EY Real Estate & Facilities Management Outsourcing Poin of View 2016

Does your workplace
outsourcing create value
beyond savings?
A point of view on the future
of real estate and facilities
management

Contents
Executive summary 4
Thought leadership 5
Introduction 6
Chapter I: Recent developments in the REFM outsourcing market 8
Chapter II: Addressing the REFM outsourcing market challenges 10
Trends are born when challenges are resolved 10
Leading practice Nordic REFM outsourcing market 11
Chapter III: What is the future of the REFM outsourcing market? 16
Getting the sourcing model strategy right 16
Vested™: a model for designing the next-generation REFM deals 18
Chapter IV: Conclusions on the future of the REFM outsourcing market 20
EY’s Nordic REFM Team 23

4 | Real estate and facilities management
Executive summary
Historically, the approach to drive REFM outsourcing has been quite consistent across
industries and organizations. “The classic approach” with competitive sourcing,
transactional business models and transactional contracts has been the most widespread.
However, if you look at the most common pitfalls, there are many inherent flaws in this
approach. It is our experience that yesterday’s best practices will not equal tomorrow’s next
great innovations within value-enabling REFM.
At EY, we believe that the classic way to conduct REFM business is still useful when a
company wants to buy commoditized services at the lowest cost. However, if your objective
is to create strategic results and generate value beyond savings and transformation, the
classic approach falls short.
Your choice of business model is fundamental to achieving your strategic objectives.
Similarly, your choice of sourcing business model strategy is integral to orchestrating the
system that will enable you to achieve strategic objectives. Last but not least, the rules
you choose to follow in the relationship with your business partners are crucial for joint
success.
In this report, we have combined EY’s insights as a leading provider of REFM advisory
services with viewpoints from workplace executives and opinion leaders in outsourcing. We
aim to describe current challenges in the REFM market, the most evident future trends and
— last but not least − how to respond to the upcoming changes. In other words, our theme
is just as logical as it is exciting.
Magnus Kuchler
Leader of REFM Advisory Services at EY in the Nordic Region
A strategic and well-
orchestrated operating
model for real estate and
facilities management
(REFM) can add value to
a company’s overarching
strategy. An increasing
number of organizations
understand how buildings
and workplaces contribute
to profits, but different
approaches to REFM and
workplace management
result in different outcomes.

5Real estate and facilities management |
Thought leadership
EY is a leading provider of REFM Advisory Services, ranked number one globally by the
International Association for Outsourcing Professionals (IAOP) in 2015.
In this report, we share observations and conclusions from the wide range of REFM projects
we have been involved in across industries and countries. We have also asked leading REFM
executives and outsourcing opinion leaders to share their take on current challenges,
future trends, and their impact on strategic partnerships and business models. Their input
has greatly enhanced this report, and we would like to express warm thanks to all for their
invaluable contribution.
Participating executives
Peter Ankerstjerne, Head of Group Marketing, ISS
Sebastian Beronius, Global Account Director, CBRE Global Workplace Solutions
David Frydlinger, Partner, Lindahl law firm
Guy Holden, EMEA President of Enterprise Accounts, CBRE Global Workplace Solutions
Fredrik Justesen, Project Manager Global REFM, Ericsson
Juha Olkinoura, Vice President of Workplace Resources, Nokia
Xavier Marmasse, Global Sourcing Lead, CBRE Global Workplace Solutions
Annika Martinson, Director Strategy & Operational Development, Volvo Cars Group
Timothy McParlane, Jones Lang Lasalle, COO, Procter & Gamble Account
Jakob Moltsen, Former Head of Facilities Management, Sony Mobile Communications
Azita Shariati, CEO Sweden & Denmark, Sodexo
David Susoreny, Senior Managing Director & Regional Lead, Cushman & Wakefield
Jesper Svensson, Vice President & Head of Workplace Solutions, Sony Mobile
Communications
Anders Thorvik, Facility Management Specialist, Statoil
Kate Vitasek, Founder of Vested Outsourcing
Ulf Wretskog, CEO Sweden, Coor Service Management
Jörgen Zetterström, Vice President Global Indirect Sourcing, Sony Mobile Communications
Magnus Åkerberg, Managing Director Integrated Facilities Management EMEA, Jones Lang
Lasalle Inc.
EY’s Head of FM Roundtable
EY invites more than 150 facilities
management (FM) leaders in the Nordics
to join exclusive annual roundtable
events. The events are a discussion
forum where FM leaders can exchange
experiences and discuss strategic
priorities and operational improvements
with peers.
EY’s REFM Benchmarking Programs
EY runs four different REFM
Benchmarking Programs in the Nordic
region. In 2015, these programs
benchmarked REFM services in
46 hospitals, 29 corporations,
17 counties and 9 municipalities.
Business knowledge
EY has performed over 300 REFM
engagements, building extensive business
knowledge. EY is also ranked as the top
outsourcing advisor by the IAOP.
https://www.iaop.org/Content/19/165/4149
Surveys, books and reports
EY has authored several reports based
on in-depth surveys over the last years,
including How can Nordic
organizations better leverage outsourcing
opportunities? in 2009 and EY’s Real
Estate & Facilities Management Nordic
Survey 2013.

