Why Vendor-Agnostic Systems Empower Property Owners and Operators

Introduction to Peak Property Performance Updates

Drew: Welcome back to the Peak Property Performance Podcast. Today, we're going to do a sort of conversational style update on the topic of what has changed since we wrote Peak Property Performance. So welcome Bill, co-host Bill Douglas is with us. Hi, Bill.

Bill: Hey, Drew. Always a pleasure. Always a pleasure.

Drew: Yeah. Yeah. So today we are guest list. We are internal only and we're just going to provide an update. And it's going to be, you know, themed around like what CRE operators are starting to realize about digital infrastructure itself. I mean, you always see us posting about it, you hear us talking about it on this podcast for sure about the absolute critical importance of the digital infrastructure. So we're going to talk in around and through that today.

Bill: Sure are. And share some stories from customers, from prospects, from industry trade shows, et cetera. But you know, take a 30 second side note. Thanks everybody for joining. We appreciate it. Don't forget to like and follow and share and all that stuff you're capable of doing. And anytime reach out for your complimentary digital infrastructure review, we'd be happy to talk to you. Just push the link on the website or send either one of us a note and we'll get it scheduled.

Drew: So to open up, Drew and I wanted to talk about what we're hearing from owners. And like Drew said, it's since we wrote the book, which the book was published nine months ago. I guess we finished writing it about 14 months ago. People don't realize how long publishers take. They had that big for six months. So we've had a lot of conversations with owners, with operators, with property managers, with engineers, with capital partners, with vendors. And I see three reactions show up constantly, especially from owner operators.

Bill: One is recognition. This quote unquote, this feels, and this explains why things feel so loose and so messy. Like I didn't realize that I didn't know that. I didn't know what I didn't know. They recognize that. Number two is validation. Like, wow, we've been dealing with this for years and I didn't even know it was a problem. So I didn't know what I didn't know. And then, Oh, Holy cow. That's the root of a lot of our problems, right? Number three is realization. They finally realized how much data their property was producing that they couldn't see, they didn't control and they couldn't utilize.

Understanding Vendor-Agnostic Systems in Real Estate

Drew: So the question here in the first round is from an operator side, what are you hearing? And what are we hearing when people talk about the framework of peak property performance? What's the reception good, bad, or otherwise, what, what are the conversations that come out of it?

Bill: Yeah. I mean, the first thing that comes to my mind, I, you know, I don't know what to attribute this to. Maybe it's because we're just constantly hammering on it. Those two things, the data and the digital infrastructure. But just, I do feel that there is, this goes right back to those three points you just outlined Bill. I do feel that there is a deeper understanding and appreciation of the enormous value of the data. Like the systems are there so often and they're just forgotten except for the little piece they're taking part of in terms of what that individual system can do, as opposed to thinking of a deeper view and a more of a holistic view of how any one particular thing fits into the entire framework of the property. Let's just, let's just stick to the property here. So yes, again, I do believe that we're getting confirmations from these operators that they're now starting to understand truly the enormous importance of all that data.

Drew: Well, you just said something interesting. The systems are there. True, the systems are there, but where's the data for those systems? Who owns it? Who controls it? And where is it? The guy just this morning had a conversation with somebody who has a medium-sized portfolio and they said, Oh, our blank, you know, I'm not going to name the name. It's a great company, but they have all that data. And I said, well, how do you get to it? He says, I just log in and see it on a dashboard and said, okay, so how would you compare that to, you know, it was a leasing system. How would you compare that to, you know, I picked five, six, seven silos of data in his building that he admitted were silos of data. And he said, Oh, I can't. Why would I want to? I said, but it's your, it's your data. Like, what if you were going to switch said vendor and the vendor was specified by his property manager and he loves his property manager. It's all great. But they said, we're going to use this lease management system. What if you just bought the building and you didn't like that lease management system and you were going to change it to yours? Your preference. He said, well, I would lose all the data unless I paid an inordinate amount of money to turn it into a project to get it. And I just, I was dumbfounded. I was like, wow. That data is your asset, isn't it, sir? He said, it is, but we're not using it. And I just paused like that was just this morning, but it happens over and over and over again.

