How do you make your money? Collecting data? Or using that data to make smarter investment and management decisions? What business are you in? Real estate management and investment? Or software development?
At Prudential Real Estate Investors, the global real estate money management arm of The Prudential Insurance Company of America, we've given these kinds of questions considerable thought. We're not in business to develop property management software systems. That's what software vendors do. Our competitive advantage doesn't come from going through the mechanics of data collection. It's what our investment professionals do with that information that matters.
Our time and energies need to be focused on efforts that grow our business, produce revenue or provide value to those we service.
With this in mind, we recently made the strategic decision to outsource many of the details and hassles of day-to-day technology management to an Application Service Provider (ASP). Cleveland-based Management Reports International (MRI) now plays host to our property management applications and data, which are housed on MRI's servers and managed by their staff at their headquarters. They also provide all training, user hotline support, hardware, software, telephony and Internet maintenance and support, and full disaster recovery.
Our fundamental desire to focus on core competencies was just one driver behind our decision. IT outsourcing makes good business sense for a variety of reasons. Through outsourcing, you can leverage the expertise and resources of your ASP. In our case, our ASP partner has a strong real estate industry focus, providing us with not only systems knowledge, but real estate industry knowledge as well. We can benefit from new technologies and innovations developed by our ASP because they can draw from a client base of thousands.
Today's real estate industry is ripe for IT outsourcing. Globalization and increasing competitive pressures are challenging all of us to become more efficient. Public structures are demanding more standardized information. Recruitment and retention of quality IT employees is a serious challenge. Maintaining a technology infrastructure is becoming more complex and more costly in terms of both time and money.
At the same time, new technology innovations, such as the emergence of thin/client-server technology and the growing acceptance of the Internet for remote communications, are suddenly making IT outsourcing a more attractive solution.
With thin/client-server technology, you can build a centralized system with servers and applications housed at any location, then connect via the Internet. The user interface is processed independently from any business application logic, which means remote workstations are only responsible for the user interface, and therefore, all processing can be handled centrally.
At Prudential Real Estate Investors, we are using Microsoft Terminal Server to support a thin/client-server environment. The applications and database are housed on high-security Windows NT servers, located at MRI's headquarters and managed by MRI's employees. Our headquarters staff then accesses that database via the Internet for analysis. Soon all of our third-party fee managers will use the system as well.
If you're ready to consider IT outsourcing, there are a multitude of issues you must consider. Solid project management skills are crucial. You need to be certain your ASP understands your particular business needs. There may be legacy systems in place you'll need to review. You'll need assurances that all functionality will be covered, and you'll need to examine conversion issues. While it's a common-sense decision, this is not a decision you can take lightly.
The human part is the most difficult with any transition. There's a natural resistance to change. That's why it's crucial to believe in what you're doing, and we do. We can see that over time MRI can bring things to the table we have neither the time nor the interest to develop on our own. And we can see that, by focusing on our core business rather than IT hassles, we'll be able to strengthen our entire organization.
In today's demanding business environment, distractions can't be tolerated. To be successful, organizations of all sizes must focus on their core competencies and the kinds of activities that give them a competitive edge. Outsourcing critical but non-core information technology activity is a common-sense solution given current real estate industry business trends.