Introduction
The REFM market as we know it is changing. The business is growing fast and, with ongoing
consolidation of REFM companies, the focus on total cost of occupancy brings REFM
management closer to the boardroom. More and more companies also expect their REFM
operating model to deliver on both top and bottom lines. Consequently, leading companies
see workplace management as a strategic concern for the executive team.
REFM executives are also increasingly being seen as strategic business partners, focusing
on creating as much value as possible rather than a tactical and operational support
function. In line with this, there is a growing trend to ensure that REFM business is based
on facts and analytics. Governing through oversight is no longer enough – in today’s
market, stakeholders must work together to harness as much insight as possible in order to
harvest new value pools.
However, we have discovered that the REFM outsourcing market is confronting some very
obvious challenges:
• Suppliers are not the proactive and innovative integrators that many wish for.
• Buyer-demand organizations are often neither skilled nor organized optimally.
• Both parties experience opportunistic behavior in their relations.
• Last but not least, REFM deals do not drive strategic business transformation.
In other words, many REFM deals and relations in the current market neither satisfy the
buyers nor the suppliers. Neither is procurement satisfied despite the fact that, in many
cases, the total cost has dropped by up to 50% over just a few years while maintaining end-
user satisfaction.

“ A current trend is
to globalize and,
sometimes, not
to centralize. We
are leveling up
from executive
sponsorship
to executive
ownership.”
Magnus Åkerberg, Managing Director,
Integrated Facilities Management EMEA,
Jones Lang Lasalle Inc.

Recent developments in the REFM
outsourcing market
During the last 10 years, the REFM outsourcing industry has been reinventing itself. It is
a market with fierce competition, relatively low supplier margins and huge differences in
business maturity − even between neighboring countries. While the REFM operating models
have delivered greatly on the bottom line all over the world, they have been, and to some
extent still are, considered a necessary cost and a completely operative task.
The development of the “scope of services” has also evolved significantly as suppliers have
become better at delivering. More suppliers are now focused on widening their service
portfolios so as not to miss out in tendering processes. Most have started delivering single
services and then moved into multiservice deliveries. Further along the line, some suppliers
started to provide bundled services, with a few delivering integrated FM on an international
scale. As a reaction to the increased amount of services, new ways of procuring them were
born, such as buying on function-based rather than instruction-based service descriptions.
REFM professionals believe that REFM functions are becoming more intertwined. On
the one hand, on the supplier side, Corporate Real Estate (CRE) and FM companies are
merging: for example, CBRE and Johnson Controls Global Workplace Solutions, and
Cushman & Wakefield and DTZ. On the other hand, on the buyer side, many demand
organizations are now forming first-generation workplace concepts and strategies where
RE and FM are joining forces.
This means that deal volumes increase significantly, putting a lot of pressure on suppliers to
act much more as integrators. An integrator is responsible for performing services rather
than delivering services that is delivering results in collaboration with all buyer stakeholders
as well as other suppliers.
Despite the sheer volume of workplace deals and daily contact with employees, most REFM
demand organizations still strive to reach the right strategic focus in their companies.
Most companies struggle to reach the appropriate strategic focus, and there are very few
CXOs that can exemplify the contribution to top-line growth from an REFM perspective.
Again, mature companies also tend to have quite interesting and productive dialogues
with their CXOs.
In our interviews, we investigated the supplier side’s ability to enable top-line growth with
the REFM operating model.
Chapter I
“ The global FM market
has been attracting a
lot more interest from
investors, analysts and
new market entrants for
different reasons. Firstly,
because the market is
huge. Secondly, because
it is relatively young
and immature. Thirdly,
because there are lots of
opportunities.”
Peter Ankerstjerne, Head of Group
Marketing, ISS

