a service provider is chosen, it is time to make sure everyone is clear regarding the key performance targets you plan to use to measure the suc- cess of the relationship in reaching the pre-defined goals. For a BAS management outsourcing agreement to succeed, fa- cilities executives must identify clear, measurable performance targets that can be used to actively track the service provider’s performance in reaching these goals. Clear and measurable performance targets are crucial to the long-term success of any outsourcing arrangement, and it’s important to agree with the service provider on the performance targets up front. Actively Manage the Relationship The outsourcing process does not end once a service provider has been cho- sen and a contract signed. BAS management outsourcing relationships must be actively managed. Not only do facilities executives have to track the project’s key performance targets, they should also carefully examine the way the service provider plans to subcontract any or all of the work. Ideally, these subcontracts or alliances should be in place and agreed upon before a contract is signed. It is also recommended that the contract in- cludes a clause stipulating the right to reject any subcontractor changes the service provider suggests. Recommendations • When deciding whether or not to outsource BAS management, remem- ber to take the needs of your employees into consideration as well as the business needs of the company. Your employees are the true cus- tomers of BAS outsourcing services. If BAS management services don’t meet their needs, employee productivity will suffer. • Make sure your BAS management outsourcing contract is structured in such a way that it allows the service provider to provide adequate ser- vices and support without losing money. Outsourcing relationships are long-term commitments and should be built on a basis of mutual trust.
  4. 4. ARC Insights, Page 4 ©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com If the contract is designed so that the service provider can’t effectively provide proper services and support, your company’s performance will suffer. • Make any BAS management outsourcing decision based on the long- term health of the company and not simply to achieve immediate cost savings. When done correctly, BAS management outsourcing can cre- ate an environment that supports the company’s core business objectives. If rushed into for the wrong reasons, however, BAS man- agement outsourcing can negatively impact the ability of the company’s core business units to operate effectively and create rising costs for the company. Please help us improve our deliverables to you – take our survey linked to this transmittal e-mail or at www.arcweb.com/myarc in the Client Area. For further information, contact your account manager or the author at dclayton@arcweb.com. Recommended circulation: All MAS clients. ARC Insights are published and copyrighted by ARC Advisory Group. The information is proprietary to ARC and no part of it may be reproduced without prior permission from ARC.

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