By Sule Aygoren

Technology Report

In the business world, executives of every stripe can't seem to spend a working day without access to at least a BlackBerry, laptop, Palm Pilot or cellphone. In fact, during the past five years, technological tools have gone from being a mere convenience to a must-have, integral part of everyday business.

With all the tools to increase efficiency at one's fingertips, it may be surprising to hear some say real estate has yet to fully embrace all the technology that's out there. "We've come a long way from four years ago, but I don't think we've caught up to the game," admits Fritz Schindelbeck, national accounts executive at Yardi Systems Inc. in Santa Barbara, CA. "The dot-com scenario quickened the pace of adoption, yet with the tech bust and economy, it's slowed down a bit."

"Part of the problem was the gold rush for broadband a couple of years ago," agrees Sandy Jacolow, CTO for ING Clarion Partners in New York City. "Many companies lost an enormous capital investment. Once they were burned in that venue, they took a step back and waited for a lot of the start-up fns to mature to some degree."

While the tech bust threw a wrench in the plans of many technology companies, execs confirm that the hesitancy on the part of real estate firms has started to change. The push, they say, is mainly attributable to a few early adopters that took a risk. "In the dark years of the mid-'90s, there was nothing going on," explains Jim Whalen, Boston Properties, SVP and CIO in Boston. "The industry was not investing. Clearly, the turning point was probably in 1997-98 when REITs took on a critical mass and a number of people in the industry started to grasp technology. It's been a complete sea change.

"In 1997, our first year as a public company, we grew by leaps and bounds," he continues. "We were dying on our old technology platform. From a reporting, flexibility and feature set perspective, we had to do something, and we've never turned back. We're making new investments in technology every quarter. You just don't have a choice."

While REITs may be touted as spearheading real estate's entrance into the technology era, some say that they, too, have a ways to go. "REITs are interesting," begins Mark Friedman, CEO of Santa Monica, CA-- based Accruent. "Real estate is their primary business, but they haven't made as much progress as you would think with regards to using technology to manage business."

Nevertheless, consensus states that it's the larger firms leading the way. That makes sense, given their size and operating requirements. Tim Harvie, CTO of ProLogis in Aurora, CO, notes, "The medium and small real estate companies are not investing as much. It's harder for them to generate the same economies of scale as the larger firms."

Yet no matter a firm's size or sector, the tools that have been among the most highly utilized are asset and portfolio management software, say the experts. These types of products not only benefit the businesses that use them, but also lend a hand in standardizing a reporting procedure for the entire industry, relates Schindelbeck.

"There have been several initiatives over the past couple of years to try to define exactly what an asset management system is and what functionality should be included in it," he says. One main goal of most real estate companies, Schindelbeck relates, is not only to use the technology to better assess their own performance, but also to benchmark themselves against established industry indices such as NACREIF.

In addition to the traditional advantages like automating business processes and making data more accessible and organized, technology can help connect real estate business functions like never before through the use of the Internet. "Real estate operates in a decentralized environment," maintains Andrew Rains, the Atlanta-based worldwide industry marketing manager for JD Edwards & Co. "The Internet has made for a great communication and collaboration tool."

With the advent of the Internet came webbased technology, as most vendors adapted their products to accommodate the growing needs of their clientele. For many businesses now, a few key strokes can globalize operations far more efficiently than months of planning. "Because the economy has become global, to be able to have the technology to support that business is crucial," explains Tom A. Ricci, senior manager and head of implementation services at Cleveland-based MRI, an Intuit Co. "If you don't have that, then you'll fail. As our clients started to take their strategies global, we tried to develop solutions that met the mobility clients required. The easiest way of doing it is by taking advantage of the Internet."

In the case of MRI that meant putting together a family of integrated products, Ricci says, called MRI Real Estate Solutions. Within it are modules corresponding to every real estate investment type. While its asset and portfolio management product, Viewpoint, is fully web-enabled, it also functions outside of the web for companies that haven't gone on-line yet.

Clarion Partners, for instance, is an MRI client that's currently using the software offline, but experimenting with the web-based product, which Jacolow says "will take that one layer of application out of the way. With it, daily information that gets entered into the system can be run through a batch process overnight, creating updated financial and property-level reports from MRI that get posted automatically to our intranet."

Jacolow reveals that Clarion has nearly $12 billion in assets under management, mainly on the investment side. Technology is used not only to handle those investments, but also to connect Clarion to its parent company, ING Real Estate in the Hague. "We are all so overrun with data. So by at least trying to filter it down to the most pertinent information in one place, asset managers can handle their processes better and be more proactive versus reactive."

Accruent's software, the Accruent Real Estate Manager, tracks and manages all aspects of real estate, from leases and rent collection to expenses and reporting, as well as strategic planning and forecasting. According to Friedman, there are two ways the product enters the market-either through direct sales to companies or to large service providers, which use the technology to outsource services.

Stamford, CT-based United Systems Integrators Corp. takes the latter route. Rick Bertasi, president and CTO, says USI has been using Accruent's Strategen product for lease administration since 1996. With it, they manage portfolio administration data for a number of clients, primarily office and industrial. "We tailor the product according to the client," he says.

As for JD Edwards, Rains says there are three main areas the company can facilitate-collaboration, automation and integration-through its web-based software, JD Edwards 5. Through the system, a user can share information, streamline workflow and reconcile systems (that previously may have been disparate) to work with one another.

One major JD Edwards client is Boston Properties. Its CIO, Whalen, says his firm moved to JD Edwards' foundation package in 1999 to better handle its billing process, a task that rings up $1 billion annually.

