Navigating Technology Sprawl in Commercial Real Estate

In the world of commercial real estate, the rapid evolution of data & digital infrastructure has been both a blessing and a curse. While technology has brought unprecedented convenience and capability, it's also introduced complexity and risk, where clarity often gets lost in the sprawl. Today, many owners and operators find themselves in a precarious position: if you don't own your data & digital infrastructure, your vendors do. This was the central theme of a recent episode of Peak Property Performance® podcast, where we explored the journey of CRE systems from standalone applications to sprawling ecosystems with Michael Mullin, a veteran in property management technology.

From Centralized Systems to Technology Sprawl

Michael Mullin took us on a journey through time, explaining how early CRE systems used to be much simpler and arguably more effective. Back in the day, property management systems were standalone, focused solely on the specific needs of a property. Operators had control over their data, and processes like accounting and budget control were straightforward. As Mullin recounted, "everything was very centralized in that one property." The system's simplicity allowed operators to focus clearly on their own tenants and residents without the distractions of a sprawling, interconnected system.

However, as the industry evolved through the dot-com boom and beyond, the push for real-time data and integrated solutions led to the consolidation of these systems. While this brought benefits like instant reporting, it also introduced new layers of complexity and risk. "Monday morning reports became like Wednesday afternoon reports," Mullin remarked, emphasizing how the quest for convenience sometimes sacrificed clarity. The transition to browser-based applications eliminated the need for physically transferring data, but it also exposed raw, unfiltered data to corporate decision-makers, often leading to hasty or ill-informed decisions.

This evolution has resulted in today's reality, where the sprawl of systems can be overwhelming. Multiple tools scattered across various functions create silos of information, making it difficult for operators to have a clear, singular view of their data. As Mullin noted, "you buy into the infrastructure," and you're often forced to adapt to the vendor's processes rather than maintaining control. This shift has led to a significant loss of visibility for operators who now find themselves at the mercy of their software providers.

Navigating Vendor Relationships and AI Concerns

As the discussion turned towards the integration of AI and modern tools in CRE, Mullin highlighted a critical point: the risk of technology sprawl growing wider and more unmanageable. He shared an example of a client who, frustrated by the limitations of vendor tools, built a custom property stacking tool in just two days. This tool allowed them to manage lease information more effectively, demonstrating the power of taking control back from the vendors. However, Mullin cautioned that while such bespoke solutions can be effective, they come with their own challenges, such as maintenance and security.

“The client is not a software developer. And when that person leaves, then they have an old system. It'll quickly become old because it won't be maintained. And the technology sprawl is creating an even larger gap that is an insurmountable problem.”

The conversation also touched on the role of AI in CRE. While some see AI as a threat to traditional software companies, Mullin sees it as an inevitable part of the industry's future. He shared a story about a client who wanted to remove all AI tools, fearing the risk they posed. However, Mullin argued that trying to deny AI is futile; instead, operators should guide their teams in using these tools effectively. "If you don't help them use it, all you're doing is bringing the shadow IT into your organization and putting yourself at risk," he warned.

Managed Service Providers in CRE

The role of Managed Service Providers (MSPs) in CRE has evolved significantly over the years. As technology has become more complex, the need for specialized expertise has grown. Mullin explained that as systems have sprawled, the demand for MSPs has increased. These providers help bridge the gap between internal capabilities and the vast array of tools available in the market.

For smaller owner-operators, MSPs often serve as virtual CIOs, providing strategic guidance and technical support. This relationship allows operators to focus on their core business while leveraging external expertise to manage their data & digital infrastructure. However, this comes with its own set of challenges, including the risk of becoming overly reliant on external partners.

“The sprawl has gotten bigger and bigger and bigger. As an owner-operator, you could try to have somebody that does all that, everything for you, but they probably aren't, can't. So you've got to find, how can I use what I, leverage what I have internally? What outside resources can we bring in to help?”

Ultimately, the conversation underscored the importance of maintaining control over your technology stack. Whether it's through strategic partnerships with MSPs or by taking ownership of your data, the key is to ensure that you, as the operator, are driving the roadmap rather than being driven by it. For more insights on managing risk and control in modern CRE ecosystems, listen to the full episode.