Bill: There is a common theme to buy a tool, buy a piece of software, buy a system. System could be hardware, it could be network, could be cloud. It could be all of that. Buy a platform, whatever blank you're going to fill in and assume it solves your problem. The problems are still isolated. They may be solved, but the root cause is not solved.

Drew: Yeah, and I think that's a good way to almost position a question like that. I mean, there's so many ways to think about this, but in terms of being vendor agnostic, let's say, imagine even agreeing that a particular data point is important. Okay, great. That sounds great. What happens if that vendor goes belly up overnight or they quadruple their price and you have 30 days to decide? That sort of thing. I mean, the notion that your data is dependent upon the vendor that you've chosen for any one particular system is craziness. But man, I mean, I would still say the vast majority of people are kind of coerced into believing that that's the way it has to be and it just doesn't.

Bill: For whatever reason, I was picturing like if you have cameras, let's just take something personal here just as a comparison. If you have cameras in and around your home, imagine you've probably got some views or maybe it's of your office or whatever it is, but imagine some views that you've come to trust so you could tell whatever, who's coming or going, deliveries, pickups, et cetera, et cetera. Imagine that all of a sudden that just went dark. Not only now, but all your history went dark just because, again, let's just say it's because of a vendor change. Like that would be terrible, especially if you had an incident 24 hours ago and you were just about to dig into that data. The fact that a vendor or the choice of a vendor would impact the presence or non or absence of that data is crazy. So that should be true for anything that has the ability to generate data.

The Rise and Challenges of PropTech

Drew: We are seeing in the industry, PropTech got hot before the pandemic. It was funded to the nines by VC, like venture capital, and we're seeing a lot of that not be funded in round, there's a round A, first round, B, C, D is not, C and D aren't coming around because the venture capital model is they make a bet on a company and they know they're going to lose nine out of 10, but the 10th one is going to earn them 15 to 20. So after the second round, if it's still not coming around, they just kill it. So we're seeing consolidation and by killing, I mean, they sell it off. They call it lifting the property, the property being the business, they will sell it to something else. So we're seeing massive consolidation. Some of it's roll up in PE and some of it is just failure of the thesis. Not that the company was bad, but the market didn't embrace it as much. And we're seeing a lot of operators stuck with these things. They were buying three and now they're buying, they're all consolidated into one, but that one has more leverage. So instead of those three things, they're paying five, six, seven X, what they were before. So they have a choice and without the data, they don't have any leverage.

Bill: So we talk a lot, especially in the book, and I spent a lot of time talking about you own the property, you own the portfolio, you're the customer, you drive the vision. You shouldn't let your vendor drive your vision. Get a vendor that understands it, get a vendor that shares the data, that allows you to do what you want to do strategically, and then performs really well for what you hire them to do. Ask the right questions, find out if they're incented by the same activities that you are and treat your supply chain like a strategic thing. Not just technology, but your vendor too. You do it in other parts of your business. You don't have to be susceptible to the technology vendor's choices. I know we got off on a little sidetrack there, but we're seeing a lot of consolidation due to market forces and that's leaving a lot of people holding a problem they didn't know they had.

Drew: Right. Yeah. It's interesting. I mean, again, it makes me think of like the right to repair, this digital effort as consumers to protect the idea that, hey, whatever I made a choice to buy, whatever make and model this thing is of any particular gadget, let's say, I should have a right to repair that thing. And I'm going to forcefully not mention any manufacturers here, right? I don't want to implicate anybody, but I think we all know who the offenders are. And some people will still make a buying decision, even though, ugh, I wish that I had the right to repair, but I don't. That really bugs me, but not enough for me to make a decision that I really think I should be making.

Bill: What you're saying is they didn't really buy it. They signed up for permanent rental.

Drew: That's exactly right. Yeah. The rental society. Yes. Yeah. I mean, again, that's just an individual device out of the consumer level. But as we roll up, up, up, up, up and imagine property ownership at a property level and especially at a portfolio level, it just compounds the issue. It's almost like to me, there's a little bit of a correlation here to say, yeah, you do have a right to repair this modularity that you control. Congratulations. You chose that make and model of that system in that property this year. Amazing. That might last you 10, 15, 20 years, maybe if it's modular and if it plays and if it participates in this overall overarching digital infrastructure. That's the plan. That's the goal. But if it doesn't play, if it doesn't play well, nah, it's almost like there's a failure in that right to repair, like, oh, it doesn't work. I can see why it doesn't work. I don't get this information out of it or more accurately, right, more commonly, I do get this information out of it, but only if I'm sitting in a particular spot and I'm tuned in with a particular application and I'm navigating to a particular place and I'm pulling the information out. You know, it's still proprietary. It's locked up in the vendor's ecosystem. Still, that is not, again, to use that comparison, that's not like I have the right to repair. I have the right to access. I have the right to make this data portable. It's my data. I just happen to be using you, Mr. Vendor, or Mrs. Vendor, I happen to be using your products today, but I don't have to. This is my choice.

