Property Industry Technology Trends
Loci Solutions attended Realcomm 2012 in Las Vegas Nevada, a conference specifically around Property Industry Technology Trends. Loci’s mandate is to provide ‘Excellence in Property Technology Solutions’ so this conference was a perfect forum for us to attend and network with our industry peers and partner vendors, and also to meet new vendors and explore new technology offerings and industry trends. Two sessions that particularly piqued our interest were on a) current industry trends from a consultant’s perspective and b) the build versus buy versus cloud debate.
Trends in the Property Industry
General consensus in the session was that the ERPs are currently seen as having a monopoly in the industry and most companies are not changing systems due to the high cost of change. There is, therefore, not much movement in terms of swapping between ERP’s. Rather, companies are now integrating other systems into their ERPs where they used to have single systems, preferring to utilise best of breed for each requirement.
Due to the current state of the industry (which is still feeling the effects of the GFC) the focus on systems is now mostly on filling gaps in current applications, operational cost reduction and process streamlining, and on “integrated upgrades” which focus on people, processes and the system rather than traditional upgrades which just focus on the system.
With data integrity being one of our passions we was very excited hear that one of the buzz words in the industry at present is “data governance” with the focus on processes that drive the integrity of data. While many people still believe that this is entirely around change control and auditing of data changes, there are an increasing number taking a holistic approach in this arena. There is now a major focus on using data to drive benchmarks on productivity, cycle time and accuracy of processing and to remove the lack of trust in information provided by our systems. Our industry in particular is plagued with having multiple sources of the so called “truth” which results in complete lack of trust in data, processes, systems and sometimes even personnel. Organisations are now starting to focus on ensuring the integrity and validity of data before it even gets into the system in order to attain reliable business intelligence. This will undoubtedly be a key focus for many organisations over the next couple of years. Loci have worked with a number of high profile clients over the past 24 months to put in place processes, procedures and also some systems to ensure that data has one point of entry and that it can be relied on.
The consensus from consultants on the panel was that we still need to focus on educating clients to ensure that they are ready to embark upon the project whether it be system selection, implementation or process change and to work as a team to ensure there is no “us versus them” approach. Throughout the industry it has been experienced that some vendors are currently promising quick implementations in order to get sales across the line, however this is not always in the client’s best interest and may result in organisations forcing old processes into a new system. It is vitally important not to skimp on implementations. All implementations should be coupled with a review of current processes and a gap analysis to ensure they are optimised for productivity and cost effectiveness and with new system capabilities in mind. This is the only way to ensure all requirements are catered for and that the client is working as efficiently and productively as possible.
One of the greatest dangers to the success of a project is unavailability of project team members and project burnout. Where possible dedicated project members should be made available and it is also important to keep projects as short as practically possible or break them up into manageable pieces. Projects are far more successful when people are enthusiastic and energetic. Long projects cause fatigue and burnout in key staff and commonly lead to project failure.
Another key success factor is having the right people with the right skills on projects. In today’s market there are only a handful of experts in some areas and it’s a challenge to find the right fit for each client and project. Property with its diverse mix of IT, property (managed, development and owned) and accounting is not an interesting prospect to most IT professionals and dotcom is a far more attractive option for the younger generation in particular. Those that are in the industry frequently have a solid knowledge across multiple areas and their experience is invaluable particularly when dealing with or acting as the liaison between IT and the business. This is a global issue that needs to be tackled by clients and consultants alike and unfortunately it is likely that we will experience a further shortage of expertise over the next few years.
The session finished off with a review of what we (consultants and clients) are currently doing wrong and it was interesting to hear similar stories to what we experience here in Australia. Many organisations are still looking at technology as a cost rather than as a capital investment and as a way to improve productivity. It was also a fairly common experience that IT departments were not treating the business as its business partner and provide them with a solution or planning with them to ensure their requirements are covered going forward. While there are IT departments that do engage with the business it was deemed that they are in the minority. At the same time the business was not necessarily ensuring that they were allocated a major line item on the IT department’s budget. If there are IT based projects that need to occur then the business must ensure it is included in the budget. It is much harder to get key projects approved when there has been no foresight to budget for it.
