Business Services Sector
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Industry Overview
The US business services sector consists of about 300,000 companies with combined annual sales of about $450 billion. Major companies include staffing services providers Manpower and Kelly Services; facilities service companies ABM Industries and Rollins Inc; and solid waste handlers Waste Management and Republic Services. Other major companies in the sector include office administrative service firms such as Automatic Data Processing and Iron Mountain; security providers The Brinks Company and ADT Security Systems (a division of Tyco International); and travel agencies including the travel divisions of American Express and Carson Companies. The business services sector is fragmented: the 50 largest companies account for less than 50 percent of sector revenue.
Companies in the sector provide support services to businesses in a variety of industries and, in some cases, to households. Offerings include office administration, hiring and placing of personnel, document preparation and similar clerical services, travel planning, solicitation, collection, security and surveillance services, cleaning, landscaping, pest control, and waste disposal.
Competitive Landscape
Demand ultimately depends on the level of business spending, which is determined by the health of the overall economy. The profitability of individual companies depends on efficient operations and effective marketing. Large companies often enjoy economies of scale and can compete for large, national accounts. Small companies can compete by offering highly specialized services, or through superior customer service. The sector is labor-intensive: annual revenue per employee averages only about $60,000. Business support activities are often undertaken in-house by establishments in many sectors of the economy.
Products, Operations & Technology
Major services provided include employment services (30 percent of sector revenue), services to buildings and dwellings (20 percent), and office administrative services (20 percent). Waste management and environmental remediation services account for about 10 percent of sector revenue, while travel arrangement, and investigations and security services together account for just over 10 percent. Facilities support and other business support services account for the remainder of sector revenue.
The personnel staffing industry is divided into three major segments: placement agencies, temporary help services, and professional employer organizations (PEOs). Placement agencies find workers to fill permanent positions at customer companies. Temporary help services provide workers for customers for limited periods, often to substitute for absent permanent workers or to help during periods of peak demand. PEOs contract to provide workers to customers for specific functions, often related to human resource management. The personnel staffing industry has been radically changed by the Internet. Many employers list available positions with one or several Internet personnel sites like monster.com or jobs.com, and on their own site.
Major facilities services include pest control, janitorial services and carpet cleaning, and landscaping. Commercial pest control firms offer services to apartment buildings, office buildings, institutions, hotels, and to the food industry. Services often involve regular preventative measures like spraying and inspection. Janitorial services include cleaning, removing trash, and washing windows. Carpet and upholstery cleaning uses specialty equipment and is slightly less labor-intensive than regular janitorial work. Landscaping services include landscape installation and maintenance, irrigation systems, tree services, and chemical lawn care.
Office administrative service firms generally provide a variety of day-to-day services such as financial planning, record keeping and billing, human resources functions, and physical distribution and logistics. Due to the Internet, many administrative services once confined to physical offices can now be performed remotely by professionals operating from almost anywhere an Internet connection is available. This added flexibility has allowed companies to offer additional, more specialized services such as technical or contract writing, desktop publishing, and web design.
Waste management services include waste collection, waste treatment and disposal, environmental remediation, and recycling. Trash is usually collected from commercial sites using either small steel containers (dumpsters) that are mechanically emptied into collection trucks, or large "roll-off" containers that are loaded onto a special truck and hauled away. Solid waste is then usually hauled to a landfill where it is buried. Handling and disposing of hazardous waste is technologically complex and expensive, often involving chemical treatment to separate the toxic components.
Commercial security services include installing security systems and providing security guards, armored car service, and investigations. Commercial security systems are often integrated with fire alarm, access control, and closed-circuit television (CCTV) systems, and may be monitored by the customer on the premises or by a monitoring company at a remote station. Many commercial systems are linked directly to local police departments. Staying on top of technological innovations is important for providers of security system services. The miniaturization of sensors and detectors and advances in communications that permit wireless systems have made security systems affordable to a wider section of potential customers. Monitoring companies use sophisticated computer systems to manage the large numbers of accounts.
Major commercial travel arrangement companies usually work with corporate customers whose annual travel budgets are $1 million or more. They typically have onsite offices (at their customers' locations) and use sophisticated computer programs to provide the lowest-cost travel reservations, centralized accounting, and detailed management reporting. For decades, the most important assets of travel agencies were computer terminals connected to reservation systems, like Sabre. Easy access to the Internet has allowed travel agencies to transition from these older computerized reservations systems to airline and hotel websites with online reservation capabilities that can also be used directly by travelers.