We asked Guy Holden, EMEA President of Enterprise Accounts at CBRE Global Workplace
Solutions: Do you see deals where the REFM results connect with top-line growth of
companies?
Absolutely – ideally, the starting point for any outsourcing deal should be the long-term
business strategy of the organization. To achieve maximum value from outsourcing,
companies need to understand why they own or occupy buildings in the first place. In most
cases, their core business is not real estate (RE) or FM. They need facilities that allow them
to focus on the activities that drive performance and business growth.
The retail business is a good example: there are specific components within those facilities
that directly affect our clients’ bottom line. Chillers or pumps have an impact on revenue
if they break down; if the environment is dirty, customers won’t return to buy the goods or
services again. Understanding how your portfolio contributes to your top-line growth is key.
Once you understand this, you can then measure it and hold your suppliers accountable for
performance. This is the way FM outsourcing can provide strategic value and contribute to
business growth.
Figure 1: Development of the REFM operating model
Source: EY Advisory Services.
Leading practice REFM organizations are continuously under transformation as corporate
objectives are generally updated annually and cascaded downward. Subsequently, the
REFM demand organization translates corporate strategy so as to enable swift execution.
In summary, the REFM operating model for workplace outsourcing is changing dramatically
into a structure where suppliers are becoming true integrators that deliver on both the top
and bottom line.
“ We have seen attempts
to form partnerships
between big service
suppliers before, but
now they also include
the RE function. This
will change the market.
It will potentially bring
the workplace discussion
higher up on the
boardroom agenda −
when you talk RE, you
talk FM to the leaders
of the company. The
curse of FM is that it was
traditionally considered
the least significant item
in the RE portfolio and,
as such, did not receive
much attention from the
company.”
Sebastian Beronius, Global Account
Director, CBRE Global Workplace
Solutions
Value
Time
stage 3
True strategic partnership
RE included and Proactive governance and “decision
making”
stage 2
Customer satisfaction and Harmonization
Efﬁcient and effective execution integrated FM supplier
stage 1
Flexibility and Scalability
Standardization
Strategic- or
outcome-
based
Operational-
or transaction-
based
Tactical- or
output-based
Commoditized services Strategic results
stage 4
True strategic partnership and
fact based decisions based on
Data & analytics
Innovation and transformation
focus
Cost savings
Proactivity
Flexibility
Transformation
Innovation
“Top line” growth
Operational
excellence

Addressing the REFM outsourcing
market challenges
Trends are born when challenges are resolved
In a volatile global marketplace, it is important that workplace delivery is flexible and can
contribute with real value by adapting to the ever-changing needs of the business, i.e.,
scaling up and down as well as closing and opening new sites effectively and efficiently. In
order to support transformation and to be in the forefront of workplace development, focus
on innovation is crucial.
Mechanics must therefore be in place to support and incentivize innovation, which needs to
be a joint priority for the supplier and the buyer. Currently, there is a movement away from
traditional transactional contracts with power and zero-sum game-based negotiations to
more partnership-oriented models based on trust and win-win ideology aiming for strategic
value. Moreover, the focus is shifting toward more strategic and company-wide benefits
such as proactivity, flexibility, innovation and contribution to corporate transformation.
We asked Jesper Svensson, Vice President & Head of Workplace Solutions, Sony Mobile
Communications: what are the most evident trends in the global workplace market?
1. Focusing on the workplace in its entirety rather than FM or RE is a trend. The workplace
is more at the core of the business, and we are wondering how to support it as a business
partner. Focusing on how to enhance and support ways of working and productivity in the
companies.
2. Connectivity and mobility, technology are components enabling the drive of productivity
and efficiency. Not only people, but also machines and buildings. Digital transformation.
From the REFM market perspective, digitalization of the business and data analytics will
heavily impact the business and the way to operate.
3. Talents from a multifunctional perspective in a globalized world. How and what kind of
new people skills we need impacts upon where we are located and how we are working.
Most companies are too locked in past legacy instead of looking into the future. We are
not optimally utilizing resources as shifting locations to find right people with right skills et
cetera.
We asked Guy Holden, EMEA President of Enterprise Accounts at CBRE Global Workplace
Solutions: How do you see commercial models shifting in the market?
Old service models were often based on a cost-plus model, which doesn’t fit the way
most organizations want to operate today. Now, we see more performance-based
commercial models. If we deliver strong results, we create a better world for our clients
and get compensated accordingly. It is a win-win situation: everyone benefits from good
performance and the relationship is based on mutual success. This tends to lead to
long-term partnerships.
EY Advisory Services has a global presence and is witnessing a shift in both the private
and the public REFM outsourcing market. REFM Advisory Services is particularly strong in
the Nordic market where we facilitate REFM Benchmarking Programs beyond our strategic
REFM transformation engagements.
Chapter II
“ Conventional transaction-
based approaches have
inherent flaws because
the economics of the deal
structure keeps buyers
and suppliers at arm’s
length. This approach
is not conducive to
collaboration, innovation
or sharing value,
especially for complex,
multi- dimensional
business relationships.”
Kate Vitasek,
Founder of Vested Outsourcing

