In the highly competitive corporate services world, the biggest providers are in a race to deliver global solutions.

Today's world of corporate service providers might be divided into at least two major camps - the Large Service Providers (LSPs) that have amassed a great deal of global scale to service larger corporate clients, and the Small Service Providers (SMPs) which are nimble, flexible and offer more customized programs.

Ultimately, large or not, it's all about service providers achieving outsource solutions for their corporate clients for the least cost and as quickly as possible. And increasingly, today's real estate services arena is characterized as consolidation personified. Larger service firms are striving to get larger quickly, to maximize scale and provide broader reach for their corporate clients, which themselves are continuing to rapidly expand internationally.

And should you have any doubts about the answer to that age-old question, "How long will the outsourcing trend continue?" especially in the face of a slowing economy, Christopher Ludeman, president of Los Angeles-based CB Richard Ellis' transaction management group, offers this prediction: "We expect the current outsourcing trend to not only continue, but to accelerate as corporate earnings flatten and the economy slows. Corporations will seek greater cost efficiencies and mechanisms to drive continued earnings growth."

Bigger firms break out Another question that keeps popping up: Is scale really the answer to greater success? Obviously that depends on who you ask, and it depends on the client and the service need. But in general, the reasons firms are striving to get bigger are pretty clear cut.

"Using a larger service provider brings national and international reach to the table," says J. Michael Dow, president and CEO of New York-based CRESA Partners LLC. "Smaller service providers cannot match the larger organizations' market coverage and corresponding ability to provide consistent services across multiple locations."

Dow says another big advantage is enhanced partnering capabilities. "The nature of today's fast-paced, high-growth companies requires that service providers partner with their clients for the long term, gaining a true understanding of their business objectives and corresponding real estate needs.

"When clients use smaller service providers, they are forced to re-educate new providers each time they require space in additional markets," Dow continues. "This scenario can't compete with the service that larger firms - possessing a clear understanding of the company's needs - can provide across the board without having to continually move up the learning curve."

Bruce Ficke, president of the Atlanta-based corporate property services division of Chicago-based Jones Lang LaSalle, says large and often publicly traded service providers have much in common with the large corporations they serve.

"One of the largest impacts we have had is to bring the market to a realization that outsourcing is a significant business strategy that enhances shareholder value," says Ficke. "For years, corporate clients have tactically out-tasked, using one or multiple providers to tactically execute single events. In the past few years, clients have come to realize the synergies derived from outsourcing versus out-tasking."

With outsourcing, he explains, clients partner with a service provider in an outsource or strategic alliance relationship to handle all of the activities required by the client in either a particular discipline area, or in a bundled approach, placing all disciplines under a single service provider.

The result, says Ficke, is a total corporate market for outsourcing that is growing dramatically. "As corporations look to improve performance, more are looking at an outsourced model, and not just for the traditional out-tasked services," he says.

"We find ourselves developing new tools and products to meet the unique needs of our clients. Virtually anything involved in providing the physical envelope in which work occurs is a candidate for discussion in today's environment," adds Ficke.

John Maher, group president of Trammell Crow Co. (TCC) in Stamford, Conn., says larger and more experienced firms offer more credibility and predictability in terms of economic efficiencies and qualitative improvements.

"In addition, an outsourcing service provider of scale will have a larger and more diversified pool of variable resources, time-tested best practices scrutinized over multiple portfolios and segregated by various industries, expanded career options to transitioned or outsourced employees, bulk purchasing of numerous procurement items, and contract bundling across vast square footage," says Maher.

Also, larger firms have more resources that allow them to immediately respond to the vagaries of the real estate industry and alleviate the resource burden for their clients, explains Maher. "This benefit simultaneously positions TCC's clients to swiftly respond to their industry marketplace, thereby enhancing competitive position. Since these resources can be leveraged for multiple clients, TCC personnel are efficient fiduciary managers and can expand resources quickly on an as-needed basis according to client requirements," adds Maher.

