Chris McLaughlin, CEO of housing management software provider MIS-AMS, looks at how a large percentage of all housing mergers’ synergies are dependent directly on IT and often it’s the IT integration process that drives the merger timetable. Should you ‘adopt’ or ‘align’ your IT systems, and how can you make merging less painful and with fewer delays?
It seems that not a month goes by without news of a merger between two or more large housing providers. Welfare reforms, the loss of grant funding and the government’s controversial rent-reducing proposals have acted as a catalyst to speed things up somewhat so that efficiencies can be found faster. Mergers promise a new larger entity, the opportunity to raise significantly more capital and the ability to refinance to fund more ambitious building programmes than would have been possible as smaller, separate entities.
In December 2015, there was news of Affinity Sutton and Circle Housing’s intention to merge which, if it goes ahead, would create Europe’s largest housing provider. As a single organisation, it would manage around 127,000 homes for almost half a million people. The beginning of February 2016 brought news of Genesis and Thames Valley’s intentions to press ahead with their merger to create a 47,000-home landlord with a turnover of more than £370 million. And most recently, news of a merger between two major housing associations in the south of England – Sovereign Housing and Spectrum Housing– would create a 56,000-home landlord and be the largest housing provider in the south and south-west. There are around 1,700 registered housing providers in the UK, but only 350 of them have estates of more than 1,000 properties, so the trend towards mergers between the largest organisations has the potential to alter the social housing sector forever as well as affecting housing IT suppliers. Those systems that can provide the smoothest and fastest route to technology and process adoption in the new organisation will surely come out on top.
How do you bring two or more organisations together to create unity for the greater good of efficiencies, rather than double your problems and your costs? IT often plays centre stage when it comes to the success or failure of a merger and has the ability to set the timetable depending on which route forward is taken. We have worked with a number of merging organisations and have seen that it mostly boils down to two approaches in technology – IT adoption or IT alignment.
In any market sector, when large organisations merge, there is usually a power struggle and decisions that have to be made based on the direction the new merged business wants to go in. IT adoption happens when one housing provider takes on the other’s systems and processes and often occurs when one organisation is significantly bigger than the other. We’ve worked on various adoption projects, such as the Oaklee merger with Trinity to form Choice Homes, and by using advanced data loaders, we have managed to turn around adoption projects in as little as six to eight weeks.
However, when it comes to IT alignment, the two merging associations appreciate that the other has certain processes that are more effective than its own, are often of a similar size to each other and thus work to find the best bits of both for the new organisation. I firmly believe that the size of each organisation shouldn’t play a big part in the adoption vs. alignment debate. It should be a decision based on which technology provides the most efficient solution and the most advanced way of working in order to be fully integrated and provide an advanced workflow engine to streamline the business processes. However, each approach has pitfalls to be aware of.
Costs and KPIs
The first step in any merger is to create a business case and evaluate the number of IT interfaces you have where there are common software modules in both organisations. Depending on which modules are required, there will be a greater cost of alignment. For example, every software module (e.g. rent accounting, asset management, CRM, customer services and mobile working) will incur a cost for the software license and a cost for the interface within both organisations. The more systems and interfaces an organisation has, the higher the ongoing costs. Buying one integrated solution can eliminate these costs.
It’s also important to check each organisation’s priorities and compare KPIs to see how similar the goals are before choosing which IT system to move forward with. We’ve seen cases where organisation A has very different KPIs to organisation B, making it difficult to compare IT systems and benchmark them. For example, ‘void turnaround’ where a property is empty, undergoes repair and is ready for let, may be measured differently between organisations. One system might quote eight days from empty to re-let while others may quote 20 days to do the same job simply because they’ve been measuring from different points. We managed to streamline Berwickshire Housing’s voids from between 20-28 days down to just eight days. This may act as a driver for which processes to adopt moving forward.
Project teams can also be expensive and remove participants from their usual role in an organisation leading to more costs as roles are back-filled. The project team is required to establish which processes to adopt, and then to ensure that the elements of the existing processes are accurately ratified from one system to the other for the newly-merged organisation to get the best solution. Large IT merger projects can have between six and 14 part and full time project team members from across the merging organisation who will be dedicated to the cause, and if they proceed with an entirely new solution, then a tender process is necessary, adding further time, resource and cost to the project.
With the current climate of government policy changes driving a need for increased efficiencies in housing providers, IT solutions that drive down costs and allow investment in properties are increasingly more important. We expect to see more investment in systems that provide those efficiencies, especially where asset management, appointment and scheduling, and mobile working is concerned.
Keeping residents happy by providing the services they require drives the IT agenda. Those solutions that provide an integrated and streamlined housing management system and can make residents’ lives easier by providing resident portals, text communications and mobile solutions will ultimately be adopted as mergers become more prevalent.
Chris McLaughlin is CEO of MIS-AMS.