Leading practice Nordic REFM outsourcing market
The Nordic REFM market is divided between the more mature private sector, where several
buyer-supplier relationships are on their third or fourth generation workplace deals, and
the public sector in which many players still prefer an in-house delivery model, increasingly
outsourcing single services, and where only very few have outsourced bundled or
integrated contracts for REFM services.
However, our estimate is that there is an increased rate of outsourced service deliveries
among private and public sector players, with an annual growth rate of approximately
2%−3% in addition to the already vast Nordic REFM market that has an annual turnover
of around US$47 billion, made up of both in-house and outsourced workplace operating
models.
Our studies show that there are two main aspects that drive Nordic companies to look for
new ways of organizing their REFM strategy and operational model. Firstly, the Nordic
business culture and mindset strives for long-term solutions, focusing on results rather
than on how they are achieved. Secondly, the region has a natural partnership culture to
draw from and business relationships are generally based on a high level of mutual trust,
which is a result of relatively low corruption levels in the Nordic countries.
Secondly, mature private sector companies on their third or fourth generation workplace
deal have managed to reduce costs greatly, but are yet not happy with what they receive in
terms of innovation and proactivity. It is only natural that mature private sector companies
look for alternative business models that better support their needs, as reflected clearly in
participant feedback in EY’s REFM Benchmarking Programs.
In order to build long-lasting partnerships, buyers, suppliers and procurement will gradually
have to revolutionize the way in which they organize the REFM contribution in the
company. In order to respond to these new requirements, companies and suppliers must
rethink how they create value.
The REFM markets development is characterized by three principal trends
1. Mindset shift from focus on cost to focus on value
Value is a matter of definition, and value constitutes different things in different settings
depending on what you want to achieve from a deal. What we see is a shift in the definition
of value, interlinked with the desired outcomes. It has become a strategic choice to pursue
either traditional competitive sourcing focused on cost reduction, or more partnership-
based sourcing focused on other values.
When the corporate strategic agenda changes, the REFM agenda must change too. In
addition, it should support the corporate transformation agenda, enabling efficient and
effective changes where the workplace is concerned. This is not a one-off, large-scale
transformation effort, but rather a continuous challenge for the workplace organization to
respond to external and internal pressures. The workplace is increasingly being recognized
as an important part of the business, not only in terms of business continuity and smooth
running, but also as a lever for competitive advantage and a way of building company
culture.

