Mulitfamily Tech Budgets Pushing Cloud Computing Trend

Lincoln Property Co. chief information officer Jay Kenney had his remarks well-prepared for the annual CIO roundtable at the NMHC technology conference last fall. So Kenney didn’t mince words when one of his colleagues asked the group what they were doing with virtualization. His response? “I’m trying to virtually get rid of all of our servers.”

In fact, the CIO roundtable later reported to conference attendees en masse that 2010 IT budgets, like most bruised-and-battered multifamily general ledger line items, are going to feel additional pain throughout the course of the year, particularly when it comes to deep cuts in allocations for additional hardware and equipment expenses. As a result, apartment firm data centers are increasingly looking to host applications on vendor application service providers (ASPs), leverage Software as a Service (SaaS) offerings via the Web, and even move entire data centers and mission-critical applications into the cloud computing era.

At Dallas-based Lincoln, the push to cut costs has included moving from a GroupWise e-mail system hosted on company servers to Google Apps, which now powers e-mail for the entire company. Lincoln retains the employees’ unique e-mail identifiers, but in execution, the company is communicating both internally and externally via the Google mail (Gmail) application.

“We were considering hosting our own Microsoft Exchange application and just putting Google Apps in there as part of the business case, but it turned out to be way more compelling than the other options we’ve had,” says Kenney, who personally tested out the technology before rolling it out to the executive team, a regional office trial, and then the entire company last summer.

While Kenney wasn’t able to provide the exact cost savings achieved thus far by the move to Google Apps, he said the migration has already negated the need for large-scale hardware and infrastructure purchases. “We were at a point where if we were going to keep hosting e-mail ourself, we were going to have to replace a SAN [storage area network], which was going to be expensive, and our archive system was getting so big that we were going to have to beef up the backup system as well,” he says.

Kenney notes that Lincoln has philosophically been moving away from self-administered IT infrastructure for some time. The company’s Yardi property management systems are hosted on the Yardi ASP, while resident portals and payment systems are handled by Provo, Utah-based Property Solutions and likewise hosted on the Property Solutions ASP.

Hosts with the Most

Lincoln is not alone in its efforts to essentially remove the need for huge, expensive-to-maintain proprietary data centers in multifamily. From Web-based software offerings to SaaS and even cloud computing, apartment operators and technology vendors alike have been attempting to develop systems and processes built on the philosophy of eliminating the need for server racks all together.

“Any application that you can get in a Web platform is worth pursuing,” says Scott McCurdy, vice president of information technology for Dallas-based third-party property management firm Pinnacle, an American Management Services Co. “Web technology reduces implementation time; it reduces the support needs; it is a much more portable platform for the user; and when we need to upgrade, we don’t have to touch 2,000 computers out there in the field in order to improve the application.”

Certainly New Carrollton, Texas-based vendor RealPage had those benefits in mind when the company announced last September that it was creating a cloud computing division with the capability to host entire multifamily data systems—regardless of vendor or application—within its cloud. This essentially amounts to giving users virtual server access to the company’s two data centers, which offer real-time disaster recovery across some 300 terabytes of available storage.

“Multifamily IT departments are spending about 80 percent of their time on tactical initiatives and only 20 percent on strategic initiatives,” says RealPage CEO and president Steve Winn. “There are a lot of other things IT could be doing to improve the operations and efficiencies of a multifamily company, but at the end of the day, there is not a lot of time left over after server maintenance, updating software, and all of the other tactical components that are consuming their time.”

Santa Barbara, Calif.-based Yardi has likewise seen approximately 80 percent of its user base migrate towards the company’s ASP hosting services in an effort to not only contain IT costs but to free up tech resources for more strategic endeavors. “IT distracts from the core real estate business focus,” says Scott Weiner, Yardi’s vice president of information technology. “An ASP-hosted client does not have to provide its own IT network staff and resources to use its primary business system. They avoid all of the capital investment of server infrastructure, bandwidth, and staff that would be associated with self-hosting.”

The Cloud is Still Cloudy

What specifically defines the difference between SaaS and cloud computing still seems to be up in the air, however. Most industry tech observers seem to agree that SaaS is a Web-based, single-code software platform or application that can live in either an internal data center environment or be hosted via ASP, while cloud computing refers to a virtualized server environment that includes both core and ancillary applications hosted and/or managed by administrators within the cloud environment and delivered over a single application programming interface (API).

“Who cares if it is SaaS or cloud computing? The terms and buzz words don’t necessarily matter,” says Matthew Stoehr, CIO for Santa Ana, Calif.-based real estate investment firm Grubb & Ellis. “What matters is how you are consuming the technology because traditional IT departments are going away. You are going to have more of your technology hosted by cloud and SaaS providers, and there is going to be less need to have daily operational IT people in your office. Instead, those staffs will be more integrative and consultative about selecting the technologies that are right for the business and facilitating and integrating those technologies together.”

Not everyone is completely sold on the cloud computing promise, however. Irvine, Calif.-based Western National vice president of information technology Ken Hodges emerged from the same NMHC technology roundtable as Kenney with a similar perspective on budget constraints but a divergent opinion on moving his company’s data center and systems into a cloud. “The dirty little secret is that it is going to cost money to move to a cloud or SaaS platform,” Hodges says. “Burning that initial expense of hard and soft monies could take a couple of years, and then what if you want to move it all back in-house? Then you go through the expense again.”

Hodges also points to security and confidentiality concerns when it comes to housing sensitive, private information about customers or corporately-competitive data on a third-party data server. While most multifamily vendors provide securitization and confidentiality that meets the expectations of industry CIOs, homogeneity of SaaS and cloud applications also remains a concern.

“You are always going to give up something by going to SaaS or the cloud, whether it is programming control or the homogenization of your strategic operations because you are using the same platform as everyone else,” Hodges says. “As far as Western National is concerned, we like customizable control and the ability to make changes quickly in-house. That’s just the way we do things.”