In the build-to-rent world, certain topics will always be a hot topic: tenant trends, capital investment and market growth projections. But another topic is also sparking in-depth conversations between property managers and builders.
“Should we hire or outsource when it comes to investing in real estate technology and other supporting solutions?”
Good question considering that by the end of 2022, the number of proptech providers grew 29% year over year to over 2,200 companies. In the next six years, analysts expect the proptech market to approach a $100 billion valuation. This number does not include the other supplier partners who support the day-to-day functions of builders and property managers.
[Want to learn more about the proptech industry and innovations shaking up property management? Download Five Trends in SFR management for 2024 to take a deeper dive.]
To say there are options is an understatement. But outsourcing may not be right for everyone. Choosing between keeping tasks in-house or outsourcing them to external partners is more than convenience. The decision represents a strategic move with a major impact on operational efficiency, long-term growth and results management. Getting it right is important.
The value of subcontracting or subcontracting depends on each company’s unique needs. There is no good answer. Fortunately, there are good questions to ask to help decide which option works best.
What problem do we need to solve?
The first step is to clearly define the problem or opportunity. Perhaps you want to reduce staff costs, refocus the business, scale quickly, avoid competition or improve service. The problem and the priority of solving it will affect the time, budget and resources required. These are three key areas of focus when deciding between outsourcing and offshoring.
Do we have time and talent?
If you have internal staff with the knowledge and skill to fix the problem or take advantage of an opportunity, they probably already have an existing workload. Hiring probably means reallocating those tasks elsewhere in the organization or reducing what is done. Recruiting talent for a project increases payroll and benefits expenses, while also requiring additional time. Outsourcing projects typically provide faster ramp-up with highly skilled and prepared staff already on board. However, internal staff understand the company’s business, brand and values. They have deep institutional knowledge and already understand critical business operations. An outsourced provider may need time to catch up.
Can we give up control?
This is a big one. Outsourcing means relying on a third party and relying on them to deliver the same or higher quality than your own team. Going abroad can mean sharing intellectual property and data, so security must be strength. Partnering with a vendor such as a SaaS-based technology provider means adapting their solution with a potentially limited capacity so that the technology meets all the nuances of your business. Keeping things in-house requires more management and maintenance, but your company controls all processes, data and platform updates.
What could we be doing instead?
Every project has an opportunity cost. Are things like new technology development, maintenance and warranty claim management part of the core business? If not, are they diverting attention from more important and profitable activities? Outsourcing allows companies to focus their available internal resources on the tasks most critical to day-to-day operations.
For example, a property management company, under pressure from investors to raise rents, outsourced tenant maintenance to a third party. The move made its highly skilled staff of technicians available to focus on long-term real estate improvements that would justify higher fees.
Who should we be in 12 to 60 months?
What is happening in the next five years that will change your business? Maybe the company wants to double its size, expand its geographic footprint, or launch a new service. What resources are needed to realize these goals? Insourcing offers greater control and innovation from unique business insights, while outsourcing can accelerate deliveries for faster scalability.
Preparing for the recovery in the housing market, one builder invested in third-party technology to support virtual projections and digital design assistants. The move reduced the number of sales staff needed on construction sites while creating a sales pipeline of potential buyers who had engaged with the company online while designing their dream home.
Can we integrate?
Outsourced or outsourced, the solution must work with the business. A research study found that technology solutions can add up to 10 hours to each employee’s work week. Outsourced solutions must integrate with existing systems, staff and workflows. Adding technology or other service providers to handle various tasks will fail if everything is closed. Initial and ongoing staff training should also be a factor in determining whether outsourcing or subcontracting is the right decision.
What are the success metrics?
Varying scope, competing priorities, and changing ideas affect project management. Just as important as defining the problem is determining how to measure the success of a solution. Without clearly identifying the resolution required, the expected return on investment and the impact on the business, it is impossible to know whether to contract or outsource. No one understands the measuring stick.
A real estate management company, focused on expanding into new markets, conducted a tenant satisfaction survey. They discovered that maintenance had become a major problem. Slow response times led to tenants complaining online, making repairs themselves and not renewing leases. The company defined the improvements needed: responses within 24 hours, solutions within 5 days, and follow-up reviews to ensure quality. The company used these three metrics to determine whether in-house staff were up to the job or whether an outside provider could better improve service. Defining success became a key part of the decision-making process.
Collaborate with PWSC
Outsourcing means trusting a third party to care about your business as much as you do. No warranty provider brings more to the table than PWSC. From the best home warranties to white glove claims administration and over 100 years of in-house construction and real estate experience, PWSC is the trusted partner to leading builders and property managers. Our pursuit of excellence in mitigating risk and maximizing customer satisfaction is unmatched. Learn more to discover why PWSC the home expert
