Former Prime Minister, Harold Wilson, famously remarked that a week is a long time in politics. By contrast, change in property management can seem glacial.

Three years ago, I wrote in the Property Systems Review about the problems experienced by clients and agents when they need to decide which of them buys and maintains the property management (PM) database. The agents generally prefer to use their own system because they need only train their staff once for all clients. On the other hand, many clients are frustrated by the quality of service provided by their agents and prefer to keep control by running the system themselves.

I discussed the ideas in the article, "Whose data is it anyway", with many agents and clients at that time; most people agreed that the issues would be resolved one way or the other reasonably quickly.

Since then, technology and business have developed apace: many of us now use Blackberrys to remain in touch with our email anywhere. Professionals work from home using 1Mb Broadband links; many organisations are trying to manage portfolios across Europe, not just the UK and US software suppliers are providing increasing competition to the more familiar UK companies. These same UK software companies are also increasing their geographic coverage and some now claim to be truly global with projects not just across Europe, but in the US, Middle East and Australia.

There has been significant change in the way we work… but not in the argument about who should own the system.

The issues
So, what has happened to the debate around who should buy the basic system? As ever, there are many conflicting drivers to resolve so let's look at the key points.

Data integration
Large clients have diverse portfolios - both in terms of property types and location. Often, they feel uncomfortable with using just one managing agent; the recent experiences of Chesterton and Nelson Bakewell, although brought about by different situations, have highlighted the risks of keeping all your properties "in one basket".

Nevertheless, integrating property data into one report from multiple agents is time consuming and prone to error. Sophisticated reporting systems on their own are expensive to configure and run and therefore it makes sense for clients to buy one system and impose its use on all their agents.

Changing agents Similarly, if the client wants the flexibility to change their agent with minimum impact on the data on the system, a single system provided by the client seems attractive. In theory, the access to the system by one agent can be curtailed and the new agent set up in mere moments.

Training and maintenance This of course puts extra work onto the agent: he needs to keep his staff familiar with several systems and this may mean as many as seven sets of staff training. His IT team needs to maintain different types of links with the clients and they need to be familiar with fixing problems in Citrix, MS .net and possibly many other technologies.

Costs of maintenance will increase for the agent and the flexibility of his team will be reduced - he will probably have to arrange his teams around clients rather than by function and this may increase his overall cost.

Negotiating power Obviously a key factor in agreeing who manages the database will be the size of the client and the importance of the contract to the agent. Many of the larger UK clients are using their position to impose systems on agents but smaller clients don't necessarily have, or want, this option. Even though a smaller client may have a diverse portfolio, needing different geographic or specialist knowledge, they may have to bear the additional costs of coordinating the data themselves. This will usually lead to the client using a separate system and some duplication of data input which is not ideal.

Technology Technology should enable change in this area. The increasing use of web-based systems generally point to a glorious future where a remote system is populated by the agents, and is read/reported by the client; its ownership is of little importance. We are beginning to see this type of system being implemented in the property industry but still the debate continues about the provenance of the system.

Ownership of data An often cited problem with using an agent's system is the concern over the ownership of the data. Many of the problems in this area came from poorly drafted management contracts dating from before the effective use of PM systems. With experienced procurement lawyers and proper contract clauses, this should not cause concerns.

Firstly, the market for new property management systems is much smaller than it was three years ago: the replacement cycle for systems appears to have lengthened from around 3 years to nearer 8 years. This means that decisions to change the way data is managed within a portfolio are being made less frequently.

The options for managing a portfolio have also increased. If your PM system is on its last legs, you could avoid new capital expenditure by using the system run by your agent - if you have one agent and they can provide you with web access, you may not need to look further.

This is a good solution for smaller clients and, even if you have more than one agent, there is technology available to aggregate the data from all sources without having to buy a full PM system.

As a large client with enough properties to split the portfolio across more than one agent, the capital expenditure for a new PM system makes more sense. The added flexibility of being able to switch data from agent to agent, coupled with simpler reporting, may prove irresistible.

However, research we carried out for Gerald Eve in 2004 suggested that clients are uninterested in the system an agent uses to manage the portfolio as long as the quality of service is maintained. There is an apparent paradox here: many clients seek control by imposing a system on their agent but when asked if this is what they want to do, they say that systems are irrelevant.

Perhaps clients are sending a message to agents that their service is not yet good enough to be trusted, particularly in the area of management accounts. Agents and clients both have the same choice of systems - availability of technology should not make the difference here. An improvement in perceived service levels may help to resolve the issue of who provides the system.

The question may, however, be taken out of the hands of the agents. An emerging type of service provider, working from India and China, may soon expand the options for many clients. Much of the accounting work done by PM teams is mundane and generic; many companies outside the property sector have discovered huge savings which can be made by opening shared services centres in India to deal with their accounting.

Now, several companies in the UK are beginning to offer these services for property managers*. They do not seek to take on the location-specific management services such as transactions and lease management. However, they do offer a range of back-office services from lease abstraction and financial modelling through to Accounts Receivable and Payable. The cost of labour in India is an order of a magnitude lower than that in the UK - some estimates show savings of up to 80%, like for like.

It is therefore possible that much of the PM accounting carried out by UK managing agents will be transferred offshore leaving the surveying services in the UK. If the accounting and IT systems are managed effectively overseas at low cost, perhaps the choice of systems will seem less relevant. If property management accounting is carried out effectively there should be little reason for the client to worry about where the data is kept and on whose system. The potential changes to the structure of property management services brought about by Business Process Outsourcing to offshore centres (BPO) may resolve the problematic decisions on buying software - and not a moment too soon.

* Remit Consulting is conducting a benchmarking survey of property management processes and the potential for taking these offshore. The survey is being carried out in conjunction with Alvarez and Marsal in the US and in association with the RICS.
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By Andrew Waller
This article was first published in Property Systems Review :

 
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