Solo episode: Digital infrastructure, vendors are interchangeable. A vendor agnostic digital infrastructure is the most powerful one because the vendor loses the power over the customer. In the old CRE models, we see the vendors driving the bus. They get in there, they're too sticky. If we switch, it's going to cost you too much capex, you'll lose all your data, you don't want to switch. We believe that the client who owns the property should be able to switch for any reason at any time. The contract aside, if you're going to switch, you know what their pain is. It's covered in the contract. I'm not arguing the contract. I'm arguing the ability to switch out that ISP, that vendor, that piece of software, that hardware, that lighting control system, that access control system, etc., for any reason. When you buy a property, when you sell it, when you just operate it, if your building engineer says this thing doesn't work, their service isn't good, you have leverage. You are not susceptible to the vendor. That's been a big aha moment with most of the firms that we engage with.

Solo episode: I'll take another system here. If you think about voice over IP, voice over IP has been around a long time. Everybody has a phone that's in their mind right now. My last job, I had this particular device that sat on my desk and it had this amazing, awesome screen that I could customize this way, that way, whatever. What many people might not know is that in the early days of voice over IP, those phones were proprietary. They used proprietary technologies and registrations. As a user, you don't care. You get dialed to and you make and receive calls. You do all the advanced things. You're good. But anybody who's been out there that's implemented these things knows that those things are kind of hanging on still. It exists. There's still proprietary systems out there, but there's a standard in the marketplace in the voice over IP realm. It's called SIP, session initiation protocol. Don't need to get into all that stuff, but just know that there's a standard that it sits above it all and all of the vendors have to come in line. Any vendor that doesn't is subject to intelligent buyers saying, no thank you, because what I'm doing is not portable.

Solo episode: Because what that allows you to do is you adhere to the standard. You choose your make and model of, in this case, voice over IP equipment and then you completely have the ability to say, I'm gonna try out this vendor. I got 30 days to try it out. I got my phone. I paid this much for six months ago. I could totally use it on the next 15 vendors that I'm gonna try. And then you get to decide which of those vendors you like. And the phone just goes with you. So that's a very simplistic explanation of how modularity should work. Again, back in the building and the portfolio commercial real estate world, that's the way that it should work as well on all of these different systems that control these buildings.

Drew: I think that's a perfect prelude into the next topic that I know we had on our list that we wanted to talk about.

Bill: Yeah. And why don't you just roll into that there? Because you just perfectly said it and I'm actually itching to talk about this one.

Digital Infrastructure: The Backbone of CRE

Solo episode: Well, it's that confusion between, so digital infrastructure is where it's at, a nice, mature digital infrastructure, holistically designed compared to just technology. Technology is important, but that's not, it's a means to an end. Technology should be like lowercase t, make great decisions, but you're doing it all in an effort to achieve this digital infrastructure. There's still confusion, I think, in those things.

Bill: Well, I see technology as tools and I bet, six, eight, 10 times a week, somebody says to me, what do you mean by digital infrastructure? And I have to explain, it's the networks in your building, it's the systems, it's the devices, it's the sensors, it's everything generating data, everything that you own in a building, whether that be tangible or intangible, but to operate the building. So don't think IT, it's not your information technology, that's run by corporate, that's all your security rules and everything you log into your company systems. Think OT, operational technology, what systems, what devices, what networks, what data runs your buildings? How do your people interface with those systems? That's the OT, right? The technology is just a tool, you still need a digital infrastructure that's designed and architected.