Building Custom Solutions: The Double-Edged Sword

One of the key discussions in our recent podcast episode revolved around the allure and pitfalls of building custom solutions. When a client decided to craft a bespoke property stacking tool, it was a triumph of resourcefulness and an example of the power of taking control of one's data. However, as Michael Mullin pointed out, the story doesn't end there. "The client is not a software developer," he commented, emphasizing the potential longevity issues. What happens when the person who built it leaves? This custom solution, which took just two days to assemble, could quickly become outdated without proper maintenance and updates.

This scenario is a classic case of immediate problem-solving overshadowing long-term strategy. While creating a tool internally can solve pressing needs, it also introduces risks. These include security vulnerabilities, maintenance challenges, and the need for ongoing technical support. "You have to build a maintenance schedule for anything you build because what you're paying for is maintained," Mullin advised, highlighting the hidden complexities of self-built solutions.

So, what's the takeaway for CRE owners? It's crucial to weigh the benefits of immediate solutions against the potential costs of upkeep and security. OpticWise recommends engaging with vendors to ensure they align with your strategic goals and to consider how tools like AI can be integrated safely. For those looking to dive deeper into these strategies, the Peak Property Performance® book offers valuable insights.

Managed Service Providers in CRE: A Balancing Act

The role of Managed Service Providers (MSPs) in commercial real estate has evolved significantly, as noted by Mullin. "The sprawl has gotten bigger and bigger," he explained, emphasizing the growing complexity of technology systems in CRE. MSPs have become indispensable, providing the expertise and flexibility that owner-operators might lack internally. They serve as virtual CIOs, guiding technology roadmaps and ensuring robust cybersecurity measures are in place.

However, as Drew Hall pointed out, this relationship is not without its challenges. "MSPs, if not given the proper level of control, might introduce abstraction and more risk," he cautioned. The key is to maintain a consultative approach, continuously assessing risks and ensuring that any solutions implemented do not compromise the organization's security posture. Regular communication between MSPs, owner-operators, and software vendors is vital to manage these complexities effectively.

In our experience, engaging MSPs can provide a safety net for CRE owners, offering access to cutting-edge technologies and cybersecurity solutions. This partnership allows owners to focus on their core business while leveraging external expertise to navigate the digital landscape. For more stories and insights, visit our Peak Property Performance® Podcast.

Data Security and AI Risks in CRE

As we delved into the risks associated with AI and data security in CRE, it became apparent that many organizations are inadvertently exposing themselves to potential breaches. Michael Mullin shared a sobering example: "We found that one client had uploaded their financials to the free version of chat GDP 504 times." This highlights a critical point — the lack of awareness about the security implications of freely available AI tools.

The rise of AI and data-driven tools offers remarkable opportunities for efficiency and insights. However, without proper governance and security measures, these tools can introduce significant vulnerabilities. "You don't know what you've left out there," Mullin warned, stressing the importance of understanding the risks associated with AI.

For CRE owners, the takeaway is clear: implement robust data governance policies and educate your teams about the risks of using free AI tools. Regular audits and assessments of your data security measures are essential to protect your organization's sensitive information. Remember, if you don't own your data & digital infrastructure, your vendors do.

Conclusion: Taking Charge of Your Digital Future

In conclusion, the journey through the evolution of data & digital infrastructure in CRE highlights a fundamental truth: ownership and control of your systems and data are paramount. From building custom solutions to leveraging MSPs and navigating the complex world of AI, the key is to stay informed, proactive, and strategic.

For CRE owners, this means engaging in continuous dialogue with your vendors, ensuring your solutions align with your long-term goals, and maintaining robust security measures. The PPP 5C™ framework — Clarify, Connect, Collect, Coordinate, Control — serves as a guide for navigating these challenges effectively.

As the landscape continues to evolve, staying ahead requires both technical insight and strategic vision. By owning your data and digital infrastructure, you empower your organization to thrive in an increasingly digital world. For more insights and strategies, explore the Peak Property Performance® book and join us on the Peak Property Performance® Podcast.

About OpticWise: OpticWise provides owner-controlled data & digital infrastructure for commercial real estate — from PPP Audits to portfolio-wide intelligence. See how we operate or read customer outcomes.