In late July, Dallas-based Riverstone Residential Group announced that it had selected RealPage as the firm’s multifamily cloud computing vendor and would be moving all of its systems onto RealPage servers over the course of a 90-day transition period. In addition to the software and data transfer, the bulk of the Riverstone IT team, including CIO Ty Brewer, departed their posts and became RealPage associates. For the entire enterprise, Riverstone retained only its applications training team and database administrators; it is now in the process of recruiting a sole full-time IT associate to coordinate client accounting and management systems.
In an interview with Multifamily Executive, Riverstone Residential Group chief administrative officer Pal Ottesen said the decision to outsource the core functions of Riverstone’s executive IT team was the most difficult aspect of electing to pursue cloud computing. With Seattle-based Pinnacle not far behind in making the move to a cloud computing model, it seems the industry is on the verge of having to make some critical decisions regarding technology platforms and the executives who staff them.
To put a finger on the pulse of that decision-making process, Multifamily Executive quizzed some of the industry’s leading technology executives and asked them the following question:
How do you think the advent of cloud computing might impact the strategic role—and even corporate necessity—of the multifamily CIO?
Vice President, Information Technology
Western National Group
The maturing of cloud computing, especially in this economic environment, has allowed companies to significantly cut operating and equipment costs while, in theory, increasing both reliability and scalability to the enterprise. With these recent changes, I certainly don't believe the CIO role will fade into irrelevancy in the business, but like all good executives, CIOs will need to adapt and change in order to be successful. The good news is CIOs live and breathe change most of their careers, so the transition should be easy for most. Moving forward, I believe the most successful companies will recognize the rounded perspective of the business that CIOs bring to the table, and they will be able to leverage that talent beyond the traditional CIO role of the past.
As to the recent news, I respect what was most likely the extremely tough decisions that have been made by these companies to outsource their IT operations. I do, though, have some reservations as to the long-term viability of this strategy. While I believe cloud computing will change the technology landscape fundamentally for the better, I'm not sure I agree with the "all your eggs in one basket" approach to outsourcing both equipment and talent critical to the enterprise in the hands of a third party. I think long-term, it will hurt a company's ability to innovate the leveraging technology that sets it apart from the competition.
Vice President of Technology
I feel the advent of cloud computing and outsourcing of our infrastructure will work as a huge benefit and further stress the importance of the multifamily CIO. This will allow for the CIOs in our industry to spend more time researching the latest technologies and less time worrying about disaster recovery plans and the latest security flaws. IT has always been looked at as a necessary evil and just a cost center by many executives, so cloud computing will allow us to outsource some of these non-glamorous duties, and we will now be able to focus on new initiatives that will directly affect property revenues and make our on-site staffs more efficient.
Vice President of Information Systems
Private and public cloud computing is definitely a game-changer, offering the ability for a technology group to transition from being a utility player to being a strategic asset by off-loading operational activities that aren't typically high value, and by effectively reducing both technology and personnel resource constraints where fundamental technology for a business is concerned. Any means by which technology expertise can be directed toward innovation and "value-add" activities is a great move for any company, and it's certainly no exception in our industry. We're living in a time when the fundamental role of the CIO is obviously changing. Skills and expertise are shifting from the management of technology to management of service provider relationships. It's very interesting to see how far the pendulum is swinging toward those third-party providers, though I wonder if it may be swinging a little too far in some cases.
Senior Vice President, Strategic Services
Camden Property Trust
The cloud concept sounds very flexible, robust, and cost-effective, but so did outsourcing when it was introduced. Questions remain concerning cloud computing: Will similar problems develop associated with creeping costs, over-subscription, and poor service? Over the past 3 years, we have fortunately positioned ourselves with an infrastructure that fully affords Camden the opportunity to evaluate the future of “cloud” industry options for at least the next two to three years. Essentially, we have built our own “internal cloud” while strategically beginning to “cloud” certain technologies where there is a clear business justification, including placing our SPAM filtering into the Gmail / Postini “cloud” and our property management software into the RPI “cloud,” both of which were there long before the popular use of the term “cloud computing.”
Chief Information Officer
Lincoln Property Co.
I wouldn’t really call these developments cloud computing. Pure cloud to me is like Google apps and Salesforce.com, where it is a multi-tenant arrangement. Our deal with Yardi, for instance, is probably more accurately described as a private cloud—it is still our database, and we are the only ones on it. But there is attractiveness to pure cloud, multi-tenant, pay-by-the-user model, particularly when it comes to the expense of setting things up comparatively to, say, something you might do with an Oracle-type vendor partner.
At the lower end of the market, it is a great idea to have a managed services play where you don’t have to stand up servers for e-mail or have an IT department to work out applications issues: The services manager will do it, and as the business grows, you can make the decision to bring it in-house later. On the upper end—companies like Riverstone and Pinnacle and Greystar and Lincoln—it basically forces the company to run their IT department in a cost-effective model. As managed services work out, that will continually drive the expense [benchmark] down as they reach efficiencies of scale. You may get better services in-house, but at what cost? It will be interesting to see how it plays out.
Group Vice President, Strategic Systems
Not all companies are going to find that cloud computing works for them. Just like the outsourcing rage of a few years ago—some will do it, some won't. And of those who do, some will find it gives the returns they expected and some won't. As for the role of a CIO, I think any strategically oriented company needs someone at an executive level who knows how to bring the business and technical sides together—and who knows how to leverage technology to accomplish business needs. Whether that's called a CIO or something else, the need is still there.
MICHAEL W. BURNETTE
Vice President, Information Technology
Place Services Group
In theory, a streamlined business takes advantage of a single platform to achieve unified and standardized processes and thus require fewer employees to build, teach, and execute. So, it is not surprising to see a large company with a strong third-party management component like Riverstone take the leap into “cloud sourcing” with a partner focused on multiplatform operation. However, as with any outsourcing contract or Software as a Service (SaaS), they will give up a certain amount of flexibility, innovation, and lengthen the time to market with new ideas and new business processes based on those outsourced technologies.
To some degree, that can be mitigated with a strong technology leadership function, which is where that may leave the industry CIO. The CIO is a thought leader and business process strategist and, if correctly supported and integrated into the business, should be no more prone to outsourcing than the COO or the CFO. The best CIOs will abandon territoriality and recognize how to recast their business to continue to achieve competitive advantage.
Cloud computing is not exactly a new initiative and has been used successfully by many organizations in and outside of the multifamily industry. Salesforce.com is used by our Yield Technologies team and AMLI has been on RealPage's Onesite application for many years. With regard to the necessity of a CIO, our organization is firmly in the camp that this person is required and extremely important to the success of the firm. The decision whether to outsource that role or not is truly a strategic decision based on the view of the value of technological innovation in the organization. If competitive advantage is gained through the use of innovative technology solutions (whether hosted internally or externally), then the CIO not only needs to be a part of the organization but a part of the executive leadership team. It is desirable to have a CIO that is focused on the benefits and interests of the company that he or she is working for, and wakes up thinking about those goals.