Size, scope and more offices Thomas H. Wenkstern, senior managing director of New York-based Insignia/ESG's corporate services group, cites the advantage of having many offices to cover clients' needs.

One problem smaller competitors have, according to Wenkstern, is a limited geographic coverage and the inability to directly service all markets.

"As a result," says Wenkstern, "they may need to refer business to another firm or negotiate some type of `co-brokerage' arrangement. With these approaches, there is the issue of maintaining consistent quality of the service and, in the latter case, providing adequate economic incentive to the firm actually providing the service. Some smaller firms have elected to join in networks that provide a platform to provide broader geographic coverage," continues Wenkstern.

He adds that the ability to provide services overseas is the most challenging issue for service providers today, and the smaller competitors are at a real disadvantage in this area.

Wenkstern says smaller firms also are challenged to make the necessary investments in people and technology to offer a full menu of services expected by corporations.

Jana Turner, president of asset management services in the Newport Beach, Calif., office of CB Richard Ellis, agrees. "Along with size and scope, we are able to attract a broader base of talent to apply to our clients' diverse needs. That strategy is difficult, if not impossible, for most smaller, local service providers to accomplish," says Turner.

"Our increasingly global culture is built on attracting more experienced personnel who demand ongoing training and professional development programs to make sure they remain at the forefront of their profession. Smaller firms simply don't have the financial resources to continually provide that level of investment in their people," Turner continues.

"To give you an example, our asset services division has established a sophisticated online global standards program - and requires certification by all of our property managers," Turner says. "As part of the program they are exposed to techniques, knowledge and practices that were developed in a much more diverse universe than just a local setting. The experience makes them more valuable to us, more confident in themselves and better able to bring value to our clients."

Large or small, the proof of the success pudding is still measured on the bottom line. "Outsourcing benefits result in improved portfolio management and cost predictability, as well as illustrating a direct benefit to our clients' bottom line," says Maher.

Ficke agrees. "With respect to efficiencies and cost reductions, we undoubtedly produce these results, and they are measurable," he says. "Cost control or reduction continues to be a major focus of our clients, and we demonstrate 15% to 25% reductions in virtually every portfolio we assume. Naturally, the magnitude of the savings is proportional to the latitude given us to implement all our processes and systems, as well as whether our clients choose to outsource the entire gamut of real estate services or just a single-service delivery area," surmises Ficke.

Biggest trend today? Of course, being bigger is not without its own shortcomings, and Maher acknowledges at least one disadvantage. "Larger firms tend to lack the communication efficiencies that smaller firms have as single points of contact for clients. TCC alleviates this problem by assigning on-site account managers with each client," says Maher.

But TCC's not the only one to deploy such a system. JLL's Ficke says bundled services are what clients demand most. "Our clients request a single point of contact within our firm to access all the services the firm has to offer," he says. "We implement this account management philosophy with many of our major accounts."

"Clients contract for the complete line of service and look to us to deliver these services seamlessly across their portfolio," explains Ficke. "Our account executives view our clients' portfolios in their entirety, consider our clients' business goals and objectives and then dispatch our discipline specialists to accomplish the real estate tasks that further these goals and objectives. Our clients can then serve as business-unit strategists, working within their firms to develop strategies to use real estate to enhance shareholder value."

According to Maher, clients require a consistent service delivery model and cost predictability across their entire portfolios. "In addition, TCC has learned that real estate specialization must be augmented with an understanding of the client's core business," he says. "Real estate knowledge alone is insufficient. Clients also want to use `real time' access to their portfolio activities, whether it is financial information, project-related work, or transactions information," Maher says.

Increasingly, clients choose to reduce the number of service providers they use, latching onto the one-stop shopping concept.

"This trend mirrors a `standard order to gain economies practice' among corporations to reduce the number of their suppliers and vendors and simplify the administration of exterior relationships," says Wenkstern. "CRE departments increasingly find that managing multiple relationships takes more effort. At the same time, this doesn't mean that CRE departments are selecting one service provider for the entire U.S. or for overseas work. Many times, regional service providers are selected, to which all business is funneled."

