Tuesday, March 23

General Session III
Corporate Real Estate 2010: Enabling Work in a Networked World

Ashok Kumar, chair of CoreNet Global's India chapter and principal, CRESA Partners, India, introduced Tuesday's General Session III participants.

Linda DeMars, Director Knowledge Networking, CoreNet Global Learning, gave a presentation on the association's pace-setting Corporate Real Estate 2010 initiative. Facilitating panel discussion was Dr. Prentice Knight III, Vice President Discovery, CoreNet Global Learning. Panelists included Roy Cloudsdale, Vice President, Corporate Clients, Johnson Controls; Bethany Davis, Director Workplace Solutions, Nokia; Alfonso "Jun" Nepomuceno, Asia Pacific Region Head for Corporate Realty Services, Citigroup; and Dan Wolody, International Director, Jones Lang LaSalle.

"Corporate Real Estate 2010 is unprecedented in both methodology and scale," said DeMars. "It is a response to changes in the business environment. It also is a research and industry transformation program. It's our intent to take what we learn out into the industry and help people grow and enhance their careers."

Over the past eight months, Corporate Real Estate 2010 assembled real estate leaders from 125 leading multinational companies and convened eight research teams to study the following topics:

• Work and the workforce
• Technology and the web
• Solutions delivery
• Portfolio optimization
• Strategic role of place
• Leadership
• Integrated infrastructure
• Sustainability and corporate responsibility

Those teams, composed of CoreNet Global members, conducted interviews with some 300 individuals at more than 200 companies. "One hundred percent of the knowledge work on this initiative is done by people like you," DeMars told attendees. "We're still interviewing and going over copious amounts of information."

The 2010 research has identified key business drivers, including technology; globalization; changes in the workforce and nature of work; innovation; risk; and sustainability and corporate responsibility. "These forces are creating new enterprise business models and totally new ways of doing business," DeMars said. "Of course, we are most interested in their impact on corporate real estate."

The emerging new business models for the future will share some important characteristics, she said. "They will be flat. They will be fast. They will be global, dispersed, integrated and process-based. And they will be interdependent and highly networked." By the year 2010, she said, the enterprise will be a collection of complex, interdependent networks that include customers, suppliers, employees and competitors.

Davis described how Nokia's real estate organization is moving more into the realm of understanding the nature of work and enabling work. In fact, the organization recently adopted a new name: Workplace Resources. "We're not the first real estate organization to do that," she reported. "But the key thing for us in doing it was to send a message to our internal customers about what we really do. It's more than just real estate."

Knight summarized Procter & Gamble's experience with integrating various internal support functions. He asked Johnson Controls' Cloudsdale if there were other similar examples. "Yes, there are," he said. "But most are outsourcing the different silos: HR, IT, Real Estate. A good example is BP, itself a highly outsourced company. BP decided they would be the integrator. They felt that there was no one out there who could do it."

Next Knight asked Jones Lang LaSalle's Wolody to comment on the real estate industry in Asia and where it's headed. "It's different country by country," he replied. "And there is a tidal wave of demand coming out of China and India that requires a platform that simply doesn't exist today. But India will get to a reasonable level in just two or three years," he predicted.

Citigroup's Nepomuceno agreed that industry capability varies substantially from country to country across the region. "A given service provider might be strong in one function, but weak in another. A key question for some multinational companies is, will service providers be able to service us in those second-tier locations that are now coming on the horizon?"

Wolody shared some insights from Jones Lang LaSalle's recent research on which cities will be the leaders in the future. "It's really down to cities, and the demographics of cities, not countries," he said. "And it's Asia's turn in this sense. A lot of cities in India and China will have a population of more than 10 million people. Soon we'll talk about Asian cities with the same familiarity we now have with American cities."

The session concluded with a discussion of the emerging role of the corporate real estate executive. CoreNet Global recently surveyed end-user members, asking them about their projected primary area of responsibility in the year 2010. "The most popular answer is 'to plan and manage a network of partners,' " DeMars reported. "That's a very different role than doing deals and buying and selling land."

Education Programme 4
Real Estate Outsourcing in Asia and Beyond

This session presented three companies' successful models for outsourcing real estate in Asia. Corporate presenters included:

• Tony Wong, Vice President and Regional Manager, Facilities Services, Real Estate Business Services, Asia Pacific Region, JPMorgan Chase & Co.
• Jerry Bernie, Director, Workplace Resources Asia Pacific, Sun Microsystems
• Eric Canale, Director of Real Estate & Facilities Asia Pacific, EMC

Moderator Andrew Barker, Regional Director Asset Services, Cushman & Wakefield, began the session with an overview of outsourcing. A variety of drivers are behind today's outsourcing push, including:

• Corporate strategy
• Emerging markets
• IT-enabled services
• Offshoring
• Labor costs
• Reduced costs
• Right expertise
• Best practice
• Training support
• Non-core career paths
• Flexibility

Barker reported that the outsourcing industry for real estate services in Asia began in the mid-1990s with basic services such as cleaning and security. But now even the highest-level functions (e.g., strategic advisory services) are being outsourced. Outsourcing took place early on in more mature markets, including Australia and Hong Kong, and now has penetrated even the newest markets, such as China.

Still, "the practice of outsourcing has to be different here in Asia," Barker said. "Many multinational companies tell us, 'We don't want a Western solution imposed on us here in Asia.' "

The reality today is that the supplier base across the region is patchy, Barker said. The breadth of services limits options, and innovation and synergy are limited. Investment in staff is limited, with poor staff retention. Supplier margins are being squeezed. And "service providers are mostly working harder today because the function is being watched more closely than before the outsourcing," he said.

