Market Opportunities for IFM in Vietnam, Indonesia & Philippines


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Frost & Sullivan Analyst Briefing on Market Opportunities for IFM in Vietnam, Indonesia & Philippines

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Market Opportunities for IFM in Vietnam, Indonesia & Philippines

  1. 1. Market Opportunities for IFM inVietnam, Indonesia & Philippines Chukiat Wongtaveerat Environment & Building Technologies Frost & Sullivan Asia-Pacific 5 March 2012
  2. 2. 1 APAC Perspective of Facility Management2 V.I.P Market3 Future Direction of IFM in V.I.P
  3. 3. APAC Perspective - Facilities Management Market Evolution and Roadmap 2012 1990 2000 2010 2020 Service PPP Externalisation Offerings FM Automation Waste Workplace ChangeEvolution Management Management Soft FM (e.g. CAFM)of Facility Outsourcing PFI Contract Value DrivenManagem Management Design IT Services BPOent EnergyMarkets Hard FM Contracting Regional/ Global Outsourcing Property Contracts Management Service Service Total Facility Sustainability Complete Workplace Bundling Integration Management Management Management
  4. 4. APAC Perspective - Facilities Management Market • The Asia-Pacific market is a good mix of developed, developing and under developed market. Hence a huge disparity exists in Australia terms of the overall status of each countries • Singapore, Australia, Japan and South Korea markets are Japan relatively more developed as compared to other countries. Singapore • The South east Asian markets barring Thailand and Malaysia are South Korea relatively less developed and are fast catching up with their APAC counter parts like Singapore or Japan • Most of the Asian countries have the presence of the Malaysia international FM players • The Singapore market is one of the most developed and the Thailand largest markets in Asia. Most of the international players have a Indonesia foot print in the country. Singapore is fast reaching a market Vietnam Philippines saturation level • The Indonesian markets are driven by the energy and resources Time sector which includes renewable and non conventional sources of energy as well Development Growth Maturity Decline • Philippines FM market is driven by the Retail industry, BPO industry in the country and the influx of multinational players in Source: Frost & Sullivan. the country. However this is a recent phenomenon and the market is still in nascent stage and small in market size as well • Vietnam is an under developed economy and so is the FM market in the country. The growth is mainly driven by the manufacturing and office space sector
  5. 5. APAC Perspective - Single, Bundled or IFM? Note: All figures are rounded Source: Frost & Sullivan analysis.
  6. 6. APAC Perspective - Single VS Integrated Services• The market for integrated solutions in Asia-Pacific will continue to grow at a faster rate than the market for single and bundled services. Growth in integrated services invariably reduces growth in single services (through the inclusion of single services into integrated service packages). • Short/ medium term: Many FM providers have been reporting double digit growth over the last 3 years, plenty of untapped growth potential within many verticals and geographies. • Long term: Integrated services will not grow without limit as the advantages are less evident for small and medium businesses. Besides, some large end-users will continue to appreciate the flexibility that comes from short contracts with multiple suppliers. Before 2005 2005 – 2020 2020 Onwards
  7. 7. APAC Perspective: Facilities Management Market Price Sensitivity • The overriding factor in pricing for the Asian market is Lack of the low level of per capita income. While consumers & Value Professional Consciousness want quality and understand that quality comes at a 1 Conduct. in the end 6 premium, most buying decisions are highly price- consumer sensitive. • Large and established FM players have the cost 2 Key advantage and manage to offer their services in a more Relationship Cost cost effective manner than the smaller players Market basedEffectiveness Tendering. • However, international IFM players are under the for Large Trends pressure to match the price of their local counterparts. Players 5 • Profitability ranges from 5% to 10% for regular FM service provider (cleaning, security, and others). IFM 3 4 Low players experience 10% to 15% profit margin due to their Cost pressures Technology value-added services from local players absorption • Small local companies are often at a disadvantage compared to large established FM players that maintain good relationship and support from the government• With the increased participation of international IFM clients companies, use of IT and Web-enabled tools to measure, • Lack of professionalism is prevalent in the non- track, and report is expected to be more common and improve government sector too where contracts are awarded the quality of FM services based on relationships rather than the merit of the• With cleaning and security being the most outsourced company services, the use of technology has been limited• Local FM companies, both small and large, do invest in technologies and chemicals pertaining to cleaning
  8. 8. 1 APAC Perspective of Facility Management2 V.I.P Market3 Future Direction of IFM in V.I.P
  9. 9. Indonesia is likely to maintain its market share among 3countries Source: Frost & Sullivan analysis.