Figure 2: A corporate transformation agenda
The corporate REFM transformation agenda shows that many companies have either
growth and optimization objectives, or they have innovation and protection objectives.
From an REFM perspective, the demand organization needs to use market insights and
trends to energize and seize opportunities for growth. This can be done much more
efficiently in collaboration with suppliers. In the same vein, demand organizations need
to leverage on advanced analytics to support real-time market and customer strategies,
especially in times when the company is rapidly growing or shrinking.
2. Suppliers are shifting value creation chains to answer to new market requirements
In our opinion, REFM suppliers can improve their ability to serve as true business
integrators. For instance, what is Nike today if not a veritable business integrator that
provides sportswear and equipment to people, since almost all of its core processes and
support processes are outsourced, yet centrally managed?
A common thread in all our interviews with supplier executives is that value creation is
perceived as moving away from bundled services toward creating customized and tailored
services for every single client. The interviewed executives indicated that the future is
not only about providing services at work but for all aspects of everyday life in order to
increase individual productivity and efficiency.
Furthermore, our interviewees foresee that when this shift in value creation takes place,
opportunities will arise from the new “value pools.” For example, consider the value pool
of “technical maintenance excellence.” Why should the same type of building be managed
technically differently in different parts of the world? Yet, global companies have vast
numbers of suppliers technically managing their various facilities in equally as many
different ways, which of course is suboptimal.
If we look at workplace supplier value chains from a buyer perspective, operating models
can be completely changed for all workplace services and tasks. With the above examples
in mind, it may make perfect sense to outsource all REFM services and build a strong, ultra
slim and competent workplace demand organization that handles all workplace matters in
collaboration with either one or a handful of strategic suppliers acting as integrators.
3. Companies are seeking more partnership-based models
The market development has put pressure on contracts that were designed during a
time when cost reductions and the workplace as a cost center were identified as main
considerations. It is difficult to achieve innovation, flexibility and corporate transformation
when relationships are based on such contracts. Hence, companies have become aware of
the dormant potential to create value beyond savings in models that are more partnership
based.
“ Buyers are increasingly
seeing that the total cost
of occupancy is a complex
formula. The advisors
best poised to help
calculate the solution,
while also solving for
productivity, are those
with expertise across
multiple RE disciplines
– workplace, logistics,
portfolio optimization,
for example – as well as
practical insight into their
clients’ industry verticals
like R&D.”
David Susoreny, Senior Managing
Director & Regional Lead,
Cushman & Wakefield
Grow
• Use market insights and trends to energize and
grasp opportunities for growth
• Leverage advanced analytics to support real-time
market and customer strategies
• Embrace market intelligence to understand how
products and services are bought and sold by the
market
Innovate
• Embrace innovation as a catalyst, speed matters in
a relatively complex market place
• Find radically better ways to delight customer base,
find advantages compared with competition
• Leverage emerging technologies, for the next level
efficient operating model
Protect
• Reduce exposure to negative events through mature
risk processes
• Balance cost of controls and risk coverage
• Manage strategic and operational risk to safeguard
reputation and business performance
Optimize
• Drive profitability through smart operating models
• Increase speed of transformation with support of
business partners
• Optimize technology and data quality, structures and
engagement to drive sustainable cost-efficiency and
effectiveness

When working in closer collaboration, companies can be more flexible in how they reward
their suppliers. Although large players can deliver most standard services within the
REFM domain at a very low price, value creation above and beyond this is often difficult
to achieve. With partnership-based models, it is possible to reward suppliers directly when
they deliver more value. In that way, the supplier wins when the business wins. Hence,
close collaboration can create better solutions that are valuable both to the buyer and to
the supplier.
We asked Ulf Wretskog, CEO, Coor Service Management, Sweden: What is the common
denominator for Coor’s best deals in the market?
The market has not yet accepted the fact that it is the contract and the commercial setup
that matter the most. One common denominator for the most successful deals is the quality
of the relationship. The biggest challenge for the market is to understand this.
Figure 3. Understanding the shift from classic to new business models
Classic business
models
• Competitive sourcing
• Transactional business model
• Transactional contracts (instruction or
function based)
New business
models
• Collaboration and true
partnership with preferred
suppliers
• Outcome-based business model
• Relational contract
• Buy commoditized services
• Generate cost savings
• Often no incentives to innovate
• The zero sum game
• Buy strategic results
• Generate value beyond savings
• Foster innovation
• Win-win
&

In what way do you see
the focus on driving
innovation within REFM
changing?
“ Earlier, the suppliers did
not offer and the buyers
did not request
innovation, it was purely
a negotiation of costs.
Now this is changing.”
Annika Martinson, Director Strategy & Operational
Development, Volvo Cars Group

