Fit for PropTech – How to scope and procure software to benefit your property business
PropTech has become the industry buzzword of the last decade as real estate investors grapple with how they can use technology to their advantage. Artificial intelligence, robotics, blockchain, the internet of things, crowdfunding, green technologies – a whole industry has been borne out of the desire to create efficiencies and extract greater value from real estate assets.
However, for many real estate investors, the world of technology is something of a foreign land and investing in PropTech means talking in another language. So, how do you identify which technologies are going to provide you with the tangible benefits that will offer greater returns on your property investment? Kathryn Rogers, Dan Badham and Roberta Organ discuss.
Identifying need and assessing options
There are PropTech offerings to help aid every aspect of the property lifecycle. You may be looking to speed up your property transactions with smart contracts, or make your properties more attractive to overseas investors with virtual reality. At the planning stage, you may be considering how you can make more informed decisions about space planning or looking to enhance your planning capabilities through the use of 3D modelling and location intelligence solutions.
When managing your property portfolio, you will need to monitor the environmental conditions and energy performance across different areas of the properties. How can you manage and control this in an automated way and use the data you capture to your advantage?
While these examples may be the tip of the iceberg in terms of what technology can achieve, we are starting to see new clauses creep into leases encouraging the sharing of energy performance data between landlords and tenants and requiring the use of specific management and reporting technology to streamline the landlord / tenant relationship. Increasingly, there is a demand for tenants to work more collaboratively with landlords on improving spaces, whether they be residential or working environments.
Regardless of the type of technology you are considering procuring, the key considerations remain the same. You need clarity as to what issue, problem or requirement the technology is intended to address and what your desired outcome is. Questions you will need to consider include:
- Will the technology help to fulfil a business critical function?
- Does it need to integrate with, or work alongside, existing databases or other systems and what happens if those systems change?
- Is this part of a wider project, and if so will your requirements change as that project progresses?
- If you are procuring software, will the software be hosted on your own premises, by your supplier or a third party? Your approach to hosting will depend on what functions the software is carrying out, and the guarantees that your supplier can provide.
- What level of customisation will be needed or will an off-the-shelf solution do the job?
- Do you need a scalable solution to ensure it is future proof?
Listing out the functional requirements that the technology should fulfil is a vital first step in the procurement process. It helps ensure that your supplier understands your needs, and gives you a basic specification to refer back to. Failing to do so, can result in the tech provider producing a solution that doesn’t ultimately do the job you need it to. You may also want to ask your supplier for help with this process, as working collaboratively with the provider, and knowing the right questions to ask at the outset will help you identify what is required.
Other factors for consideration include timescales, budget and levels of support and maintenance required. Additional costs to the software may include termination costs of any existing systems, customisation costs, training costs, legal fees and ongoing licensing and support fees.
Finally, plans may change over the course of the project, but clearly scoping your requirements and expectations at the beginning, and articulating these to your supplier, should make the whole process much smoother.
When things don’t go to plan
Disputes arising out of technology procurement projects have unfortunately become increasingly common. When disputes arise they can cause delays and result in the relationship between the customer and the supplier breaking down completely. To bring a project back on track and to avoid protracted litigation, it is critical that any disputes are resolved quickly and smoothly.
- Alternative dispute resolution – many disputes arise out of misunderstandings or miscommunications between contracting parties and are capable of resolution via an informal discussion. By including an alternative dispute resolution (ADR) clause or a dispute escalation clause in the contract with your supplier, you can encourage the parties to come to the negotiating table early and give your project the best chance of being completed successfully.
- Exit strategies – Where disputes cannot be resolved, it is important that you have a clear exit strategy, so you should ensure that your contract also contains robust termination and transition provisions to enable you to withdraw from the project with limited financial and practical consequences.
One thing is for certain, technology will continue to drive change in the property sector. Those who invest time early on to understand the advantages it can bring in helping to address tangible issues, will be those who reap the rewards.
For more information and advice on how to procure technology, visit www.softwarelaw.co.uk