Based on contributions from BPHA, F-fectis, Montal, Northgate Public Services and Sovereign Business Integration Group, this feature article looks at how housing providers can benchmark their IT services, what to benchmark, the merits of internal staff and external consultants, how often to benchmark and how to integrate benchmarking into other IT and business projects.
Why benchmark your IT services?
Most housing providers undertake some form of benchmarking their IT services, ranging from using internal staff to evaluate specific IT areas, to using external consultants and benchmarking clubs to get a holistic picture of their IT operations and a view of which they can compare with their peers.
The most common reason for undertaking IT service benchmarking is to find out if the service is delivering value for money, closely followed by the need to demonstrate that particular services are delivering the right service levels and meeting end-user and tenant expectations.
Claire Bayliss, director of IT consulting at Montal, said, “The key justification for benchmarking is generally to establish whether the service is delivering value for money – how much do you spend compared to others and how much do you achieve with that compared with others – on several occasions, heads of IT have complained to me that their finance director has seen the Housemark benchmarking figures and decided that their IT department was too expensive! Benchmarking can also be useful when a service is being reviewed – I have used it to justify increasing in staffing.”
The Dutch housing consultancy, F-fectis, breaks IT service benchmarking into four core areas: how do our IT costs compare with other housing providers; how do IT service levels compare with others; what are the best practices or average outcomes of the peer group; what are the opportunities for lowering IT costs?
Tim Cowland, senior consultant at Sovereign Business Integration Group, said, “Benchmarking can be an essential tool to help an organisation ensure it is getting value for money and quality from its IT service. The process can help provide reassurance to management that their IT spending is on track and comparable with similar sizes and types of organisations. Benchmarks on the quality of services being delivered are also an important aspect to make sure value for money is being achieved and ‘customer’ expectations are being met.”
This view was shared by Kate Nelson, executive director for corporate services at BPHA, who said, “Benchmarking is a critical tool for establishing whether internal, external and managed services are delivering value for money.”
How to benchmark
A key part of benchmarking is not only knowing what you want to measure but also knowing how you will use the resulting benchmarking information. As Montal’s Bayliss explained, “Generally, benchmarking works best if you have a few metrics you want to measure, and you find a small number of broadly similar organisations which are prepared to share their data on those metrics in exchange for you sharing the results.”
Cowland said, “Benchmarking typically falls into two categories. The first is benchmarking costs, often shown as a proportion of turnover, cost per member of staff or cost per tenant, and the second is the benchmarking of quality data. This gives a housing provider a complete picture of the investment it is making in IT services and of the resulting benefits. They can then use the benchmarking data to monitor performance internally to see how it changes year on year.”
Henk Korevaar, founder of F-fectis, said, “Our Dutch benchmarking studies over the past 12 years have focused on total cost of ownership. It’s important to note that TCO is about cost, not spending; the TCO comprises the annual operating costs and the annual costs of amortisations. For example, if a housing provider spends £100,000 on replacing an application, then that application ‘only’ costs £20,000 in that year (based on amortisation over five years), not £100,000.”
Standalone project or integrated campaign
The consensus view is that benchmarking IT services is merely part of a wider strategy, with the benchmarking results used as part of a wider strategy for change or measuring the results of existing programmes.
Glen Lewis, UK housing sector manager for Northgate Public Services, said, “We recommend that housing providers build benchmarking into their wider business strategies. Fluidity in operational activities and the ability to adapt to constant change can be driven by great IT service, but it is only part of a means to an end in terms of delivering operational and strategic excellence.”
BPHA’s Nelson said, “For us, this is part of a wider continuous improvement strategy of ensuring both internal and external service costs are minimised whilst service levels are improved.”
Korevaar added, “Benchmarking is the basis for change. Benchmarking is basically learning from others, such as information exchange between benchmarking participants. We see benchmarking as a tool because the comparison of IT costs is not an end in itself; it is a means for housing providers to change based on the outcome of the benchmarking.”
What to benchmark
Bayliss said, “The most common benchmarks are total cost, although that’s not always straightforward as that depends on what you count as an IT cost, and staffing levels, although that depends on how much is outsourced, and whether some IT services are provided by other teams, for example IT training is carried out by HR.”
Housing providers need to have realistic expectations of how much they can benchmark and to what level of detail. Sovereign’s Cowland said, “The list is endless in terms of the possibilities, but housing providers should be careful not to overdo the process and make the task too onerous. It is really a case of ‘horses for courses’.”