What is the future of the REFM
outsourcing market?
We know that fundamental change is required to be successful in the market, to overcome
the challenges, to be proactive and innovative and to enable constant transformation.
Proactivity, flexibility and innovation are values that the marketplace requires from REFM
operating models.
“The more strategic and complex the deals that need to be designed, the more relational
the contracts must be. Only relational contracts can enable the collaboration needed to
achieve mutual strategic outcomes.” David Frydlinger, Partner, Lindahl Lawfirm
Simply put, to prepare for business, one must understand which sourcing business model
to use.
Getting the sourcing model strategy right
In our view, both transactional and outcome-based business models will continue to
be used in future. However, we predict that a growing number of deals will be strategic
partnerships by nature.
Figure 4: Sourcing business model matrix
Source: Vested™.
The table above illustrates that the vast majority of REFM business models in the market
involve an approved supplier, a simple transaction supplier or preferred suppliers. These
research results might surprise the players in the market who believe that they have
strategic partnerships.
Chapter III
“ The reason why
companies do not ‘get’
innovation is because
they don’t buy innovation.
There are several
fundamental flaws with
how existing outsourcing
relationships are
structured today.”
Kate Vitasek,
Founder of Vested Outsourcing
Relationship/Contract Model
Transactional Contract
(Market)
Relational Contract
(Hybrid)
Investment
(Vertical Integration /
Hierarchy)
EconomicModel
Outcome-Based
Economics tied to
Boundary
Spanning/Business
Outcomes
Mis-Match
–
Not a Viable Strategy
Vested
• Equity Partner
(e.g., Joint Venture,
Subsidiary)
• Vested Shared Services
Output-Based
(Performance-Based
/ Managed Services)
Economics tied to Supplier
Output
Mis-Match
–
Not a Viable Strategy
Performance-Based
/Managed services
Agreement
• Equity Partner
(e.g., Joint Venture,
Subsidiary, Co-Op)
• Shared Services
Transaction-Based
Economics tied to activities
drive behavior, e.g., per
unit, per hour
• Basic Provider
• Approved Provider
Preferred Provider
• Equity Partner
(e.g. Joint Venture,
Subsidiary)
• Shared Services

In reality, most companies actually have a transactional business model and contract that
they call a strategic partnership. Many adhere to a preferred supplier model combined with
a transactional contract. Moreover, some companies have a performance-based business
model where the suppliers are rewarded based on performance. More often than not, they
are combined with a transactional contract, which we no longer consider to be a viable
option.
The more value beyond savings you want to achieve, the more you will tend to move
upward on the vertical axis. In addition to moving upward, you also need to move to the
right in the matrix, i.e., choose a relational contract instead of a transactional contract.
Figure 5: What characterizes a strategic partnership?
In the global REFM market, we see large, complex deals covering a vast number of services
in many countries where both the buyer and supplier stick to the same old (transactional)
routine while expecting different results from a structure that does not enable different
results. In order to orchestrate new types of REFM outsourcing deals, new RfX1
models are
needed.
The default soliciting process in the workplace market is a Request for Information followed
by a Request for Proposal. However, the Request for Solution and the Request for Partner
processes are vehicles that take the market to the next level. These processes differ from
the default practice in many ways. A Request for Solution is different from a Request
for Proposal in that the buyer does not know the solution; rather, suppliers are asked to
propose the most appropriate solution. A Request for Partner process uses a Request for
Solution, but adds an element that stresses the importance of finding a supplier that will be
a good “fit” and culturally compatible with their organization.
Standard Request for Proposal processes cannot be used when entering a true strategic
partnership. Think about it: you are going to create a bigger pie together and not fight
over the pie. Many developed REFM organizations are now getting ready for true strategic
partnerships. In order to shift to the next gear or implement a new business model, new
soliciting processes are needed.
1
2
3
4
5
6
Both parties get an added value
from the partnerships and they
both contribute equally.
The time frame is long. The parties
are willing to sacrifice short-term
gains for better long-term
performance.
The parties have agreed on the
vision and intent of the partnership
and have a clearly defined goal.
The relation is characterized by a
high degree of trust.
Both parties are granted flexibility
to deliver their part in the most
suitable way.
The parties develop with and for
each other, which results in new
ways of doing things.
1 RfX is an acronym for Request for X, where X can be either information, price, quotation, proposal, solution or partner.

True partnerships that enable a win-win situation do exist, but they are rare. The obvious
question is: How do these contracts work and how are they created?
Vested: a model for designing the next-generation REFM deals
A research group at the University of Tennessee led by Kate Vitasek managed to codify
the key elements of successful partnerships, based on extensive field study research.
The codified solution called Vested is, according to the university, “Business model,
methodology, mindset and movement for creating highly collaborative business
relationships that enable true win-win relationships in which both parties are equally
committed to each other’s success.” EY and Lindahl Lawfirm have, in collaboration over the
last two years, successfully taken Vested to the REFM market.
Vested is a combination of an outcome-based business model and a relational contract.
Vested creates business relationships with experts outside one’s own domain with the aim
of accomplishing ambitious objectives never accomplished before. These relationships are
characterized as “Vested” because they involve creating a relationship in which the parties
have a committed and profound interest in each other’s success. To put it simply, the
parties are most successful when both reap the benefits.
By applying Vested, the misalignments described in the previous sections can be avoided.
This can be illustrated by looking at the five rules Vested is built upon, introduced as a
chronological process where buyers and suppliers collaborate and apply a “What’s In It For
We” - (WIIFWe) approach — not a “What’s In It For Me” – (WIIFMe) approach.
1. Focus on outcomes, not transactions: the buyer specifies the needs (transformation
to a certain stage, cost savings, etc.), not specific transactions. The supplier will not
be compensated or measured on how often the activity is performed. It is the desired
outcomes that matters.
2. Focus on the what, not the how: many REFM contracts have moved beyond
instructions (how to perform a service) to defining the function (e.g., lawns should
make a pleasant impression or be within a specified height range). By doing so, the box
that the supplier can optimize has been made bigger.
Figure 6: Vested five rules

