05/01/2000

Is Technology Eclipsing Your Job Description?

By Todd Zeldin and Michael Pascale

Meet John, a corporate real estate executive working for a large multinational corporation. John has prospered in his career via industry expertise and a plethora of personal relationships. When you examine his office however, you won't find a computer on his desk. If you ask him about technology and the Internet, he will be able to throw some buzz words at you, but if you ask him how he is leveraging them in his day to day activities you probably won't even get a response.

There is a lot of hype surrounding the Internet and you hear about the many millionaires that it has helped create. What was once considered a terrible career move to drop out of top tier business schools like Harvard, Stanford, MIT and Berkeley to join dot.com startups is now more commonplace because of the urgency to participate in the Internet phenomenon. At first the industry was focused on Business to Consumer (B to C) Web sites like Amazon.com. Now, flocks of entrepreneurs both young and old are joining Busi-ness to Business (B to B) startups. The question remains how you and your company will embrace technology and the Internet to be-come more successful.

"Most applications will be deployed through the Web and there will be more commerce delivered through the Web than any other resource," says James Dobrzeniecki, CIO of McGuire Woods Battle & Booth, a national law firm based in Richmond, Virginia. "More collaborative tools will be developed and deployed so that we can sit together to interact more closely and make it easier and more cost effective to complete a project. We won't simply pass edited documents around an office, rather we will complete an as-signment together and without the need for dozens of versions to be sent via e-mail," adds Dobrzeniecki.

The proliferation of the Web enables better collaboration. Furthermore, as high bandwidth access to the Web becomes more commonplace in homes, people become more accustomed to being in touch with information anywhere and at anytime. Gone are the days of leaving multiple voice mail messages to simply request the latest version of a file.

Technology and the Internet

Technology and the Internet are the enabling factors in allowing information to be shared between systems both within and be-tween organizations. Through Enterprise Resource Planning (ERP) and Application Programming Interfaces (APIs), systems that once used to be separate islands of information have been designed to "talk" to each other. Once this integration is achieved, how the information is processed and used will become the differentiating factor between organizations. Technology is the primary vehicle to convert data into knowledge and provide integrated solutions to clients.

Take for example the J.D.Edwards' E-Procurement system powered by Ariba. This system consolidates the decentralized pro-curement process within an organization. What was once a disparate set of individual transactions characterized by maverick buying becomes a focused system leveraging the size of the entire company to negotiate the best prices with select suppliers. This centralized procurement system is made possible through the ease of access to the Internet. Satellite locations are able to remotely access the system through the Web to enter, approve and check on the status of orders on-line.

Other technologies currently available over the Internet by J.D.Edwards include ActivEra Portal and push technology. ActivEra Portal brings personalized Web-based access to enable users to see only what's important to them from customer information to the latest industry news. Using a Web browser, users can navigate between important applications and corporate data throughout the day all within the same screen. Push technology enables ERP systems to send e-mail messages based on critical dates within the system. For example, when leases are due to expire within an organization's portfolio, the people required to make the associated business decisions can be notified via e-mail in advance.

Getting the latest technology and applying the Internet to Web-enable applications requires both financial investment and man-agement buy-in. An important factor to consider is the total cost of ownership and the payback period. Depending on the size of the organization, the E-Procurement system mentioned above could easily have a payback period of less than a year and could have a sub-stantial impact on the value of your company. For example, if current operating costs for your company are $200 million and the E-Procurement system can save you 20% on those costs, an earnings multiple of 25 would equate to a total impact of $1 billion on the market value of your company.

For some organizations the costs of utilizing the latest technologies may be cost prohibitive. Does this mean they will automati-cally be at a disadvantage to the companies able to spend large amounts of money on their technological infrastructure? Not neces-sarily. There are alternative options available including application hosting by Application Service Providers (ASPs). Application hosting refers to the act of companies sharing applications at a remote site hosted by a third party. An ASP is a company that provides the use of an application, from basic e-mail to enterprise applications, based on on-going usage fees.

For example, Prudential Real Estate Investors, the real estate money management business of The Prudential Insurance Company of America, is outsourcing Information Technology operations to Management Reports International (MRI) via their NetSource? solution which allows on-line access to MRI for Windows? client/server software. The application is hosted at MRI's site and is maintained by their staff including full backup and data recovery services. "By working with MRI, we can refocus our energies on efforts that are essential to our real estate money management business," says Donald Gulbicki, Vice President, Operations & Sys-tems, Prudential Global Asset Management. "We no longer have to worry about infrastructure issues and the mechanics of data col-lection and can leverage MRI's expertise and innovations."

Additional technology soon to be offered by MRI includes Web Reporting due out later this year. Web Reporting is a Java based applet that will allow users, with the appropriate security privileges, to access and generate MRI reports via XML/XSL technology through any browser. Users will have access to all runtime options as if they were connected via a network - they will be able to drill down on information, export to Microsoft Word and Excel and print formatted document. "This means our clients can now give their customers - or the casual users within their own organizations such as executives - the ability to view information at a global or de-tailed level without having to know the software at all," explains Ron McComas, Vice President of marketing for MRI. "If a user knows Netscape or Internet Explorer, they can easily access information from within this product."

An ASP can house applications at data centers or host the applications at the customer's site. If the ASP houses the applications, it is ultimately responsible for maintaining the hardware, software and network services as well as linking the applications to the cus-tomer base. Although the ASP model reduces the up front hardware and infrastructure costs required for organizations, there could still be costs involved with implementation and training. The cost of the implementation process will vary greatly from one company to the next. Depending on client needs, it could entail linking multiple systems from within a client's organization to the ASP appli-cations or it could be as simple as customizing a few of the screens within the hosted software. If the ASP application is designed intelligently with a rich graphical user interface, training costs are generally minimal.

