IT departments often are asked to do more with less. Try doing more with nothing.
Apartment management firms have faced a common budget dilemma over the past year: figuring out how to do more with less. For many technology executives, the circumstances are even more extreme, says Western National’s Vice President of Information Technology Ken Hodges: “The overriding theme this year is to ‘do more with nothing,’ ” he says.
With revenue declining for many apartment owners and management companies, information technology (IT) departments are not immune to cost cutting. But with technology becoming an ever more vital aspect of apartment companies’ operations, any cuts can have a significant impact.
“There is a lot of pressure this year on technology budgets,” Hodges says, “and it can be challenging because IT departments are usually considered the good guys. We take pride in providing the organization what it needs, when it needs it. If the end-user experiences disruptions in service (whether it is an employee or a prospective resident), undoubtedly the frustration level will go up.”
Technology executives are trying a variety of tacks to keep their departments within budget while maximizing the services available for corporate and onsite employees. The strategies recommended by these executives could help apartment technology departments do more, even when it seems like their resources are lacking.
Identify ‘Needs’ Vs. ‘Wants’
With corporate management asking his department to cut equipment purchases and other investments, Hodges has had to more carefully analyze his company’s technology needs. “We are categorizing them into need-to-have and want-to-have,” he says. “With some purchases, I ask, ‘Can I put this off this year?’ But on critical infrastructure items, you have to stiffen your backbone and explain to upper management, ‘We have to purchase this, and here are the negative consequences if we don’t.’ ”
Core infrastructure needs such as server replacements, routers and data storage are examples of technology purchases that cannot be delayed, Hodges says. “If mission-critical hardware is nearing the end of its life cycle, you’re taking a big chance in not replacing it. You don’t want to be in the position of cutting equipment expenditures that you really need to have in the coming year, and then standing by and watching the original technology break or becoming over-extended. This creates down time for the users, and then of course you have to purchase the equipment that you should have budgeted for in the first place.”
To reach a decision on technology spending, Hodges meets with the company’s CFO to discuss planned purchases or investments, why those purchases are necessary and how they fit within the overall objectives for the organization. For example, in 2008 the company began a project to convert all of its communities’ connections to the corporate office from a VPN (virtual private network) system to a virtual desktop system. Although the virtual desktop product is useful in extending the life of hardware at the site and can be supported better by the IT staff, it’s fairly expensive to deploy, Hodges says. While the project was to last through 2009, the economic slump put the deployment on hold until further notice.
When making such decisions, open and effective communication with both end users and upper management is critical, Hodges advises. Technology executives should explain the decisions they’re making, why they’re making those decisions, and describe the potential impacts of postponing initiatives or purchases on both finances and services, he says. “That way everyone can understand the risks.”
In any economic climate, apartment executives say the technology investments they choose to make must deliver payback, whether through operational savings or through the delivery of services that help apartment companies achieve their primary task: renting apartments.
For any potential technology investment at AMLI, a Chicago-based private real estate firm with 26,000 apartments in major markets, the company assesses the investment’s potential return, as well as the time frame for bottom-line improvement, says Steve Small, AMLI’s CIO. The company currently is focused on both cost-saving and revenue-generating technologies.
One of its priorities is creating a robust set of real-time dashboards for onsite staff and executive management that allows them to track financial and operational information. A maintenance manager, for instance, could ensure he’s properly managed controllable expenses and that apartment turns are being scheduled in advance.
AMLI also is focusing on technologies used to market its communities, including software applications for online listings and leasing. Small says the company is willing to invest in such technologies with viable returns, even if it means spending more. “AMLI views technology as a very important component,” he says. “You need to invest in technology to stay competitive.”
Village Green, a Farmington Hills, Mich.-based apartment management company that operates 36,000 apartments nationwide, is another firm that has maintained its technology investments for initiatives that help eliminate costs or meet customer demands, according to Jonathan Holtzman, the company’s Chairman and CEO. Village Green invested in a system that enables it to track all prospective residenta and how they learned about the community. While the system constitutes an additional operating expense, it has allowed the marketing staff to save money by cutting costs associated with underperforming advertising sources, such as listings in newspapers and relocation guides.