3. Agree on clearly defined and measurable outcomes: the parties spend time on
defining a limited number (preferably not more than five) of clearly defined and
measurable outcomes for the entire service delivery. By doing so, the buyer will not
micromanage the supplier − after all, the idea of outsourcing is to let someone that is
better suited manage the services. It will also help ensure focus on the right areas.
4. Pricing model with incentives that optimize the business: the pricing model should
be built on three principles. Firstly, there should be strong incentives to deliver results,
not to deliver a service. Secondly, the buyer and service should share risk and reward
based on aligned interests. Thirdly, only risk that the service provider can control
should be transferred.
5. Insight versus oversight structure: instead of multiple reports on used volume of
consumables and dashboards, the information between buyer and supplier must
support the desired outcomes, where the parties collaborate to manage the business.
Vested thinking is different. It often means going against how suppliers and business
partners traditionally approach working together. It requires long-term thinking, not short-
term thinking. Vested is about working alongside suppliers as business partners rather
than relying on default procurement processes that use transactional buy-sell principles.
Moreover, it is about moving away from rigid contracts and statements of work, and instead
creating flexible business agreements based on trust, transparency and fairness when
business happens.
In our view, Vested is not just for big companies − it can be applied successfully in all kinds
of contexts, be they private or public.
“When Vested contracts are conceived right they require less ongoing maintenance and less
escalations. Shared savings and gain share programs are effective. The providers are now
really impacting the buyers’ balance sheets.” Timothy McParlane, Jones Lang Lasalle Inc.,
COO, Procter & Gamble Account
Unlike previously, the value
that companies will be
looking for from an REFM
operating model will be
tightly connected to the
corporate transformation.

Like the global outsourcing market, the REFM market is in turmoil. The industry has been
perceived as operational and tactical, but has now been put on the CXO agenda. It is very
clear that REFM sourcing as we know it is slowly disappearing. Companies all over the
world are experiencing an unprecedented pace of change, and they need to transform now.
Overall REFM outsourcing market trends 2016
From all our latest client engagements, and from this research, we can summarize the
movements in the REFM market. Future REFM deals will be increasingly globalized and
centralized, and more often they will have CXO ownership, and not only CXO sponsorship.
More and more companies will understand why they have buildings in the first place,
which is why a total cost of ownership focus is necessary. The default way of sourcing
REFM services will change from the traditional way into new business models where
buyers choose the “best fit” business model based on their unique desired outcomes.
The REFM value contribution to corporate strategy will increase where REFM challenges
such as strengthening the brand will become even more important in order to attract the
right talent. To manage these challenges successfully, a more data-driven approach is
required and therefore there is a strong and growing trend to utilize analytics. The leading
companies that already have a good analytics approach in place see new value pools being
created.
The most obvious trend is the move from buying and supplying REFM activities as a
“commodity” to buying competitive advantage through true strategic partnerships. EY has,
over the last two years, become convinced that one of the business models to use to enter
into these true strategic partnerships is Vested.
These trends in the REFM outsourcing market are impacting how a professionally
developed REFM business model is architected.
Globalization and centralization of REFM operating models with CXO ownership
Strategic value and transformation through total cost of ownership focus
Mindset shift and competence development for ”best fit” business model,
solicitation and governance, which apply to buyers, suppliers and procurement
Competitive and attractive workplace concepts, such as Acitvity Based
Workplaces (ABW), strengthening “the brand,” increasing productivity and
assuring talent influx
Analytics and digital transformation of REFM, enabled by affordable technology
and a need for fact-based decision-making
New value pools, creating value beyond savings through optimizing building
square meters by site consolidation, proactive space planning and technical
maintenance excellence
Moving from buying activities to buying competitive advantage through true
strategic partnerships that create “win-win” solutions
ThefutureofREFMOverall REFM outsourcing market trends
Chapter IV
Conclusions on the future of the REFM
outsourcing market
It is not up to “them,” nor
is it up to “you,” but it is up
to “us” to help adapt to the
new ways of working.
That is a first step toward
a better working world.

