On 22 June 2010, Chancellor George Osborne made his first budget speech to the House of Commons in which he pledged to ‘balance the books’ by 2016, slashing a massive £11 billion from the annual public expenditure bill, with £1.8 billion being earmarked for savings in social housing in this parliamentary term alone.
I think it’s fair to say that many people raised an eyebrow after reviewing the details of the government’s proposed budget cuts. And those eyebrows were further elevated following outlined changes to the housing benefits system, and then went into orbit with the announcement of the plan to scrap the Audit Commission by 2012/13.
As a supplier to social housing, we now find ourselves ‘living through interesting times’ and doing business in a period of considerable change and readjustment. So just how serious are things?
Recent research carried out by PricewaterhouseCoopers revealed that 96 per cent of housing professionals are braced for ‘steep and lasting cuts’ to public funding for affordable housing, and 100 per cent expected any cuts to last for at least three years. The PwC research added, ‘The affordable housing sector is preparing for a period of austerity, accepting that there are difficult times ahead. They are aware of the challenges they face and are preparing for funding cuts and there is a willingness to challenge orthodox thinking and explore new ideas.’
So how should technology suppliers respond to not only the situation but also the needs of their clients?
Rachael Fry, director of commercial operations, A2Dominion, commented, “Budget cuts are of concern to housing providers like A2Dominion, and it is important that we consistently measure supplier effectiveness and return on investment to ensure we can limit the impact of any changes.
“Although A2Dominion is a relatively young organisation [A2 and Dominion merged in October 2008], we have always been very careful to measure supplier efficiency so that even if budgets shrink, we know who delivers genuine value and can take the right cost-cutting decisions accordingly.”
Experience has taught us that all housing organisation are not the same. A2Dominion is particularly proactive at measuring the efficiency of its IT, and in the long run it’s better to work with those who measure, quantify and understand your offering rather than those who have a more analogue appreciation of its benefits.
We should ask ourselves – how transparent is the value derived from the services we provide and are we making it as easy as possible for clients to grasp and measure its true worth?
Fry said, “The services that pay for themselves (and more) are obviously far more likely to survive. This is particularly true of rent collection services, where there is a constant drive to ensure that collection occurs as fast and as cost-effectively as possible.”
With that in mind, we have identified four areas for technology suppliers to consider:
- Agree the measurements of success with the client. How will the client know if your solution has provided a return on investment – is it cost savings, more output from the same resources, or increased tenant satisfaction? Work with the client to identify how they will know if the solution has achieved the identified returns after one year. If it has saved £100,000, how will they prove this to the board?
- Prove value before a client commits – reduces client risk. Is the client looking to achieve savings in one service area and if so, how much do they need to save to make the business case viable? Once you have identified the agreed measurements of success, put them in touch with a current client who can reassure them that these targets are achievable.
- Offer a no-obligation trial – reduces client risk. There can be no better way of demonstrating the value of a product than to have the client try it for themselves. But you must decide: how long must a trial last for it to generate meaningful and realistic results, and can it be offered free of charge?
- Keep upfront capital investment as low as possible – reduces client risk. Big upfront payments may be seen as a gamble, particularly when budgets are shrinking. If the cost can be spread over time then it can be balanced by efficiency savings; in other words, the service pays for itself month-on-month.
What is certain is that the current situation presents an opportunity to push the boundaries of innovation because everyone knows that ‘doing more for less’ and responding to all the changes will take considerable creativity.
A2Dominion’s Fry concluded, “We are currently planning and preparing for the proposed sweeping changes to the housing benefits system. Suppliers like Mobysoft will have to work closely with us to ensure readiness.”
We will all have to step up to the mark.
Derek Steele is managing director of Mobysoft.