Village Green also has invested in technologies that keep up with consumers’ changing needs. It launched a mobile-leasing platform, a rare application in the apartment industry, which allows customers to reserve an apartment by using their smartphone or the smartphone’s voice recognition technology.
Another investment the company made was in a system to assign individual prices to each apartment in a community based on the apartment’s floor plan, view or other luxury upgrades so customers can choose the apartment that best meets their lifestyle and financial needs.
When to Outsource
Outsourcing makes sense for companies seeking to improve services while cutting in-house expenses, according to Matthew Foster, Vice President of Information Technology for Omaha, Neb.-based property management company DEI, which operates 10,000 apartments in 11 states.
“Our industry is ripe for vendors that can look for things we’re doing, take it out of our hands, and improve it and speed it up,” Foster says.
The collection and storage of apartment community data is an example of a task ideal for outsourcing, Foster says. A Web-based service can save all data in one place while continuing to make it accessible to any staff member. Guest-card information, for example, can be stored online, then automatically pulled onto a rental application or online lease, creating less chance for entry error.
E-mail is a costly service for companies of all sizes and types, and outsourcing the function to a third-party vendor can provide greater security as well as lower costs for licensing, hardware and administrative staff, Foster says. Vendors that provide e-mail service can absorb the costs to support the necessary equipment in a managed data center and have it backed up regularly. This can help alleviate the costs for apartment companies that would perform the functions in-house. Foster says DEI’s vendor allows the company to manage the number of users it must pay for on a day-to-day basis, rather than buying packages of licenses in bulk. Outsourcing the service is “very cost-effective,” Foster says, “and it gives great piece of mind.”
Outsourcing doesn’t work for all functions, however. AMLI’s Small, for instance, says his company outsources some administrative processes such as payroll, but keeps strategic initiatives such as online leasing within the company.
Through the Clouds
As outsourcing technology services becomes more common and companies take greater advantage of remotely based services, technology executives have coined the term “cloud computing” to describe this advancing strategy.
Generally speaking, cloud computing refers to using hardware or software based on the Web or in an outside vendor’s data center. Google’s Gmail is a good example that many are familiar with: Users store their e-mails or files on Google’s remote servers, accessing them through a Web page rather than needing to run software on their own computer. Such services generally are flexible, easily accessible, and simple and more affordable to set up.
Property management software is a perfect example, Small says. Rather than building their own programs, companies can use Web-based software that caters to their specific needs.
DEI uses cloud computing for backup storage and disaster recovery, Foster says. “Instead of absorbing $50,000 to $100,000 in hardware costs, you start paying by the hour, day, or gigabyte,” he explains. “If you sell some of your portfolio, you can dial it back down to minimize unnecessary expenses. We have terabytes of potential storage available, but we only pay for what we use.”
Western National’s Hodges says some downsides to outsourcing a company’s core systems include the loss of direct control over company data, as well as difficulty in providing integration with other systems. For that reason, Western National develops many of its programs in-house and makes sure they can be integrated with the company’s various internal systems such as human resources and property management software. “Right now, I prefer a little more flexibility with my data and systems by keeping them in-house,” he says.
Go Virtual
Software isn’t the only technology need that can be filled from a remote location. Experts say an increasing number of companies are looking at virtualization, in which users work on a “virtual” desktop. In such an environment, the computing power itself—the programs, applications and data used—is done on a central server, rather than on the local hardware.
“The idea behind desktop virtualization is that you’re able to get more out of the end user’s equipment than if all the computing were done on the desktop,” Hodges says. Because the user doesn’t need as much computing power, the technology department can lower equipment specifications, reducing purchase costs and extending the equipment’s life by as much as 18 months. Additionally, troubleshooting is improved because help-desk technicians can log in to a computer remotely and see first-hand what challenges the end user is experiencing.
For executives who aren’t fluent in technology, these strategies may sound futuristic, and indeed, many of them are still in the development stages. But their popularity is growing. As information technology departments continue to work within strict budgets, they also will continue to work toward developing faster, cheaper and easier strategies that enable them and their companies to do more with less.
Jeffrey Lee is NAA’s Manager of Communications. He can be reached at jeffreylee@naahq.org or call 703/797-0647.