Housing Technology interviewed Itica’s director, Neville Brown, on the merits of best-of-breed applications vs. enterprise resource planning (ERP) software in social housing.
What’s the background to the single platform vs. best-of-breed debate?
The housing sector is undergoing significant change at a time when the options for delivering systems are increasing, therefore it’s right that housing providers should continuously monitor and consider other ways to deliver their IT requirements. Many providers are broadening their activities into other areas, such as commercial developments and the off-site manufacturing of properties.
Housing mergers, and the numbers will accelerate during the next three years as early examples prove the rationale and a model for do’s and don’ts, are creating businesses of increasing size and complexity. Add in the ‘digital agenda’, service and process integration/automation and increased regulation, and it’s no wonder that housing providers will be reviewing their current systems’ portfolio. Nevertheless, most providers’ core business will remain the management of tenants and housing assets, something that is well covered at an operational level by existing IT suppliers within the sector.
Developing a technology strategy should never be the starting point; housing providers must first decide what business outcomes are needed to deliver their vision and strategic intent and develop a plan to achieve them. Those outcomes should be defined in sufficient detail to establish how best to deliver the requirements, looking at all aspects of the many capabilities required, and driven by business need rather than technical ideology or bias.
People and especially culture play a huge role here; housing providers should avoid the trap of believing that implementing new systems will, on their own, deliver a change in culture.
This upfront effort to establish the ‘why?’ and the ‘how?’ is essential because the examples I’ve seen suggest that early ERP adopters’ experiences have been mixed and that some have had to plug gaps with point solutions; perhaps that is an argument for adopting a hybrid approach.
Are housing providers different?
Sector-specific software was developed because nothing existed which could manage the complexities brought by regulation, and housing providers may understandably consider generic ERP as not covering all of their needs that the housing-specific solutions have met over a number of years. The alternatives will mature over time, and many providers have adopted a ‘wait and see’ approach to ERP.
I don’t think housing providers see themselves as special or different. It’s more that they have invested significant sums in their systems and processes, and in many cases can’t see a compelling reason to embark on a hugely disruptive, expensive and potentially risky programme of change, particularly when the sector is facing so many issues.
I also think that many housing providers will shy away from entering into indirect relationships with large, monolithic software providers, supplying systems through large SIs or resellers. Many providers that we talk to value the direct access they have and the reasonable balance of power between them and their key vendors.
The pros and cons of best-of-breed
The primary advantages are the functionality of specialist systems, acquisition costs tend to be lower and there is flexibility to change or substitute providers when business needs change, cognisant that there will be a cost to change that element.
Best-of-breed, and for that matter an ERP, requires access to resources and capabilities to implement, support and change the solution. Although the skillsets are different in each case, the question is whether the housing provider can recruit and retain the necessary expertise and, in both cases, will be reliant on the supplier or a third party to support them.
With best-of-breed, there is the longstanding issue of data integration (APIs and other interfaces) and an ongoing commitment to testing every time the suppliers issue a new release, so adopting a policy that a systems portfolio should be provided from as few providers as possible will reduce the risk, cost and complexity of ongoing change. Master data management (MDM) also becomes a much more important capability because data may be held in several different places, each requiring its own controls to ensure veracity, leading to the goal of a single version of the truth.
The increased focus on fully automating a tenant’s ‘digital journey’ is bringing challenges for those with a disparate systems portfolio. For example, a self-appointed repair requires (at a minimum) access to and workflow between the requesting system, the repairs system, the scheduling system, the financial or other authorisation system, possibly asset management and finally the CRM function – not easy to do if those systems are supplied by different vendors with no integration between them.
Is ERP right for you?
Just as ‘cloud’ has many definitions, ERP suffers from the same issue and defining what ERP means is a first step; this could be as simple as agreeing that as much of the system requirement as possible comes from a single vendor.
Conceptually, ERP systems provide for a single data source for all elements within the system (important for data governance and reporting). They also offer wide-ranging, integrated functionality, from back-office through to CRM, with the constraint that an ERP system might not cover every aspect of an housing provider’s operations.
