Outsourcing cost-effective for realty firms

In today's environment, property managers, developers and contractors are facing many challenges. The impact of a slow-down is already apparent – delayed project start, slow paying customers, and discounts by competitors.

At the time when businesses are beginning the process of downsizing their revenue expectations, outsourcing real estate dealings can provide companies with cost effective solutions to counter the downturn. Successful companies have discovered their time and energy is best focused on solving problems that increase the company's profits while letting others handle the back office and administrative works. This is the way forward as it will increase revenues, decrease their costs and boost corporate profitability.

As those in the property and construction business "cut out" operational practices and personnel, the objective is to create a suitable outsourcing partnership with a trusted consultancy that will help optimise the business operations and ensure the resources are in place for the next economic "up" cycle.

So what is outsourcing delivering that keeps the client side coming back for more? The answer to this is complex and inevitably quite specific to each client. But, if the reasons outsourcing keeps going from strength to strength in every sector of the industry had to be captured in one word, it would probably be "flexibility".

The primary reasons that drove the outsourcing phenomenon across the world in the first place were lowering costs, moving fixed costs to variable costs, using outsourcing as an agent of change, freeing up management time to focus on core business, introducing robust processes and procedures, using the IT systems of the market rather than investing in them internally and improving customer focus.

Over time, after costs have been reduced to what is considered an appropriate level for the organisation, the focus of services may change to improving customer service and staff amenity to help improve productivity and reduce attrition.

In well-established markets such as the US and UK, the models for outsourcing have continued to be refined as both clients and providers work out new and better ways of delivering the services, often collaboratively. Importantly, unlike IT outsourcing – where the massive initial deals have been steadily broken down into more bite-sized chunks as clients realised they were better served by smaller, more specialised providers – outsourcing contracts in the property industry have found acceptance due to the existing necessity of streamlining operations costs and creating an avenue that can offer more dedicated services.

Real estate outsourcing is the ideal solution for firms that are experiencing one or more of the following issues: Demands by investors or vendors require detailed and extensive monthly or quarterly financial reporting; concerns about increasing overhead costs, special projects that require an escalation of overhead personnel costs for a finite period of time.

The outsourcing of non-core business and property services functions – such as customer service, information technology, human resources management and data processing – has been a rapidly growing sector for more than a decade. But, this option has not been fully explored in the region as yet, since most of the activities vis-a-vis any project has been conducted in-house by most developers. But as the industry enters a lean phase, the practical option is to outsource works. Besides helping to manage costs, outsourcing will also create alternative job avenues for real estate industry professionals.

But, as the priorities of an organisation change over time, the objectives of an outsourcing should also change. For example, over time, after costs have been reduced to what is considered an appropriate level for the organisation, the focus of outsourcing may change to improving customer service and staff amenity to help improve productivity and reduce attrition.

The author is the chief executive of gowealthy.com