Site Selection Game is Changing

The site selection business is changing. Anybody involved in the business already knows this. The question is what do all these changes mean to companies and communities as key participants in the economic development process? I have been thinking about these issues for sometime, but my thoughts were urged along after reading a recent Business Facilities Magazine article about how site selection consulting is changing.

In short, the article says that over the past few years there has been a trend among accounting, business consulting, computing, engineering, financial services, and even real estate firms to acquire site selection capabilities. This has occurred through mergers, acquisitions, and restructuring initiatives, firms such as CB Richard Ellis, Deloitte & Touche Fantus, IBM, KPMG, and Price Waterhouse Coopers have expanded their areas of expertise to include site selection services.

Firms are developing site selection/location capabilities to position themselves "upstream" of their core products and competitors. Site selection can be a very effective selling tool, because it enables firms to develop client relationships early in the project development stages. Over time, these full-service location companies can offer customers a comprehensive suite of downstream products and services.

In other words, if you want to make the "big bucks" designing and building the facility, do the site study first to gain an edge on the other business. While I can understand how some service providers use site selection to get follow-on business, it is my opinion that site selection decisions should be clearly driven by overarching business goals and strategies. The failure to do so not only leads to bad facility decisions, but also a decision that injures the long-term proftability and competitiveness of the business.

Is this move toward a bundled approach to site selection and facility design and build good or bad for companies and communities? The author of the Business Facility article says there are pros and cons to both the "bundled" and "unbundled" approaches. He suggests the company buying these services conduct an internal evaluation of costs and other impacts for each approach. This is true.

In my way of thinking, the proof is in the pudding in terms of what the company is looking for and the results it receives. There may be projects where a bundled approach makes the most sense, especially where facility design and build considerations need to be considered throughly during the site selection evaluation process. In other cases, the site search function can be easily separated from the follow-on steps.

One thing that I clearly see in companies is that the "real estate function" is no longer a separate corporate function. Real estate affects various aspects of the company, including finance, tax, legal, operations, human resources, and many others. As these functions become more tightly linked, it suggests that site selection decisions will be made more by 'teams of internal and external experts." The choice for the company is whether and how much to "outsource" of the process leading to the final objective of locating and building a new facility. Outsourcing of business functions has its pluses and minuses. Outsourcing critical knowledge and decision-making expertise is often a mistake for companies if it weakens their ability to achieve overall business bottom line goals.

Here is a point that both companies and communities should bear in mind as they think about how site selection is changing--as the complexity of the site selection process grows, more expertise is needed from both internal and external experts to make the right location and facility decisions from start to finish. In my way of thinking, this argues that the company locating a new facility should consider carefully its final business performance objectives and the strategies it chooses to achieve results. Strategic goals should clearly drive facility location decisions of all types. The failure to do so undermines the company's ability to get where it wants and needs to go in the future.

What's best for the community? That too depends upon the company project. There may be instances where communities can increase their ability to compete on a project by providing a "turn-key" package of incentives and services to an integrated service provider. Leverage and influence are the most important issues for any community competing for a deal. How much of each can the community have in working with an integrated service provider or separate entities providing the various services. Companies as a rule do not want to give any of their suppliers more leverage than they have to, including communities as "location suppliers."

The community should identify ways to best compete for projects under both the bundled and unbundled site selection service provider options. Successful communities will know how to adapt to the business prospect's needs. The community's role in an overall sense is to serve as an "ongoing service provider" to the company, if it locates in the community. That is the important perspective to bear in mind.

One final issue I will put on the table is the growing trend toward the outsourcing of both production and office functions to offshore locations, such as China, India, Mexico, and Singapore. In my estimation, much of the bundling of site selection, engineering, architectural and construction functions is designed to address the complexity surrounding international facility location decisions, where political, economic and other risks are much greater than those experienced in U.S. locations.

Read the Business Facilities Magazine article by clicking here.