  10. 10. Vietnam – Emerging Economy of APAC• The country has rapidly created private sector job opportunities and is well positioned to achieve all the Millennium Development Goals by 2015.• Vietnam is an emerging market, offering ground floor and growing opportunities for exporters and investors.• Vietnam’s economic growth rate has been among the highest in the world in recent years, expanding annually at 7-8.5 percent, while industrial production has been growing at around 14-15 percent per year.• Telecommunications, information technology, oil and gas exploration, power generation, environmental technology, aviation and education are some of the key industries in the country• These sectors continue to offer the most promising opportunities as infrastructure needs continue to expand with Vietnam’s pursuit of rapid economic development  Like in other Asian countries, the trend to outsource FM in Vietnam is expected to increase, especially in sectors such as banking, telecommunications, energy and power sectors
  11. 11. Vietnam – Market Features and Characteristics  Less than 10 companies in Characteristics DetailsNumber ofCompanies Tier 1 with hundreds of Pricing  Large, established FM participants have a costin the small and medium players advantage and manage to offer their services in a moreMarket in Tier 2 and 3 cost-effective manner than smaller participants.  However, international IFM participants are under  International well- pressure to match the prices of their local counterparts. established service providers  Local service providers Tendering  Small local companies are often at a disadvantage that are well-known in theTypes of compared to large, established FM participants that industry with significantCompetitors maintain a good relationship with and get support from market share government clients.  Smaller or individual service providers, usually Technology  As cleaning and security are the most outsourced catering, cleaning or services, the use of technology has been limited. security companies  With the increased participation of international IFM  Tier 1 (2-3%) companies, the use of IT and Web-enabled tools toTiers of measure, track, and report is expected to become more  Tier 2 ( 25%)Competition common.  Tier 3 ( 70-75%)
  12. 12. Vietnam – FM Key Market Trends • The trend to outsource the entireKey Trends inVietnam bundle of FM services to a third party Price sensitivity and value consciousness is weak, although IFM participants among end users have recently started bidding for Cost effectiveness in large participants projects outsourced by multinational companies. Cost pressure from local participants • Vietnam provides great potential for Low technology absorption FM service providers, as major socio- economic development is underway. Relationship-based tendering This includes construction in real Lack of professional conduct estate, rising concern about pollution, and increasing focus on energy conservation. Source: Frost & Sullivan analysis.
  13. 13. Vietnam – Market Opportunity Analysis by Service Type Opportunity by Service Type (Vietnam) Catering is an M&E important service to multinational Cleaning manufacturing Relative Growth Rate companies in Vietnam. Security Catering Pest Control M&E service is one of Property Services IFM the longest FM Traditionally, services, with the most common highest growth rate; single services most sought service in Vietnam Office Services across Vietnam Relatively new Relative Market Share service propositions;future potential is high Source: Frost & Sullivan analysis.
  14. 14. Indonesia – Rapid growth on FDI drives FM market• FDI in Indonesia has increased significantly by 20% in 2011, especially in the telecommunications, energy, and infrastructure sectors. There are around 1,700 MNCs across 37 industrial sectors• Indonesia is one of the most resource-rich and populous emerging-market countries in the world• Indonesia has long been considered a essential economic power, both in the region and globally• Government plays a significant role in Indonesian economy since it owns more than 164 state- owned enterprises and administers prices on several basic goods, including energy, food and basic infrastructure Similarly to other Asian countries, the trend to outsource FM services is expected to increase in Indonesia, especially in the banking, telecommunications, energy, and power sectors. An increasing trend to reduce energy cost as well as waste generation is expected to favor the rise in demand for FM services focusing on energy and waste management.
  15. 15. Indonesia – Market Features and Characteristics  More than 30 companies inNumber of Characteristics Details Tier 1 and Tier 2, withCompanies inthe Market thousands of small local Pricing  Indonesia is a highly price-sensitive players in Tier 3 market and FM participants are under constant pressure to lower prices.  International well-established service providers  International FM service providers offer consultative value-added services and  Local service providers that tend to be more expensive. are well-known in the industryTypes of with significant market shareCompetitors  Smaller or individual service Tendering  Goverment and local tendering for IFM providers, usually catering, projects in Indonesia are mainly based cleaning or security on the relationship between the service companies providers and clients. Technology  Technology usage in FM services is at  Tier 1 (3-5%) an early stage in Indonesia, thoughTiers of  Tier 2 ( 40%) some IFM participants offer Web-Competition enabled tools to track and manage  Tier 3 ( 50-55%) facilities.
  16. 16. Indonesia - FM Key Market TrendsKey Trends inIndonesia • The trend to outsource FM services is increasing in several Level of price sensitivity in local clients is high sectors, especially in offshore mining More focus on customized services and retail. Commercial buildings are also projected to contribute Integration of green technologies and IFM significantly to the overall development Web-based technology to communicate with clients of the FM market in Indonesia. • Excluding the mining and retail Price competition is high sectors, the adoption of IFM in New buildings might list technology advancement Indonesia is low and limited to sectors as a key requirement such as healthcare, business, and IT. Source: Frost & Sullivan analysis.
