CRE Systems: The ten big decisions

Systems have entered the real estate industry late in the piece – surprising because it is a wealthy and data-rich industry. Possibly real estate is thought to be too different. CRE applications are even less evident, probably because corporations seldom focus on this aspect of their business models. Demand for these systems has not been there.

Integrated Workplace Management Systems are starting to emerge. These systems are designed for user portfolios and integrate functionality including lease management, facility management and general ledger. This coincides with the property and facilities management amalgamation trend as an integrated corporate solution – often outsourced. There are a host of applications purporting to deliver CRE property, facility management and reporting functionality, including investor orientated property management systems; various CAD (computer aided design) platforms; lease modelling decision support systems; CMMS (comprehensive maintenance management systems); and a range of help-desk and reporting software. This pot-pourri of systems is usually in-filled with a clutch of spreadsheets. Sooner or later organisations decide that there must be a better way. And along this path decisions are made that are later regretted - mostly because there were no clear objectives up-front and the big decisions were not clearly addressed.

1. A bespoke system designed to meet all business idiosyncrasies?

This is where horror stories are born. Stories abound of millions of dollars spent on great, but poorly thought-out ideas, and which are never switched on after months and years of effort. All users believe their portfolio needs are different and methods superior - no existing system could possibly support their requirements. In reality, differences are imagined and superior processes are seldom true - after all effective portfolio management with appropriate processes and rules is not rocket-science.

2. To what extent should in-house IT departments be involved?

This sounds like IT blasphemy. The IT department will need to be aware of the application, and playa role in security, remote access, back-up, server space requirements and the like. But, depending on the attitude of IT and other project priorities, this involvement can complicate and slow the process down. Is there an interim strategy involving a process requiring minimal interface with other company systems and negating the paranoia of collapsing the whole IT infrastructure? External hosting may be part of that solution.

3. Use the house ERP accounting system or the general ledger in the CRE system?

This is a similar but more fundamental dilemma. How are rental, outgoing and general accounting transactions to be handled? Most financial ERP systems now claim to have CRE functionality, but in reality this is tokenism and major customisation will be required. Integrating the CRE functionality with the house accounting system usually means much of the unique functionality is lost. This is a difficult roadblock to navigate - so be prepared.

 4. A one-stop system solution or interfacing 'best of breed' systems?

One system with all the functionality reporting through a common portal is the ideal - but not realistic. Few systems exist that truly meet all these requirements - albeit a number of vendors are trying to create this nirvana. Usually a pragmatic approach of integrating 'best of breed' systems into the overall system seems to hold sway. The challenge is to understand how well these subsystems are integrated and operate through the CRE reporting portal. It may not be enough to have a standard CAD application or report writer with a flimsy reporting link.

5. Processes and reporting to be adapted to suit the system or should the system be customised?

CRE groups believe their processes are superior to their peers. Professional jealousy is healthy but a certain amount of pragmatism can save many dollars in customisation costs. Superior CRE functions are all about understanding, efficient execution and succinct reporting and not necessarily the support processes. Adoption of the system processes may be a good option if these are aligned with core business practices. The bigger issue to guard against is changing a system to fit existing bad practices. System implementation is a great change management opportunity.

6. Where will the system be hosted?

Part of the decision-making is about hosting and web access. The norm has been to host on the company server. Full IT department support and interfacing with other company systems is an absolute. With the advent of the web, application service provider (ASP) solutions have emerged, with the system hosted on the vendor's server and access via the web. Web-access, be it through an ASP or company server, is a liberating CRE management experience. But first caution: Where (in the world) is the system being hosted? This can materially impact speed and ease of use. How secure is the company information? What if the system is replaced in the future?

7. What data is to be captured and who populates and owns it?

CRE groups often fall into the trap of trying to capture too much data. Do not be too ambitious. Data has to be updated and maintained. Without a full complement of resources, data becomes stale and can no longer be relied on. Let down once, operators quickly revert to maintaining their own records - usually spreadsheets. Data integrity is lost, double data entry abounds and the new system grinds to a halt. Start with minimum functionality, allow the system and operators to mature and the application to evolve. Data population and ownership is often problematic. Too often, the cost of data population is forgotten. Or operators are expected to populate their own data, resulting in extended schedules and blown budgets.

8. Emerging innovative solution or a robust well established solution?

Linking into innovative and emerging systems - to ensure the model is developing around the latest thinking - is great, but not without risk. But remember, most emerging systems companies are capital and resources constrained, and great visions of fully integrated systems may still be many years away. Beware the presentations with excessive PowerPoint and local drive mock-ups. The operation of the real system needs to be seen. Buying into a well-established system will have less risk and innovation, but expect far less flexibility in customisation.

9. How is systems support and development to be provided?

Local support is far more useful than international support across time-zones. More mature offerings will probably have a larger support team - but as one of man  users, there may be less dedicated support than expected. New customers are probably far more important to less mature offerings, but development and support resources may be sparce.

10. What is the cost and the financial advantage?

Systems always seem to cost significantly more than the original estimate. And true cost is seldom accounted for, being far greater than the software, customisation and implementation. This cost dilemma is exacerbated by the challenge of doing a business case that has a clear financial advantage - systems always seem to be net costs. This may be best expressed by cost savings such as the impact of one missed lease renewal; or the changed mind-set induced by a charge-back system; or the reduction in the cost of churn. The business case can make financial sense. But this may have to rely on admitting to past mistakes and short-comings