Remote monitoring has potential to improve the building’s energy efficiency and increase its value.
Our aim is to increase service and maintenance business and long-term service agreements by conceptualising our services and developing facility management, remote monitoring of properties and energy efficiency services.
In 2013, the service and maintenance of techical systems accounted for 55% of Caverion’s total revenue. The figure includes also industrial maintenance.
By growing our service and maintenance business, we can contribute to the profitability of the entire Group, as the margins in service and maintenance are typically better than in project business. In addition, demand for service and maintenance is less susceptible to economic cycles than project business, promoting the stability of our business.
Our goal is to increase the service and maintenance of our business in all regions in which we operate but particularly in Central Europe, where its share of total business has been considerably lower (historically around 30%) compared with Northern Europe. However, the share of service and maintenance revenue has been steadily increasing in Central Europe, reaching 38% at the end of 2013.
Long-term agreements bring steady cash flow
Caverion provides a wide range of service and maintenance, ranging from single service visits to comprehensive maintenance of the property and facility management.
While a typical project delivery takes one year, service and maintenance agreements typically cover two to three years and include the option for an extension of one to two years. In life cycle projects, the duration of the agreement may be up to twenty years. Long-term agreements help to smooth out the cyclical nature of the business.
About one third of the service and maintenance revenue comes from long-term service agreements, one third from additional work for existing contractual customers and the remaining one third from ad hoc service orders from individual customers.
Long-term service agreements often cover only daily maintenance at a fixed rate. Additional service and maintenance work is typically invoiced at hourly rates specified in the framework agreement.
Additional work is profitable for us, but it is more susceptible to the effects of economic cycles. By increasing the proportion of long-term agreements, we can smooth out the cyclical nature of work and acquire more additional work.
Remote monitoring: Utilising the full potential of digitalisation
Caverion has been providing property control room services for more than a decade. In 2013, these services were available in six countries: Finland, Sweden, Norway, Denmark, Germany and Austria.
Altogether 10,000 properties are connected to Caverion’s 24/7 remote monitoring service. Our customers include retail premises, industrial plants, data centres and student dormitories, among others. Caverion monitors their heating, plumbing, ventilation, electrical and security systems.
In the control room, we use remote connections to monitor and analyse the functioning of the technical equipment and the conditions inside the properties. In addition, we ensure that the performance of each system is as optimal as possible and within the agreed limits.
The condition data from remote monitoring helps us to improve energy management in the property and increase its value. Remote monitoring decreases the need for on-site visits, which means savings in property maintenance costs. For Caverion, remote monitoring creates bond with the customer, and the availability of condition data generates potential additional work.
We have systematically developed our control room services over the past years. In the future, additional information from public sources, such as information about the weather, the functioning of the power and heat distribution network and energy prices, can be introduced into Caverion’s control room data flow. Property owners and users will receive reports into their own portals, containing information about the building systems and energy consumption in their property.
Focus on facility management
In 2013, we actively developed our facility management concept. We aim for a uniform concept that can be used in all countries in which we operate.
Facility management is strategically important area for us as it provides the opportunity for more extensive service agreements and, thus, has potential to increase our revenue. In addition, extensive facility management agreements are subject to less competition than smaller and local maintenance contracts.
The value of a typical agreement varies from 1 to more than 10 million euros, and the agreement period is two to three years. Agreements often include the option for an extension; therefore, the average duration is about five years.
In facility management, we take care of all the services related to the property. In addition to maintaining and managing technical systems and ensuring energy efficiency in the property, we may also be in charge of other services related to the use of the property. These include reception, maintenance of external areas, security, cleaning, or restaurant services. We purchase these services from subcontractors and take care of the tendering process for the desired services on behalf of the customer. We can take on responsibility for the operational management of the entire property, as well as the planning and management of property-related costs.
Some of our customers have completely outsourced their building systems service and maintenance to Caverion. In outsourcing, Caverion is responsible for all building systems, and the customer’s service and maintenance staff become Caverion employees.
ServiFlex facilitates sales of services
Caverion has developed the ServiFlex concept in which the customers can flexibly combine an individual package from an extensive range of services. More than 100 services in more than 20 technical disciplines can be covered in one single agreement. The content of the agreement is tailored to the customer’s individual needs, and one contact person is in charge of all the services.
The agreement enables the customers to choose exactly the services they need and define service targets that best suit the property.
ServiFlex focuse on preventive maintenance. Quality-assured processes and standardised service descriptions guarantee uniform quality in all the countries. The concept based on preventive maintenance also helps customers to anticipate their operational expenses.
From Caverion’s perspective, the conceptualisation facilitates the sales of services and helps in contract management. In addition, it increases cross-sales and co-operation between technical disciplines. The service is easily scalable because it includes common service descriptions and work instructions, sales and marketing materials and tools for tender calculation, among others. A comprehensive agreement also provides greater opportunities for additional sales.
In 2013, the ServiFlex concept was in use in all countries in which we operate. In addition to ServiFlex, during the year we also initiated the conceptualisation of our other maintenance services.
Control room keeps
an eye on energy consumption
Approximately 150 properties owned by the Finnish retail chain Kesko are connected to Caverion's 24/7 remote monitoring.