As an example, F-fectis’ Dutch benchmarking studies cover six IT areas: workplace PCs and standard Windows and Office software; LANs, storage, back-up devices and peripherals; external voice and data connections; business applications (such as CRM and HMS) and associated hardware; fixed and mobile telephony; IT personnel; and tactical and strategic IT management.
Peer review and other business sectors
The value of benchmarking figures can be augmented by comparing them with similar figures from other housing providers, and in some cases with companies in other business sectors. However, with the latter two options, a common problem is ensuring that the data in question is comparable and that ‘apples’ aren’t being compared with ‘pears’.
Cowland said, “In general, a comparison with similar organisations gives the most value. This approach gives validity to figures in the sense that all participants are on the same playing field, and therefore removes an element of ambiguity. Having said that, there are occasions when it can be healthy to benchmark against different sectors. This may be the case when you know that another sector excels in a given generic area and that this is an area your organisation would like to improve.”
Northgate’s Lewis said, “Many housing providers have joined benchmarking groups with their peers. The benefits of this include being able to measure consistently within the sector and therefore driving competition. Some housing providers have now started benchmarking their performance against organisations outside the sector as this bring a different perspective and a greater degree of commercialisation to the benchmarking exercise, and allows housing providers to expand their knowledge and experience of good practice outside the sector.”
Minimum standards and target goals
The question of whether benchmarks should be used as the basis for minimum standards or to set future targets polarises opinions. On the one hand, some head of IT might take the view that as long as their services meet the benchmarking figures then nothing needs doing, as Northgate’s Lewis explained, “One risk with benchmarking is that it can breed complacency if not managed properly. It is really important that we get to the point where all housing providers use benchmarking as a minimum criterion, as opposed to the end goal.”
On the other hand, other heads of IT might use benchmarks as guidelines for the ideal ‘future state’ IT operating model. Sovereign’s Cowland said, “Benchmarks should be used to set targets rather than achieve minimum standards. If an organisation wants to improve its IT services, benchmark targets which are realistic yet challenging should be set. This not only develops a continuous improvement culture, but also gives the IT team a motivational incentive to reach the targets.”
In some cases, there is the danger that the benchmark figures end up having unintended consequences. Montal’s Bayliss said, “I have done some benchmarking for the Southern IT Forum and it was interesting that the ratio of staff to properties has been very close to 1:1,000 for the last 10 years, making me wonder whether people are resourcing to the benchmark; in effect the tail is wagging the dog.”
In-house staff vs. external staff
In common with many IT projects, smaller benchmarking projects are frequently handled using internal resources while bigger projects often benefit from the experience of external consultants, with the added benefit that although externally-resourced consultants are more expensive, they tend to be seen as more valid and less prone to the effects of internal vested interests. As BPHA’s Nelson said, “We use in-house staff to survey and assess service levels annually, but for the big stuff it has to be external in order to get the right perspective and gain buy-in from our internal customers.”
Despite representing an external company offering benchmarking services, Bayliss said, “It doesn’t always need external resources; if you only have a small number of metrics you want to benchmark and some good friends, go ahead internally!”
Cowland said, “Undertaking the process using internal resources does increase the likelihood that like-for-like comparisons are not being made. Using an external resource does give some consistency if a number of clients are being reviewed using the same approach. Added to this, I have seen a greater degree of scepticism around results prepared internally, particularly if they paint a very positive picture of an organisation. Bringing in an external resource gives an element of objectivity and, in some people’s eyes, a more valid set of results.”
There’s little to be gained from benchmarking too often, with most people thinking that benchmarking every one to two years. Nelson said, “I find it’s useful to look at the basics annually, and in particular customer service levels need to be monitored and benchmarked frequently, with an external assessment every two to three years.”
Bayliss said, “You may want to benchmark before and after a significant change, for example a merger or a stock transfer, but otherwise benchmark every three years at the most, I would have thought. Equally, you may decide not to benchmark at all; one of our customers has decided not to benchmark – what they are interested in is whether they deliver the services their business needs within a budget the business can afford.”
F-fectis’ Korevaar said, “We have found that if an organisation takes part every two years in one of our annual benchmarking studies, then they can use the outcome of the benchmark to gain insights into IT costs and identify improvements.”
Thank you to Kate Nelson (BPHA), Henk Korevaar (F-fectis), Claire Bayliss (Montal), Glen Lewis (Northgate Public Services) and Tim Cowland (Sovereign Business Integration Group) for taking the time to contribute to this article.