Solo episode: And we get asked a lot of times, what is digital infrastructure? And it still kind of shocks me. Another thing that almost takes me back still, because Drew, we've been pushing this rock uphill for over a decade, right? Just this one conversation alone, we were so early to it 11 years ago, is, oh, we already have that covered. We already have internet, we have to take a breath and say, well, this is so much more than internet. Internet is just a supply issue. How your building runs has nothing to do with internet. Yes, it's connected to internet. But if the people that think that the internet provider can solve these problems for them are the ones where I just have to take a breath and ask, okay, show me how this works.

Bill: Literally had somebody tell me this morning, we had a converged network. It's a newer property. So it's like nine months old. We have a converged network and everything is connected to it. And I said, great, could you send me the network diagram? You are ahead of 95% of the market. Got the diagram, it's from an ISP, and it's just a Wi-Fi network. So we started going down the digital infrastructure review, it was a free consultation. We were just going through it on the phone. How does this system connect? What is it? Who is it? Who owns it? Where is it? And by the time we were 20 minutes in, we were on system seven that he didn't know where it was, how it was connected. It was so far outside of the internet. They were paying internet fees for half of those systems on top of this other system. So he had a nicely architected Wi-Fi system, but that was one piece and all of the operating technology was left by itself. And it was just hodgepodge together. There were switches upon, switches upon, switches upon, switches from multiple, and he showed me some of the closets, just hairballs, like wires everywhere, undocumented. Now, Smart Locks had these repeaters. They were running on this. I think that one's on cellular. I'm not quite sure. That one might be on Bluetooth. And wow, I don't know where that one is. Oh, that one's good old fashioned CCTV. We don't have any IP cam. And this building's nine months old. So they had come to the conclusion they had spent several dollars a foot that they didn't need to, to build the building. Okay. That's spent. That's some costs. Now let's look at operating costs. We found $2,000 a month in operating costs that were just wasted, but nobody had sat down and looked holistically at digital infrastructure. That was within one hour. It was our second call, but one hour of actually digging in. I was just like, wow, what are we missing? Why can't we explain this better?

Solo episode: He had not read the book. He had listened to some podcasts and he reached out and said, I'll take you up on your complimentary digital infrastructure review. And I love those calls. I absolutely love those calls, but buildings don't become valuable because they're stuffed full of these cool technology tools. They become valuable because they operate really efficiently. Now, how do you operate efficiently? It's got to start with the digital infrastructure that generates the data and then use the data to maximize your efficiency.

Drew: I got an example that comes to mind. It's a commercial tenant that is moving into the first floor of a multi-use. It's majority residential above, but we've been working with them on this notion of digital infrastructure. They see clientele, obviously. As we were working along, it's funny because they actually open in six days. They go live. Doors open, flashing open sign on the glass, on the front glass. We've never deployed any of our people to this site, but we do everything remote and then working through the vendors that are already there in the market in that city and state. So just through communications with this commercial tenant, they've gone on site and verified, oh my gosh, yeah, this works exactly as we need. And for their things, it's things like, hey, we know we want to roam here. We're going to be, whenever our people are in the office, they're going to be Wi-Fi only, but ooh, they need access back to headquarters and just all of the technical pieces that go in. We love to help them figure out how to solve their thing. We don't interfere.

Bill: Integrated firewall into a mobile environment.

Drew: Exactly. Yeah. And try to help them find the balance of what they want to do. So we're not trying to take over anything. We're just trying to figure out what it is that they want to do. So in their case, they're like, ah, I don't want to bring any hardware in except for the laptop that's under my tech's arm as he walks in for the day, for his eight hour shift. And so we're like, yeah, great. That's awesome. Virtualize a firewall and blah, blah, blah, VPN back to headquarters. And let's talk to your corporate IT people and figure out what you want to tunnel. So that when you flip up the lid on your laptop, when you start your shift at 8am, you can access everything that you access when you're at HQ or any of your other branches. Well, they roamed onto the site last week and came back and said, beautiful. It works great. Now they weren't even able to step in their suite yet. They were just stepping on campus. So here's where I'm going with this holistic design thing, right? They knew that it worked exactly as they needed. The only test they hadn't been able to do was step into their suite and do something because it's not finished yet. Like there's still lifts being brought in and installing some stuff.

Bill: TI is still underway.