It is also common globally that many organisations customise their ERPs to meet their specific requirements and there is no sharing of information. In many cases, similar if not the same functionality is being built by multiple companies so they are all baring full cost of R&D for their custom solutions. Some economies of scale can certainly be generated where solutions apply across the whole industry but the barrier of perceived “competitive advantage” needs to be broached before this can happen.
Build Vs Buy Vs Cloud
In this discussion there was some very heated debate around the topic including extended discussions around the usage of open source code and the real definition of what “Cloud” means. Key take away points on this discussion were:
• Build only if no software exists and it provides competitive advantage.
• RFP is a key component that can’t be ignored when purchasing.
• Cloud Solutions move risk to the provider, and are better suited if you have no infrastructure or technical support.
• On premise is recommended if you need to integrate to other solutions.
• Cloud can have extra charges if you need to “touch” it and may not have timely support.
The key considerations with Cloud versus On Premise are expertise, availability, accessibility and control. Having your solution On Premise provides greater access to the solution and also the ability to perform integrations between your systems without having to meet 3rd party provider access requirements and also potential additional fees. On Premise gives you complete control over your solution and complete responsibility for ensuring ongoing availability. With some Cloud solutions you may not have the choice about upgrades or versions so this should be kept in mind and the provider asked about upgrade procedures and frequency, particularly if you have any customisations in your solution or if upgrades need to be scheduled at specific points in time for your business.
Cloud solutions are ideal if you lack internal infrastructure or technical staff, particularly if you require high availability for your solution as the cost of building in redundancy may be prohibitive. When looking at a Cloud solution it’s important to ensure you are aware of any additional charges for needing special access to the system or for any configuration changes. You should also review the providers SLA’s for their response times to support issues whether technical or functional and also SLA’s for system availability to ensure they will be sufficient for your business requirements. It’s important to bear in mind that 3rd party providers will need to be in compliance with your IT Audit requirements so will they need to be able to provide you with documentation to support that. It is always best to sight this documentation up front prior to committing to ensure they comply rather than sourcing the information during an Audit and finding that it is not available or that the provider does not meet your audit requirements.
Cloud solutions also offer a very attractive solution price wise for smaller or start up companies that do not have the capital for a large upfront investment. While it is important to note that this is a cheaper solution, it does not mean that there should be less investment in the implementation of the solution. Regardless of your spend on your system, you still need to train users, configure and load data into your system, review your processes and undertake a gap analysis. Budgets for implementation can generally be kept in control by reducing customisation which requires vendor or consultant effort. Rather the effort on process improvement and change management should be increased.
There was a general consensus in the session that building a solution for the real estate industry should only be undertaken if there is no software in existence that provides a solution and only then if it provides you with a definite competitive advantage. One of the key reasons given in the session for building your own solution was that maintenance fees on purchased software are often very high and the other reason was that it gained you competitive advantage. That being said it is also very expensive to build your own software. There is not only a cost to do research and undertake the development of your software, there is also a “hidden” cost of all the non-IT staff that are involved. Invariably the input required by the business to get the solution they require takes a lot more time and people than it does to select and implement an off the shelf solution. The business needs to be involved on an ongoing basis in requirements gathering and also unit testing at the barest minimum. There is also the cost of providing ongoing support and improvements to the product which needs to be weighed carefully. With a purchased solution, someone else has already worked out the calculations, and solved all of the big problems and any remaining work should be isolated to building solutions or customising for product gaps and improving business processes around the new solution.
There is also a huge risk of knowledge loss when key developers leave, especially if there is no technical documentation for the solution and even more so if there was only one or a very small group of developers. With a purchased solution you get an industry worth of knowledge and support, with a built solution you only have your own business. Even if development is outsourced, it is invariably your business that has determined the requirements. Key staff changes will result in knowledge loss as nothing is ever 100% documented, particularly around why certain business decisions have been made.
Regardless of which option you choose, all three of them (cloud, build and buy) require careful documentation of requirements. If you don’t know you’re requirements you cannot correctly select a product for purchase let alone build a solution. This is often ignored or not understood and it leads to mismatched products and poorly functioning in-house solutions and very unhappy customers/end users.
In closing, it was refreshing for us to have confirmed at this global real estate technology forum what Loci have believed for years.
To help our clients develop the correct strategy for their business we have structured offerings that allow you to draw on the experience and expertise that Loci can provide via our team of consultants that have worked with some of the largest organisations in Australia and around the world.