Chris McLaughlin, CEO of housing management software provider MIS-AMS looks at how a large percentage of all merger synergies are dependent directly upon IT and often it is 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 with less delays?
It seems that not a month goes by when news of a merger between two or more large housing associations is announced. Welfare reforms and the loss of grant funding have acted as a catalyst in the industry 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 a greater building programme that wouldn’t be possible as smaller, separate entities.
There are around 1,700 registered housing associations in the UK, and only 350 of those with an estate of over 1,000 properties, so the trend towards mergers in the largest organisations has the potential to alter the housing association landscape forever and impact housing management technology vendors too. 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. MIS AMS is currently working with Sovereign Housing Association post its merger with Spectrum Housing Group to bring together its 56,000 home estate across the south and south west of England.
So, 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 upon 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; adoption or alignment.
Within any industry when large organisations merge there is usually a power struggle and decisions that have to be made based upon the direction the new merged business wants to go in. IT adoption sees one housing association take 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, like the Oaklee merger with Trinity to form Choice Homes, and using advanced specialised data loaders have managed to turnaround 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 put a business case together and evaluate the number of IT interfaces you have where there are common software modules in both organisations. Depending upon which modules are required there will be a greater cost of alignment. For example, every software module, for example, 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 larger number of 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. For example, ‘void turnaround’ where a property is empty, undergoes repair and is ready for let, may be measured differently between organisations. One system may quote eight days from empty to re-let where 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 Association voids from between 20 to 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 within 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 associations, 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.