Drew: Exactly. Yeah. So that's the pinch point. Now it's down to physical construction things. But see, when you're working in the digital infrastructure and you're designing it holistically, you can prove the solution before the physical elements in the building are even completely finished. So the race is on for them to get the lifts out of there and actually clean it up and get everybody working in that space on Tuesday, next Tuesday. But all signs point to that's what it's going to be. But I think that's important because here it is, commercial tenant that's able to do absolutely everything that they want to do again, because they are being built on a digital infrastructure that already existed. I mean, this property that they're moving into has been live for, I don't know, maybe nine months, something like that.

Bill: But isn't this a residential property, multifamily upstairs? And this is a commercial tenant on mixed use first floor that is now paying that client for these technical services?

Drew: Yeah, exactly. Okay. So it's newfound NOI and a multifamily, they're finding commercial tenant NOI. Right. And so everybody's pleased, right? Because owner is making money here where he wouldn't have before. The tenant themselves is extremely pleased because it's just...

Bill: Much simpler. And less expensive. And less expensive. There was no countbacks. Yeah, absolutely. Yeah. Yeah. I love it. And it's ready before they move in. Exactly. Yeah. Good old 5S. Seamless mobility and secure. Right. Yeah. That's true. That's true.

Addressing the Digital Hairball in Properties

Drew: Well, back to the operational. Somebody said this to me and I've been using it a lot lately. It's a digital hairball problem. We all know, every commercial real estate owner operator out there knows about that closet you open and it's full of wires that are white and yellow and blue and maybe some hopefully not red because that's fire code, but you never know, it might be some purple in there, some black ones and it's dusty and there's blinking lights and they just close the door and say, I don't know what that is. Well, in the digital world, the same thing happens with the systems and the data. Like how many subscriptions are you paying for? Where is your data? It's like, can you use it? And the answer is most of the time answer is, I don't know. So that's why we start with clarify. Like what do you want to know and need to know that you don't?

Solo episode: But in the past decade, maybe even 20 years, buildings have been built. This is our experience. One system added at one time. And I don't know, half of those systems are probably added 60 days from TCO, right? And who knows if it was the contractor, the owner, the property manager, or a major tenant that said, I need this now, but you see access control and leasing platforms and energy, you know, packaging systems, they've been added later, but you know, maintenance software, connectivity. Oh, we forgot this. And Oh, how do we connect the elevators? Oh, oh, oh. And then wham, there's no overall architecture.

Bill: So when you walk into a property, cause I know you and I visit a lot of properties. How often do you see a clean architecture and a clean tech stack versus the digital hairball and the physical network hairball?

Drew: Yeah. I mean, it's unfortunately not that often. It's really, it, you know, it takes preemptive design for sure, which means being involved in the core of the teams that are influencing any particular decision. I always think about physical architecture cause that's easy. You can see it, you can feel it, you can touch it. The physical architecture. There's no question. Yeah. Sticks and bricks. Yeah. There's no question who's doing that work and not anybody can just walk in off the street and do something from an architectural perspective, right? It's a protected ecosystem. It really should be the exact same thing inside those data closets. There should be no question about what's there.

Solo episode: You know, I mean, optic wise, we strive truly to be able to have an absolutely comprehensive like rack unit by rack unit view of those things. Not because we're selfishly in control of all of it cause we're not, but because it's a life cycle thing. Those things may be there. That thing might, the thing, you know, at eyeball level in closet 405 might be there in 15 years. Guess who's not going to be there in 15 years? Probably the vendor, probably the management company, right? There's probably not going to be a single tenant that was there. Maybe not even the owner. They might have taken it.

Bill: Yeah. Absolutely. You said rack level. I'm going to go further. I've seen what your team does. It's down to the port. Sure. Oh, absolutely. Every port is identified. Yeah. I was thinking about it like, you know, if you imagine the way that the US postal service or UPS delivers, right? We all have addresses, city, state, zip, maybe it's a unit number, those kinds of things. And without all of those details, your package would never get to where it needs to get to your door, to your mailbox or whatever. It's very similar in these, again, if we just think about it physically in terms of what's inside the closet, it is imperative that all of these things have unique addressable locations in the building.

Drew: And I'm trying not to dip into the weeds of the technical realm, but that's probably, suffice it to say, every individual system that has the potential to communicate should be designed in such a way that it could send data to and from all of those other systems. And then yes, all the security things come into play here because you don't want everything communicating to everything at a point-to-point level. No, it's not required. However, you need to know how the communication flows between them all.

