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Lease management systems: corporate trend.

The recent recession and turbulent economy have had a devastating impact on industry. Without question, the changing conditions have placed significant pressure on business to reduce operating costs and improve management systems. Corporate America, in particular, has responded to this volatile climate by examining internal structure -- including corporate real estate-with the goal of improving efficiency.

Over the last 10 years there has been a continuous movement toward automation, not only of operations but also of financial management. How can technology benefit corporate real estate professionals? Computer systems can, of course, be employed to accomplish more work with less staff. A more interesting use of technology involves the exploitation of information as a strategic tool in controlling real estate costs.

For example, many corporations are trying to take advantage of the current soft market by renegotiating leases in advance of expiration. A real estate executive faced with a variety of leases in different markets, but with limited time, can use a system to prioritize opportunities and to evaluate the impact of landlord proposals on occupancy expense.

There are many issues that need to be examined when selecting an approach to the automation of corporate real estate. At the recent industrial Development and Research Council annual conference, an entire session was devoted to this topic. Perhaps the most fundamental question to be answered is: Does the corporation need a pre-packaged system, a custom system, or a hybrid of the two?

1. What is the Real Use? The first step in deciding the best approach is to define the real use of the system. Does the corporate real estate department process rent invoices, or is payment authorization handled by local offices? If the real estate department has final Sign-off on payments, a Lease Administrative System might be needed.

If the primary role of the system is to provide data on lease expirations, options to expand or terminate, and occupancy expenses organized by state, Organizational unit, or year, then a Lease Management System is needed.

There are good commercial products available to serve either of these requirements. However, many corporations have both needs, which might require a "systems integration project to tie together software from different vendors.

2. Define the Type of Organization. The second question that must be answered is: what type of organization are you? Are your reporting requirements constantly changing, driven by reorganizations, rightsizing, and other radical changes that affect the corporate landscape? If so, then flexibility should be high on the priority list.

An area of particular importance in many organizations is the attribution of occupancy expense to specific cost centers. As a company spawns new organizations and eliminates others, and as reporting relationships are restructured, a system that aggregates costs must change or risk becoming irrelevant.

If an organization's reporting hierarchy changes on a monthly basis, and each month the real estate group must "rerun the numbers" to reflect structural changes, it is dynamic. If changes in cost center assignments happen once a year or less, it is probably static.

A dynamic organization will most likely require an outside consultant m modify an existing system or to advise on building a customized solution.

3. What Level of Function? Third, an organization must realistically consider what is expected of a real estate system. Is it a tool to save some time and produce reports that are tedious to do manually? If so, expectations for the system might be fairly low, and commercial systems will almost certainly meet the need.

On the other hand, are expectations for the system driven by radical downsizing, the reassignment of significant new tasks to an undersized department, or by a major reorganization or acquisition? Must the organization implement the system in six weeks and show results? If so, expectations are high, and the organization should consider combining a commercial product with consultant labor.

Most firms' needs fall somewhere in the middle. If so, it is important to be on guard for the gradual migration from low to high functional requirements which sometimes occurs. This usually begins with initial low expectations for the systems process. As time goes on, and as management begins to visualize additional uses for so much valuable data, more and more features can be added to the system specification.

4. How much integration? Equally important to consider is the issue of integration. Will the system be used by a small group that reports to one person and is located in the same place? If so, the corporation needs a stand-alone system.

Will the system need to communicate with general ledger, accounts payable, financial accounting, or budgeting software currently installed on other hardware elsewhere in the company? Will the users be remote from one another, either geographically or in terms of job function? Will it be networked? If so, the requirement is for an integrated system, which will probably require the assistance of a systems consultant.

The key here is to realize that the flow of information from one system to another is not only a technical problem, Rather, it is a human resource and data problem.
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Title Annotation:Review & Forecast, Section III; evaluation of computer software systems useful for automated operations and financial management for real estate industry
Author:Colacino, Michael
Publication:Real Estate Weekly
Date:Jan 27, 1993
Previous Article:Partnering: new approach to project relationships.
Next Article:1993 could be the year for change.

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