Serving the greatest (tech) needs Technology is increasingly topping the "most-wanted" lists of today's corporations as well.

"Another major trend is the aggressive use of technology to manage real estate portfolios and portfolio-related activities," Wenkstern says. "The development of Web-based tools to conduct and monitor activities represents a focal point for increasing efficiency, controlling costs and reducing cycle time."

Enter Project Octane, the technology consortium/initiative launched by Dallas-based Trammell Crow Co., Jones Lang LaSalle, Los Angeles-based CB Richard Ellis and most recently Insignia/ESG. "Project Octane will provide clients with an online procurement platform, transaction collaboration tools and an ASP platform designed to deliver information faster via customized client Web sites," says Maher. "Clients are demanding technology improvements, Web-based information retrieval and communication ability, online procurement tools and client industry-specific KPIs, or key performance indicators."

In one of its first significant moves, Octane recently invested $30 million in Austin, Texas-based Sitestuff, a procurement dot.com. The consortium also has announced a spring 2001 formal launch of its transaction platform, and industry eyes are watching.

Asked what new services his clients are demanding, JLL's Ficke says emphatically, "Everything and anything to do with the Internet. Reporting, transaction tracking, budget drill-down and portfolio management - they want it all."

CRESA's Dow agrees. "Clients need service providers that understand their needs and provide the preparation and planning to make quick, strategic corporate real estate decisions. And, in today's wired world, they need providers with access to the latest technological tools such as Web-based transaction platforms and project management applications to facilitate the high-speed communications and widespread dissemination of information," says Dow.

CB Richard Ellis' Ludeman says every corporate service will be delivered through Web-based tools that make the process more transparent to clients and allow greater speed and efficiency in managing information, knowledge and process. The spectrum of services required of real estate service firms will expand to include finance, human resources, high-technology consulting, energy management and risk management, Ludeman says.

A corporate perspective Frank Robinson, vice president of corporate real estate at San Francisco-based McKessonHBOC, and his six-person team are in charge of 19 million sq. ft. of warehouse and office space in 400 locations across the United States. McKessonHBOC is a Fortune 40 corporation and is the world's largest supply management and healthcare information technology company.

Managing all of that space is a big job, and Robinson uses a variety of service providers to get it done. But he does have time to see clear distinctions in the way vendors operate.

"Large service providers have expanded the network and types of corporate services," he says. "More types of services are being offered, and these services are being presented, not only throughout the U.S., but globally as well. Today they are available and accepted in many countries throughout the world. They have assumed a valuable role as a `single point of contact' for activities across the U.S. as well as worldwide. Their larger breadth of services and geographic reach has resulted in more standardization of processes as well as lower costs."

As for McKessonHBOC's own outsource needs, he reiterates that services need to go well beyond transaction management.

"Because many internal corporate real estate functions are being outsourced, there is a critical need for `project integrators' who understand how we as a client and end user define and manage a project," Robinson says.

He adds that those involved with integration need to coordinate and manage real estate, project management, information technology, furniture and fixtures, etc. to make for a successful project.

"From the client's viewpoint, a successful project not only means a lease signed but also the right tenant improvements and furniture are in place, the right technology infrastructure is installed and people are connected to the right systems," Robinson says.

So what new services, if any, is Robinson demanding from his partners?

"In addition to having technical skills in various disciplines, we need corporate real estate advisory service providers that have the ability to understand how the various project options and solutions will impact us as a company. They need to be trusted advisers to us - providing advice not only on what options may be available to us, but also what impact each of those options may have on our corporate strategies and goals," says Robinson.

Creativity wins out In the end, whether service providers are big or small - or somewhere in-between - their ability to provide creative solutions in a timely and cost-effective manner will be paramount to their survival.

"Creativity is the ability to turn `never-before-seen' challenges into solution products," says JLL's Ficke. "We are diverse in geography, employee types, skill and challenges faced. With a robust knowledge management program we are able to share information globally, analyze challenges, apply best-practice solutions and often create new products to address problems not encountered by most organizations. We are always on the leading edge."