In a report released April 15 updating a 2008 survey on how multifamily technology executives allocate their budget dollars, the Washington, D.C.-based National Multi Housing Council (NMHC) finds spending on outsourcing has nearly doubled, comprising 23.63 percent of apartment IT budgets in 2009, compared to only 12.6 percent in 2008. According to the study, Information Technology Investment Benchmarking Survey: A 2008-2009 Comparison, the move to outsource tech functions was most prominent among smaller (less than 200 employees) multifamily firms, which spend an average of 42.43 percent of their technology budgets on third-party IT outsourcing, compared to less than 1 percent spent by firms with more than 1,000 employees.
“The value proposition to outsourcing is strong and can deliver tangible results,” says John Martin, director of technology for Greenbelt, Md.-based multifamily owner/operator and developer The Bozzuto Group. “Most external applications will perform adequately for 80 percent of your requirements, whereas in-house developed systems constrain technology resources in an endless maintenance and upgrade cycle. The Software-as-a-Service (SaaS) model is more effective.”
According to NMHC director of technology and project director and author Lauren Dwyer, firms participating in the survey—conceived in 2007 and launched in 2008 as a process for benchmarking multifamily IT budgets and expenditures—were generally looking to outsource internal, employee-facing systems rather than customer-centric software and services.
“There is definitely a pattern of companies switching over to outsourcing, particularly with functions that are traditionally internal,” Dwyer says. “Outsourcing leaned more towards day-to-day IT operations like help desk support and other internal operations rather than software development.”
That’s not to say tech departments are getting the short end of the stick: The survey finds that IT spending as a percentage of gross revenue increased 250 basis points last year to 0.95 percent of gross revenue, up from 0.7 percent in 2008. With multifamily income and revenues declining across the board, most IT shops are still dealing with fewer dollars to invest, however. Even as multifamily technology shops farm out internal functions, their appetite for hiring outside intellectual guidance has waned: Spending on IT consultants decreased from 20 percent of IT budgets in 2008 to 6.8 percent in 2009.
“Most multifamily CIOs didn’t target things that were going to cost them on service to the residents or property operations, but they did seem to cut back in areas where they could respond to the employee base,” adds NMHC vice president of capital markets and technology David Cardwell. “But there were some efficiencies created in the market where some companies have brought forth internal functions like call centers and lead management activities traditionally in the front office that can now clearly be moved to a third-party provider partnership.”
Editors Note: to participate in the 2010 NMHC IT benchmarking survey, email Lauren Dwyer.