‘Global players prioritise net cost of ownership’

Jatinder Kaul, Managing Director, Kärcher India delves into the difference between how global and local FM players approach machine acquisition, how interactions with them differ, and how the rental model is a third way out.

In terms of percentages, what are the proportions of sales to service providers vs facility owners/FM heads of organisations?

This is a dynamic ratio. In YTD 2022, the FM companies contributed approximately 25% of the business vs institutional end-user sales.

How has this mix evolved in the past year? According to you, what is the reason for this trend?

• Over the past year, the contribution from FM companies has been significantly higher. Multiple reasons attributed to this scenario.
• Post Covid, with the reopening of larger facilities, it has been critical to manage the respective facilities from a hygiene perspective.
• A qualitative cleaning approach has been followed by most of the end users, so they prefer outsourcing to service providers over the in-house cleaning staff.
• With complete staff strength, cleaning within the defined schedule becomes crucial and this can be systematically managed by the service providers.
• Last, but not least, a long-term relationship with the manufacturing companies has seen an upswing. where they want to tie-up for extended security and warranties.

As a solutions provider, you will naturally have differing relationships with these two categories of clients. Please tell us what differs in the purchasing process.

That’s a good question! Well, for FM companies, the purchasing process varies as per the business setup. Global FM players have a tendency to follow an organised structure. They usually have an internal team to provide application-based solutions to the Business Development team once the opportunity is identified. They also seek support from the solution provider in terms of pre-bid surveys and site audits.

This helps in refining the bidding process in terms of solutions and the possibility of application mismatch is also minimised. With this approach, qualitative procurement happens to keep the net cost of ownership on priority.

Local FM players largely rely on cost-effective product solutions where the focus is mainly on reducing the Capex cost over optimising the total cost of ownership.

The facility owners’/end-user’s procurement process is relatively well-planned but largely dependent on the application-based solutions offered by the solution providers. The ownership mainly lies with the facility head in terms of choosing the appropriate product solution as the product is utilised by the in-house facility management team. Product life span is an important aspect while choosing a mechanised solution because of asset cost depreciation. Opex has also been managed internally so the optimisation of operational costs is critical, which advocates the philosophy of total cost
of ownership.

Considering all the factors, which of these two types of clients is easier to do business with, and why? Can you please explain?

Both types have their unique facets. While servicing FM companies, over and above the application-based mechanised solutions, the supply chain also plays a significant role in terms of inventory management, multi-location site mobilisations and parts management to meet the KPIs set by the end users.

If the global player outsources the contract to the local contractor, the focus shifts to the Capex cost reduction rather than net cost optimisation. Here at Kärcher, while dealing with end users, our philosophy of total cost of ownership is widely appreciated. It is done with seamless supply chain management. However, in the absence of robust solution support and a monitoring team, the in-house operation demands critical after-sales and training/ retraining support.

To cater to the growing market of the latter, we have started a rental solutions model, which can be customised as per requirement and timelines with real-time monitoring and added service support. This model has been widely appreciated by the market and we are serving diverse industries through this.

In the coming years, how do you feel this balance of clients will evolve, and why?

With the ever growing infrastructure in India, it is expected that FM companies will have a sizable contribution to our business. As the market evolves, it will readily accept innovative and advanced mechanised solutions. We optimise our product portfolio to seek better reach.

Replicating our global sustainability initiatives will also be a priority. It will gradually help both service providers and end-users with green certifications. The introduction of dedicated FM and skill development modules in public and private institutions in India will gradually provide a suitable workforce to support both service providers’ and facility owners’ setups, which will result in growth opportunities in both business segments.