From a buyer perspective, we found that the REFM business model needs to contribute
to corporate strategy with value beyond savings. The REFM business model must enable
execution of the full corporate transformation agenda. Through combined forces,
sustainable business transformation can be achieved faster when a small, yet competent,
demand organization collaborates with a “best fit” partner. With that in mind, REFM
business as such must also change its way of structuring and soliciting its deals.
From a supplier perspective, we found that suppliers are shifting value creation chains in
response to a very challenging business climate where a wider service portfolio (total cost
of ownership) will enable suppliers to come closer to their clients. In the process, new value
pools arise. Suppliers therefore welcome the movement toward true strategic partnerships,
as strategic and complex deals are best orchestrated on the basis of outcome-based
business models in collaborative contracts. In the future, REFM suppliers have a real
opportunity to become true integrators that deliver real strategic client value closely
aligned with the buyers’ strategic objectives.
From a procurement perspective, sourcing as we know it is slowly disappearing. Strategic
relationship management is becoming a hot topic as new business models entering the
market create completely new expectations for procurement. Procurement organizations
need to become strategic business partners that focus more on value creation and less on
savings. To achieve this, new competencies are needed along with knowledge about the
REFM market and which approach to use when requesting information, quotations and
proposals.
Our role as advisor is undergoing definite change, and we will be seen as taking sides less
often. Our role will be that of a deal architect helping complex strategic businesses where
we facilitate the process and support stakeholders in generating desired results. At the
same time, our market is growing rapidly as we work with various market stakeholders.
Moreover, we can play an even greater strategic role when REFM becomes a topic on
the boardroom agenda. We believe that strategic partnerships and new business models
represent the next level for the REFM business. Lastly, we acknowledge that the “classic”
way of carrying out REFM outsourcing business will remain, but not as the default choice.
It is not up to “them,” nor is it up to “you”, but it is up to “us” to help adapt to the new
ways of working. That is a first step toward a better working world.

Building a
better working
workplace.

EY is a leading independent REFM advisor in the Nordic region with experience
from more than 300 transformation projects.
Nordics
Magnus Kuchler
Leader of REFM Advisory Services at EY in the Nordic Region
magnus.kuchler@se.ey.com
Denmark
Claus Frigård Christensen
REFM Advisory – responsible Nordics
claus.f.christensen@dk.ey.com
Sweden
Robin Warchalowski
REFM Advisory
robin.warchalowski@se.ey.com
Norway
Daniela Hamborg
REFM Advisory
daniela.hamborg@no.ey.com
Finland
Jaakko Hirvola
REFM Advisory
jaakko.hirvola@fi.ey.com
Nordics
Henrik Järleskog
REFM Advisory, Head of Vested
henrik.jarleskog@se.ey.com
Authoring Management Consultants and Project Team
Henrik Järleskog
Gustaf Leijonmarck (editor)
Henrik Orre (editor)
Josephine Bergström (editor)
Alexander Lundin (editor)
Amanda Lundell (editor)
Martin Cardell (Project Team)
Niclas Elfström (Project Team)
Rune L. Johannessen (Project Team)
Daniela Milosevska Hamborg (Project Team)
Victor Mannerholm Hammar (Project Team)
Christine Bergan (Project Team)
EY’s Nordic REFM Team

EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction and advisory services.
The insights and quality services we deliver help build trust and confidence
in the capital markets and in economies the world over. We develop
outstanding leaders who team to deliver on our promises to all of our
stakeholders. In so doing, we play a critical role in building a better
working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of
the member firms of Ernst & Young Global Limited, each of which is a
separate legal entity. Ernst & Young Global Limited, a UK company limited
by guarantee, does not provide services to clients. For more information
about our organization, please visit ey.com.
© 2016 EYGM Limited.
All Rights Reserved.
EYG no: AU3717
ED None
This material has been prepared for general informational purposes only and is not intended
to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors
for specific advice.
ey.com
The views of third parties set out in this publication are not necessarily the views of the
global EY organization or its member firms. Moreover, they should be seen in the context
of the time they were made.

EY Real Estate & Facilities Management Outsourcing Poin of View 2016

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