We are starting to see more companies developing Internet products and services specifically for the commercial real estate in-dustry. One service provider currently in the marketplace is web-real-estate.com. They provide on-line information to commercial real estate professionals who want to quickly and easily access actively marketed properties. Through services ranging from design and hosting to creating photos and virtual tours of buildings, they aim to shorten the marketing and selling cycle. With their Web Real Estate Bid product, they plan to execute the entire sale and closing process on-line. According to Carl Forsythe, President and COO of web-real-estate.com, "We have seen tremendous acceptance of our services from the commercial real estate industry. We are pro-viding the tools that allow companies to get on-line faster than they could have on their own."

More Investment Necessary

The real estate industry has not been at the forefront of the technology advances despite the fact that real estate and facilities-related costs are often one of the three highest costs to a company. Corporations are actively seeking ways to better manage their real estate be it reduced occupancy costs, enhanced transaction management, improved collaboration during build-outs, development of strategic partnerships with third party brokerage firms or integrated lease administration and accounting systems.

One inherent problem corporate real estate executives face is convincing their superiors that additional investment in technology is required. According to one real estate executive from a Fortune 100 company who prefers to remain anonymous, large corporations may not have as much technology as outsiders think they have. The perception that droves of funds are being allocated toward new technologies is greater than the actual dollars expended. In fact, larger companies are not likely to be early adopters of technology simply because they are generally more conservative and prefer to pay a premium for proven technologies than to be on the bleeding edge. Yet, the public relations departments leverage every opportunity available to promote technology as their competitive advan-tage.

With the investment made to ensure a smooth transition to the new millennium behind us now, one would expect funds are now available to embrace new technologies; however, it continues to be a struggle to get senior management to recognize that real estate should be a higher priority than it has been in the past. With facilities costs rising due to higher rents and lower vacancies, many com-panies are giving their real estate concerns their just attention. As Wall Street rewards companies who cut payroll costs, many com-panies are outsourcing their real estate departments entirely. Therefore, the corporate real estate (CRE) providers are the ones who will ultimately need to invest in new technologies in order to differentiate their services from the competition.

"Historically, CRE providers have not embraced technology save for upgrading their Excel spreadsheets," according to Bob Boyd, Director of Corporate Real Estate Services of Advantis, a wholly owned subsidiary of St. Joe Company. "Now we are being challenged to provide true value-added services that can only be provided through greater technology. As we continue to speak with our clients across the United States, we are amazed to see that few have access to the mounds of information they have collected over the last ten years. Our ability to process transactions offers them little in knowledge and strategic thinking. That is the primary reason why Advantis has embraced programs that use Internet technologies to provide access to that library of information now sequestered in a row of file cabinets sometimes hundreds of feet long," says Boyd.

Some of the up-and-coming Internet-based programs allow users to review any and all information related to a property be it lease abstracts and lease documents, floor plans, commission agreements and a host of other related information over the Web. According to Mr. Boyd, the ability to see the actual text from a lease juxtaposed to the abstracted text is extraordinarily powerful. It would be extraordinarily powerful to monitor the transaction flow between brokers and tenants, monitoring the entire deal process from pro-posal to lease execution to move-in, all over the web. Tenants could easily review the status of any deal and run several reports out-lining the most current status of any transaction. In several systems that are ready to be launched in the marketplace, analytical reports show tenants how much money they are spending on their facilities and outline occupancy cost trends over time. Ultimately these technologies will allow brokerage firms to not only better monitor the activity in their pipeline, but also to assess how they are adding value to their corporate clients. A commission voucher system is also being developed as part of an enterprise solution. All of these solutions are made available via an ASP.

In the past, technology spending meant buying new desktop machines and upgrading to the latest version of Windows. That an-nualized cost typically was no more than a thousand dollars per employee. Today, many companies have already spent millions of dollars to develop strategic solutions that provide their clients more information and knowledge. Expectations are that CRE providers will double or triple their technology budgets in the coming years or face a declining market share.

"There is simply no other way to achieve added value than to set aside funds for technology investments. Money must be spent and programmers must be paid", adds Advantis' Boyd.

Real World Solutions

InterTech Information Management, Inc., an Atlanta-based company with industry leading Web-enabled document management technology, is making great inroads to provide the real estate industry with tools that will help reduce costs and understand future fi-nancial considerations. According to David Brehmer, an InterTech executive who focuses on the real estate market, there is increased demand for Web access to lease documents that historically has been stored in filing cabinets. "Instead of running around the office looking for a lease, companies are scanning in their documents so they are accessible anytime, anywhere by those who have privileges to view them," states Brehmer.

InterTech's DocuPACT software is currently in use by The Limited, Inc. According to Ann Bolton, Director of Lease Admini-stration for The Limited, Inc., "DocuPACT allows us to quickly and effectively manage our lease documents. We can quickly pull up images of our leases which have been scanned and indexed so that we can review the information on-line versus digging through our filing cabinets." At The Limited, Bolton adds, "it is critical that technology has a positive impact on the bottom line. We use technol-ogy in a way that allows us to operate more intelligently and efficiently."

Today, some of the most successful real estate professionals are embracing technology as their primary vehicle to provide value-added services. The Internet is a superb tool to process, post, report and collaborate on information vital to your real estate considera-tions. A commitment to apply capital and human resources to develop Internet solutions may be the difference between being hung out on the line and becoming a success on-line.

If you would like to address any interests, you may contact Todd Zeldin at tzeldin@acgpro.com.