So there is proof that companies have indeed embraced technology. Yet when the products and services first came out, many admit it was hard to convince the industry to adopt them. "It was an evangelical process," recalls Friedman. "The idea of automating real estate was pretty advanced. Most corporations at that time had a three-ring binder with Word documents that summarized what was going on at a location. When they finished negotiating a lease, someone would type it up and they'd stick it in the binder. That's how they managed their portfolio. The initial response was slow."

In fact, spreading technology through the real estate world is still a work in progress, especially given the fallout of the dot-com era. "During the dot-com heyday, there was a tremendous amount of excitement and chaos in the industry with a lot of real estate companies chasing a lot of different ideas," describes Rains. "There were probably well over 500 real estate dot-coms. Today, there's only a handful left."

While the tech bust may have deterred some real estate firms from using technology and obliterated some newcomers, it strengthened the survivors. "When we first started, there were about 12 companies that do what we do," Friedman says. "Of those original 12, 10 have gone out of business. Also, we've acquired two start-ups that didn't quite make it, but built some good products."

Once a firm gets over the initial fear and decides to invest in technology, it can't expect its business to turn around overnight, say vendors and users. "Technology by itself is not going to make a firm more efficient," stresses Jacolow. "You're looking at a marriage between the process and technology to reap the maximum benefit."

But if everything's done right, users can glean many rewards. For one, says Friedman, technological tools help a company save money. "If a company has no system in place and we put one in and make it more efficient, generally it is looking at saving anywhere from 2% to 4% of the overall occupancy cost," he estimates.

Technology enables a firm to accurately track or allocate costs down to the space level, "which is material in terms of ultimately impacting decisions," Bertasi says.

Likewise, technology allows firms to get more bang for their buck. "Most of our clients will say that once they've implemented the software, they're getting a lot more value from the work they're doing," says Schindelbeck. "Instead of focusing all of their efforts on data entry and month-end financial statements, they now have time to analyze data and make adjustments to their strategies."

And with web-based platforms, the shift to decentralized operations is made easier, experts say. Functionality increases as well. "One of the benefits of open database technology is that a company isn't required to use a specific product," MRI's Ricci notes. "For instance, Morgan Stanley in New York had us develop a portal. As they make investments in Japan or Italy, the third-party managers could enter information through a webbrowser interface. Through an application-- hosting environment, the application is housed here in our data center. They just dial in, and through a browser they're able to access the MRI application to do business without having the responsibility of a large IT staff dealing with all the back-end issues."

Of course, the technology available today didn't appear out of nowhere. Innovations cannot be made without feedback and participation from actual clients because, after all, they're the ones using it. "We do not have the philosophy of build it and they will come," says Rains. "As we develop solutions, it's hand-in-hand with our customers."

Developing packaged software based on a technology firm's interpretation of the market's needs is hit or miss, concurs Schindelbeck. "Our steering committees keep us grounded," he says.

So, what opinions do real estate firms have about the technology they utilize today? While the products are helpful in many ways, a number of users feel they can be improved upon. Bertasi, for one, feels the availability of information needs to be more widespread and accessing it should be more userfriendly. "If you have to learn the software to really use it, you minimize the number of people that can use it," Bertasi emphasizes.

Moreover, the industry has some opportunities to provide new features, like performing projections, Whalen adds. "Some of the leading providers out there need to improve and take advantage of the new technologies that are available," he says.

Providers concur that they're building more functionality into their products. "The collaboration and workflow tools are starting to significantly improve," says Jacolow. "When you can have information in a central database as you're making acquisition or disposition decisions, you can see trends."

Workflow, or process management, has become a hot topic. Because many of today's products don't offer workflow technology, or are in the process of developing it, some firms, like USI, have taken matters into their own hands and created their own solutions.

"Portfolio and asset information systems give you data with which you make better decisions," Bertasi maintains. "Those capabilities are critical, but they don't make you more efficient. Most of the cost of running an actual real estate function is process. Our process management system/workflow product integrates with the portfolio and asset management applications. It's the piece that's missing in the marketplace."

As for vendors, they're starting to catch on. Most of the newest innovations are geared toward workflow management. In Yardi's case, while it's continuing to expand its current web-based product, Voyager, Schindelbeck says they're adding workflow capabilities as well.

"The focus of the industry today is to reduce the operational rigor and cost, while increasing efficiency and customer service," says Ricci. MRI, he reveals, is tacking applications dealing with workflow. Role Pages, for instance, will allow individual users to tailor the product to their particular role at the firm, and Leaseflow automates and streamlines the lease-execution process.

Likewise, the next applications at JD Edwards, Rains says, are geared toward advanced real estate forecasting and business intelligence. "The ability to forecast financial and operational performance is going to be a key asset in the real estate industry," he relates.

To be sure, there's a lot to be done as far as real estate-specific technology is concerned. "There is a significant opportunity for the new tools to emerge," says Harvie, "but until more industry-specific products are developed, organizations like ProLogis will be forced to develop some of their technology solutions internally."

In a true chicken-or-egg scenario, vendors themselves feel that it's the real estate companies that have to take the huge step in terms of technology use. And while a handful are in step, vendors say a greater number of real estate firms will have to follow the new technology that comes out. "I don't think they've fully digested everything that's there yet," Friedman finds. "Most of the real estate technology that's implemented today is administrative and tactical. Few companies have matured to a point where they're using it for strategic planning, such as forecasting."

Workflow may be the thing most vendors are focusing on today, but the innovations won't end there. Rather, executives at many of tech firms relate they have barely scratched the surface with regard to the benefits technology can bring to real estate.