Financial Services

By Larry Dignan  |  Posted 2004-10-11 Email Print this article Print

Technology is a tool. But brains are what bring washington reit better returns.

The common tack among the financial services companies that are the most productive managers of information is clear: sticking to their knitting.

No world domination. No expanding constellation of new businesses to boost the company's footprint. The consensus: Pick something to be good at, whether it's managing a portfolio of real estate investments or delivering certificates of deposit to senior citizens. Then, become the best at it.

Oh, and don't do anything—especially undertaking technology projects—that does not improve the customer's experience.

Washington Real Estate Investment Trust, for instance, specializes in owning and managing income-producing properties in the Baltimore-Washington metropolitan region. This trust tops both the overall Baseline 500 and the diversified-financial-services sector listings with an Information Productivity rating of 840.2%, compared to 700.7% for runner-up Chesapeake Energy Corp. Prentiss Properties, another reit, was No. 12 in the overall ranking with 417.5%.

Among commercial banks, an industry where regional banks dominate in Information Productivity, Washington Federal, a savings and loan institution in Washington state, finished No 25 overall with a rating of 254.5%.

With product and geographic specialization, it's not too surprising there aren't a lot of household names on Baseline's list of top financial companies. But financial services firms dominate the overall Baseline 500—and their executives say they can manage information quite well—even if they don't have the most advanced digital systems doing it.

"Our operating performance is through making good investments with solid returns," says Sara Grootwassink, Washington reit's chief financial officer. "Technology doesn't drive our results."

Washington reit, which declined further comment on its technology, isn't alone in its assessment. "Technology has a role, but it's a tool," says Kent Barner, chief information officer at Prentiss Properties. "We don't do anything unless it fits our strategy and is supported by business unit heads."

To be sure, reits have been helped along by the real estate boom and low interest rates, which are essentially reits' cost of capital, but Washington reit and its brethren aren't going to be spending wildly, either. Real estate veterans like Barner and Grootwassink know the boom-and-bust cycles well.

Financial companies also look for small wins that can leverage their inherent advantages. At financial firms, many tasks such as teller services and transaction processing can be automated. To succeed, financial companies have no choice but to be efficient with information, says Georgia State University professor Ephraim McLean. "When you transfer money, you're not physically moving money," McLean says. "You're moving information about the money."

Although McLean says financial services firms have more information management experience than most companies, executives at Baseline 500 companies fill in on desktop support if needed and stretch life cycles as long as possible.

Indeed, Terry Permenter, senior vice president of information systems at Washington Federal, runs Windows 98 desktops at Washington Fed. These computers were a big upgrade in 2001 when the company replaced 20-year-old green screens running custom banking applications.

Permenter says that since Washington Fed's primary business is issuing cds to retired customers, the company doesn't "have to go in new directions because everyone else is doing it."

Prentiss Properties' Barner also casts a wary eye on technologies that don't apply to real estate management. Instead, he focuses on the continuity of his team. Barner is a 20-year veteran at Prentiss, and most people on his 11-member team have at least 10 years at the company. They know real estate and the processes underpinning Prentiss.

"Continuity is a big factor," Barner says. "Hire people better than you, keep them happy and breed loyalty. It's really a simple concept."•

Washington REIT
Rockville, MD
Overall Rank 1
Sector Rank 1