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If you want something done right, hire an expert.
It seems obvious. In the commercial real estate industry, we hire experts at every step, from environmental site inspections to contractors and architects. When it comes to property technology, however, some companies want to take it in-house and develop proprietary software and tools.
The build versus buy dilemma isn’t unique to the real estate industry. It’s a universal debate among all business owners, but the answer always seems to be the same: buy. In fact, research from Gartner shows that 95% of IT companies use open source technology already—and that’s because there is a real value in outsourcing.
Here are five reasons why using third-party commercial real estate technology is essential to getting your digital strategy right.
They’re the Experts
Proptech companies build and manage technology; they understand it from the inside out. On the other hand, commercial real estate companies are experts in the built world—not the digital one.
While more and more firms—61%—have already adopted a digital strategy and 96% of firms are, at the very least, thinking about technology integration, most companies don’t have any technology professionals on staff. The majority of companies with a digital strategy do have a dedicated professional at the helm of the technology plan or platform. However, in 65% of cases, that person is not a technology specialist and about 40% of the time, companies have enlisted a real estate professional to run the show.
In-house technology requires specialized talent to both build and routinely update it just to maintain basic operations and functionality. By working with an established proptech company, technology support is managed by an expert team that ensures the technology is not only responding to user needs but is also operational, leaving real estate professionals time to focus on business operations.
It’s Cost Effective
Let’s face it, building technology is expensive. In-house software doesn’t only require a specialized technology team—which in of itself is an expensive endeavor—but it also requires time and a significant budget to get it right.
Research from Project Management Institute has found that 43% of IT projects go over budget and 49% are late, resulting in increased costs. An additional 14% fail completely. Those are tempered estimates. A Gallup report found that about one in six internal IT projects exceed the budget by 200% and the schedule by 70%.
In an industry perpetually focused on the bottom line, it seems like a clear decision. The cost savings is reason enough to eschew in-house technology and it is the decision most companies are making. Last year, spending on enterprise software increased 8.2%, showing that most companies are in fact taking the buy approach to get better control over costs and to dedicate the budget to the technology, not to managing it.
Standardization Is a Benefit
Click the skills tab on any resume, and a drop-down list of software programs will appear. Companies like to know that prospective candidates are experts in Excel and Microsoft Word, not in Apache or Pages. As technology adoption accelerates, leading proptech tools are becoming part of a standard skillset for CRE professionals.
Like with Excel, there are many benefits to hiring a candidate with fluency in industry-leading proptech tools and software. To start, it supports a seamless onboarding process and a flat learning curve for new hires—which enhances productivity. It also supports better collaboration in the office and with clients and outside colleagues, supporting company growth and potential partnerships that can lead to expansion.
Customization is the counterargument to standardization, and it is the one major reason that companies choose to go down the often arduous path of building in-house technology. But, most third-party proptech tools come with flexible options built into the model.
Cyber threats have become a top concern for commercial real estate companies. Cyber attacks have steadily increased year after year, but during the pandemic, cybercrime increased a staggering 600%. Financial institutions are a top target, with 90% reporting that they have been the victim of a cyber attack.
Building in-house software increases the likelihood of a breach. Third-party technology companies are better equipped to manage cyber security. In a KMGP survey, 67% of proptech companies internationally said they were confident in their cyber security measures, 70% had tested their cyber security preparedness, and nearly half of companies had ensured business continuity in the event of a breach.
There is also the issue of data governance. In-house technology platforms that collect and manage data will have to comply with data protection and privacy laws, like the California Consumer Privacy Act, or international regulations, like the General Data Protection Regulation in the European Union. Failure to comply with these laws could result in substantial fines.
It Drives More Value
Data has become the cornerstone of CRE technology—and this is where using third-party technology tools shines. Third-party data has been shown to improve NOI and ROI for commercial real estate companies by augmenting internal data and providing better insights.
Roughly 60% of CRE companies say that they are already using IoT sensors to capture data, and only 15% of companies store this data for their own use. The rest share data with tenants, vendors or other property stakeholders to ultimately improve operations and drive efficiency. Deloitte recommends companies use “sensing tools, alternative data sets, and analytics” to even better predict CRE usage and demand.
But, it isn’t only accessing data. Proptech companies like Northspyre are using automation and AI to process data analytics and deliver critical project and investment insights that inform strategic decisions. These complex processing capabilities and data-driven solutions couldn’t be replicated in an in-house model.
Proptech companies deliver efficiency, reduced costs, risk mitigation and value. It’s a developer’s dream wish list, and it arrives before you have even started using the technology.
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