  17. 17. Indonesia – Market Opportunity Analysis by ServiceType Opportunity by Service Type (Indonesia) IFM focus is high in major cities. Demand from new buildings is Security significant due to IFMRelative Growth Rate intense building construction in these cities Pest Control Cleaning M&E Catering An important Continuous Office Services single service for demand on all types of end- security services in Focus is mainly Property Services user sectors government and in major cities in commercial Indonesia buildings Relative Market Share Source: Frost & Sullivan analysis.
  18. 18. Philippines – The Top Outsourcing Destination in Asia• Philippines has a dynamic private sector with a strong positioning in several sectors such as electronics, offshore IT and tourism• The country has 8 to 10 million OFW (Overseas Filipino Workers) working primarily as the contract workers across various countries• Moreover, lower dependence on exports, resilient domestic consumption, large remittances from over millions overseas Filipino workers and a growing business process outsourcing industry helped the economy sustain during turbulent times Philippines is emerging as the one of the most lucrative ITO and BPO destinations of the world, Metro Manila is the biggest outsourcing hub for players such as IBM and Accenture With a sprawling BPO industry there has been an influx of multinational companies in the country World leading IT companies, banks and various other enterprises are increasing their footprint in the country
  19. 19. Philippines – Market Features and Characteristics  Less than 10 companies in Characteristics DetailsNumber of Tier 1 with hundreds of smallCompanies and medium players in Tier 2 Pricing  The Philippines market is highly pricein the Market and 3 sensitive and insists on value for money. Therefore, services must stay price  International well-established competitive to gain a foothold in the market. service providers Tendering  Tendering is relationship-based rather than  Local service providers that operating on the basis of cost and service are well-known in the efficiency.Types of industry with significantCompetitors market share  Procurement methods and procedures are well in place but slowed by red tape and  Smaller or individual service corruption, which often disrupt the providers, usually catering, tendering process in the business cleaning or security environment. companies Technology  Information and communication  Tier 1 (1-2%) technologies are two of the key industries inTiers of the Philippines but the uptake of technology  Tier 2 ( 25%)Competition in FM is still in the nascent stage.  Tier 3 ( 70-75%)
  20. 20. Philippines - FM Key Market TrendsKey Trends inIndonesia • The growth is expected to be fueled by the commercial and retail sectors. Relationship-based business There has been a severe influx of IT services companies in the Non-uniform pricing country, due to the growing business process outsourcing market in the Low awareness of benefits country. Red-tapism • The manufacturing sector in Philippines is predicted to contribute Price sensitivity is high significantly to the overall FM market in the country in future. • Most IFM service providers have set up offices in the country, as they anticipate a huge FM demand. Source: Frost & Sullivan analysis.
  21. 21. Philippines – Market Opportunity Analysis byService Type Opportunity by Service Type (Philippines) Energy savings are the main proposition in new or bigger SecurityRelative Growth Rate Cleaning buildings in Metro M&E Manila IFM Catering Security services are prominent in Property Services most public Pest Control areas such as Office Services shopping malls, commer Niche services in cial major cities only buildings, and train stations. Relative Market Share Source: Frost & Sullivan analysis.
  22. 22. 1 APAC Perspective of Facility Management2 V.I.P Market3 Future Direction of IFM in V.I.P
  23. 23. Future Direction: Customer Characteristics Customer Characteristics CompetitiveCountries Preference for Intensity Level of Price Level of Brand Local Sensitivity Awareness Participants Malaysia Impact: High Singapore Medium Indonesia Low Philippines JapanSouth Korea Thailand Vietnam Australia Source: Frost & Sullivan analysis.New Zealand
  24. 24. Future Direction: Market Attractiveness Parameter Vietnam Indonesia Philippines Market Size Low High Low High Low High 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5Market Growth Low High Low High Low High 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5Competitiveness Low High Low High Low High 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Rate of Low High Low High Low High outsourcing 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5Development of Low High Low High Low High IFM 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Source: Frost & Sullivan analysis.
  25. 25. Future Direction: Market Opportunity by End-User Potent Level by End-User Most Likely Least Likely Country High Market Share Moderate Market Share Low Market Share Business & IT Transportation &Vietnam Services Infrastructure Govt. Offices Retail & Wholesale Healthcare Energy & Resources Education, Manufacturing,Indonesia Business & IT Transportation & Retail & Wholesale Services Infrastructure Business & IT EducationPhilippines Services Retail & Wholesale Govt. Offices Manufacturing
  26. 26. Future Direction: Key Success Factors Vietnam Indonesia Philippines Business & IT Targeted End-User Services Energy & Business & IT Sectors Retail & Resources Services Wholesale Brand Value Price State-of-the-art Technology Past References One Stop Services Source: Frost & Sullivan analysis.
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  28. 28. For Additional Information Carrie Low Donna Jeremiah Corporate Communications Corporate Communications Asia Pacific Asia Pacific +603 6204 5910 +61 (0) 8247 8927 Jessie Loh Chukiat Wongtaveerat Corporate Communications Consultant Asia Pacific Environment & Building Technologies +65 6890 0942