Solo episode: Well, to make the point here, we don't advocate integrating all systems because switching out vendors is harder. Integrating that system to your data repository, data lake, database, whatever it is, is the key because your system can talk to that system alone and tell it what to do. Integrating all this, I've had very large clients, prospects say, oh, all our systems are integrated. It's like, really? Show me the data. Oh, we don't have it. Our vendors do. Oh, okay. So you can't really do anything. You're relying on their logic to do it. And they can only talk to one system, but you have 12 systems. So how is that integration helping you? And if you go to switch out that vendor, aren't you kind of stuck? Yeah, they are.

Data Ownership and Vendor Independence

Bill: I think we need to get back to the vendor agnostic point that we all want. We want to be able to, because vendors change, markets change, properties change, owners change. Some of the vision of the properties changes.

Drew: Well, and then just the natural merger and acquisition markets within these different vendor ecosystems, I've seen it all too many times where a vendor that has been pretty good on quality, at least for a time, becomes pretty poor on quality. While the determination is made of how to collapse those companies and complete that, you know, to complete the merger, for instance. That's a real problem. Yeah. So why don't we shift and talk about the next phase?

Future Trends in CRE Technology and Operations

Bill: Yeah. Okay. So let's take it to the next phase for CRE operators. What are some truths that we expect to be prevalent as we look into the future here? Number one, digital infrastructure is permanent. It's not optional. It's mandatory. It's important. And number four, as some of these other things we've been talking about today. Well, it's now permanent. It was an afterthought before, networks, internet, you know, IT, it was optional, IT at the property level. But now it's permanent. Like it is an asset and it should generate a return for you. It's not an expense. Digital infrastructure is yet another asset. You manage assets, you have asset managers, this should be managed as well. Buildings and portfolios now depend on it. So it is critical.

Solo episode: Yeah. I'll go further and say data ownership matters, but to get the data, you have to control the digital infrastructure. So they go hand in hand, but it's really difficult to get the data if you don't have a handle around clarity on your digital infrastructure.

Drew: Yes, exactly. Yeah. And independent, having independent movement of that data, independent access to, yeah. When you control the data, the transitions are easier. The property transition, a vendor transition, you know, you have insights to things. You know, you have visibility, not just a dashboard, you have true visibility.

Bill: Yeah. So on that point, it's like you said, it's not just dashboards, they don't need more dashboards. Operational signals matter more than those dashboards do. Absolutely do. We want to see where risk is emerging. You want to know where your inefficiencies are. And I do, I forgot to say this earlier, I do bring this up a lot. Getting your data is not a quick fix. Like you're going to have to collect data for a certain amount of time before any predictive analytics or any machine learning or anything approaching AI. Some people are scared of AI and don't want to do it, but business intelligence has been around a long time. So before any business intelligence can start to work, you have to have a good runway of data. I don't mean years, but a couple of quarters would be better. So this is not an immediate fix. It's not a quick fix. It's not something you buy and flip the light switch and it gets better. This is a strategy. That's why we call peak property performance a playbook. It's good.

Drew: So again, the goal of the framework inside PPP or peak property performance was never to make buildings more complicated. It was to make operations more visible and ultimately more controllable because we believe buildings in five years will be autonomous. The building will be making decisions about its operation and the people working in the building will be focused on tenants and tenant experience. That's really what's going to be the differentiator.

Conclusion and Call to Action for Tenants

Solo episode: Yeah. Yeah. Which is exciting, I think. You know, I've talked about some of our guests looking forward and the notion of having some tenants in there that can actually bear witness to some of these things that we're talking about, some of the early evidences that we can actually show and have tenants talk about it. I think that's going to be good to hear specifically from them.

Bill: On that note, if you're a tenant, listen to this, speak up. We'd love to have you on the show. Tell us what you like, what you don't like about, again, we're not selling anything. We're not going to throw anybody's name under the bus, but we're talking about experiences. Share your experience, good, bad, or otherwise. That is what this conversation here on this podcast is about.

Drew: Yeah. Yeah. Fantastic. All right. Well, I think this brings us to the end. I feel like we pretty effectively talked about the journey toward peak property performance today and thanks as always for joining us and come back. See us. We look forward to seeing you on the next episode, everyone. Thank you.

Bill: All right.