Following Barker's introductory presentation, the three corporate panelists discussed their experiences with outsourcing.

Wong said that he preferred the term 'right sourcing' vs. either in sourcing or outsourcing to describe his organization's practices. "It's selective outsourcing," he said. Principles behind the decision to shift work to external service providers include:

• Desire to align compensation to the CRE industry vs. the banking industry
• Need for a flexible workforce
• Availability of ready-made technical expertise to fill the knowledge gap
• Access to greater market intelligence
• Risk mitigation - avoid putting all the eggs in one basket

"We are a bank, and risk is high on our agenda," Wong said.

In comparing needs vs. current reality, Wong noted that it would be preferable to have a single service provider (with a full range of services) as a single point of contact. "But regional service providers have a difference presence in different countries, and quality differs from location to location," he said.

Next, Bernie described the drivers behind Sun's outsourcing strategy, including:

• Establish appropriate and consistent service levels
• Leverage industry expertise
• Achieve measurable net cost savings
• Increase employee productivity and satisfaction
• Maintain resource agility

Functions outsourced include facility management, project management and moves, office services, food and concierge services, and environmental health and safety. Staying in-house are business partnering, financial planning and analysis, portfolio management, Sun Sigma (e.g., application of Six Sigma principles in corporate real estate and workplace management) and product development.

"What the industry really needs, and what Sun really needs, is contract flexibility, consistent delivery, a managed services mindset, innovation leading to industry growth and visible management for a management fee," Bernie said. "We want a strategic partnership with our service provider. We want to do it, but we don't quite know how to close that gap." Still, he noted that the capabilities of service providers across Asia have grown "dramatically" since he came to the region four years ago.

Canale is one of just two internal CRE staff for EMC in the Asia Pacific. "My team is just me and my administrator, and I don't think I need any more," he said. An outsourced provider employs an additional 28 people. Canale explained that his company wants most real estate work done outside.

"We are first and foremost an information lifecycle management company," he said. "Maximum value to the company comes from being managers of the process, not necessarily doing the work itself." Additionally, EMC's view is that synergies between various aspects of CRE - and integrated information systems and web platforms - can be best obtained through working with a service provider.

Strategic functions are retained in-house: planning, headcount forecasting, financial analysis, business unit interaction and process management. Everything else is outsourced. Lessons learned from EMC's outsourcing experiences include:

• Have a good understanding of your organization's value proposition to your company
• Look for a service provider with a similar vision and culture
• The service provider should be strong in your major markets
• Sometimes a single service provider can act more like three
• The account manager is the key role
• At the end of the day, it's all about the people

"You might have great processes," Canale said. "But if you don't have great people, you don't have much."

Luncheon/General Session IV
Our Journey to India: Business Leaders Discuss Opportunities & Realities

George McKay, Managing Director, Corporate Services Asia Pacific Region, Colliers International, introduced the General Session IV speakers and moderator. Featured in this session were two business leaders - not real estate professionals - discussing their experiences in doing business in India.

Presenting first was Sanjay Nayar, Country Corporate Officer, Citigroup India. Citigroup has been in India since 1902, when it opened a branch in Calcutta. "But I wasn't around then, for sure," joked Nayar.

Today Citigroup has 26 branches in 19 cities, and the footprint is growing. Some 31 branches will be open in 22 cities by June 2004. The company's head offices are in Mumbai and Chennai, and centralized operations and phone banking facilities are in those two cities, plus Gurgaon.

To be sure, there are challenges associated with setting up in India, he said. But the opportunities are too great to ignore.

For example, India represents a huge opportunity for the banking industry. "India's consumer debt percentage is only 3-4 percent of GDP," Nayar pointed out. "In the United States, the figure is 38 percent. In Korea, it's 26 percent."

The economy is growing, he said, and its growth is coming in new industries - not old. "So there is an immense sense of urgency and hurry on the part of the bank to grow quickly and take advantage of these opportunities and take market share. We can't afford to miss it."

By contrast, Ford is a much more recent entry in the Indian marketplace. Sharing the story of how Ford came to set up major production facilities in India was Vinay Piparsania, Vice President of Marketing and External Affairs for Ford India PVT Ltd.

"To be in India was a unique opportunity," he said. "The fact is that very rarely do you get a chance to invest in a country that is a clean sheet of paper." Several factors swayed the automaker's decision to invest in India, including a democratic government; legal structure and contract law; and flexible production capabilities.

And for Ford, the opportunity in India is tremendous: The country has just 5 vehicles per 1,000 population. By comparison, Brazil has 80 per 1,000 people - and North America has a whopping 500 per 1,000 population.

"Inflation has been brought under control, and the Rupee has stabilized during the past 4-5 years," Piparsania said. "This translates into households that are growing in affluence. We are seeing a growing middle class."

Ford India was established in 1996. It subsequently selected the southern state of Tamil Nadu for a US$400 million plant on a 350-acre (142-hectare) greenfield site. "Our criteria for selecting a manufacturing location included workforce, infrastructure, supplier base and government commitment," Piparsania said. "Tamil Nadu offered us a superior package with all these elements." Today the plant employs 900.

Ford has a strong corporate commitment to environmental responsibility worldwide, and that policy is being followed in India. Ford India also is committed to creating opportunities for women, and its plant employs a percentage of females (12 percent) that is much higher than the norm for India.

Ford's experience in India shows that structural and cultural impediments can be overcome, Piparsania said. "And we have adapted practices and products for India, but we have retained international standards. Everything we do adheres to Ford global standards."