How seamlessly the integrated platform performs in practice is largely determined by how the solution is structured under the covers; was it designed from the ground up in a coherent, all-encompassing architecture or has it been constructed through the piecemeal absorption of different functionalities through acquisitions? The latter may be hidden under a blemish-free skin, but dig a little deeper and the problems begin to surface. Of course, it could be argued that this is an issue with the housing-specific systems as well, so the same question should be asked.
ERP providers are generally very large organisations with a single focus and therefore provide a high level of assurance that they have the resources to develop the product and will also have longevity in the marketplace. There is also the advantage that there is only one supplier relationship to manage. However, housing providers should assure themselves that they and their reseller/systems integrator have the requisite leverage (relationship and contract) for both the implementation and support of the solution.
Even though ERP suppliers are adopting subscription-based models, that level of assurance comes at a price; within housing, cost examples have been in the tens of millions of pounds, excluding the business re-engineering costs. A housing provider would be reliant on a vendor-approved integrator (effectively a service provision monopoly) as not many wont’ the resources or capability to configure, install and manage an ERP system. The level of integration within an ERP system means that it’s then difficult to ‘de-integrate’, which some might perceive as ‘lock-in’, although if the solution does what is required then that’s perhaps less of an issue.
The middle ground between BoB & ERP
In the past, housing management systems have tended not to focus on the back-office or customer-facing systems. However, that middle ground (in modern parlance, a ‘hybrid’ model) has been underway for a while as HMS providers partner with others to offer functionality, data sharing and integration, an example being the repairs module linked to a scheduling system.
Several scenarios are emerging, with some housing providers re-engineering every aspect of their operations onto a single platform, while others are considering integrating the back-office and leaving the operational systems on their current software, and many are using a workflow-based CRM as their customer-facing systems capability.
What can’t be ignored is the impact ‘cloud’ services will have on technical architectures. For example, one of our customers is implementing the full Microsoft suite including CRM, collaboration and document management while leaving their HMS, finance and asset management on their existing platforms.
All of this means that the days of point-solution sourcing are ending as a more holistic approach is needed, requiring housing providers to be smarter in their approach to procurement.
Regardless of the route taken, the key is to create a systems portfolio with as few suppliers as possible, and in every scenario the need for robust data governance is paramount, not forgetting stewardship of the supplier relationships.
The reality is that all systems, whether a generic ERP or a dedicated HMS, will require configuration to align with housing providers’ business requirements. At the same time, housing providers should resist the temptation to customise beyond the product configuration; heavy customisation or bespoke development stores up future problems (‘technical debt’) relating to new releases, integration and changing business requirements. It is also much easier to change a business process than make a system do something that it was never designed to do.
ERP suppliers aren’t housing specialists…
This is not surprising because ERP’s provenance is in manufacturing and was formerly known as manufacturing resource planning, morphing into ERP around 20 years ago. While ERP could be successful in certain (or even most) areas of housing operations, a vital task is to identify what an ERP doesn’t or can’t cover. It still all boils down to a housing provider’s strategy and the capabilities (such as people, processes and systems) that are required, and it could also mean that a decision is taken that sets a level of acceptance; for example, “we are aiming to deliver 80 per cent of our needs from one platform, and that platform could well be an ERP.”
Could the latest HMS be used as a single ERP-style platform?
Yes, most definitely. It’s worth noting that pure best-of-breed is dying out as many HMS vendors redevelop their solutions or add modules to cover a broader range of functionality and offer ‘out-of-the-box’ integration. With that in mind, housing providers should consider foregoing that last bit of elegance or non-essential features if they can get other benefits from the integration of processes and data, while fully understanding how that integration has been achieved.
Recent entrants into the market offer integration across several business functions but as with ERP systems, housing providers must establish what business functions those new entrants don’t cover and also establish whether migration to a newer system will deliver the required business benefits; is it worth the effort, disruption and cost, given that software typically accounts for just 20 per cent of the overall cost? Of course, if the housing provider is running on old versions of their core systems or they are subject to end-of-life notices and change is inevitable, then that is also the time to consider all options, including cloud and ERP as well as the sector’s current providers.
Neville Brown is a director of Itica.