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Competition Heats Up Among Software Providers

Three main players dominate in the sale of desktop financial analysis software to financial managers in the retail and shopping center industries.

Over the years, each has continued to tweak and improve its package to bring an increasing number of analytical capabilities to customers.

The players are ARGUS Financial Software, Houston; Dyna Software, Clearwater, Fla.; and SS&C Technologies Inc., Windsor, Conn. Actually, SS&C has only recently gotten into the game, with its March 1998 acquisition of Quantra, a once-popular brand that had flagged in recent years.

ARGUS and Quantra were founded in the early 1980s. By the early 1990s, Quantra had grown to dominate the business and held approximately 80 percent of the market. ARGUS owned about 10 percent of the market, with the other 10 percent going to Dyna, a newcomer that introduced its product in 1992.

When Microsoft brought out Windows and Windows 95, ARGUS, Dyna and Quantra brought out upgrades designed for Windows. The Quantra offering proved to be buggy, and Quantra failed to provide support.

As a result, Quantra lost market share and ended up being acquired by SS&C.

Meanwhile, ARGUS and Dyna benefited from Quantra's missteps, and the market balance shifted dramatically.

According to John Stone, vice president of the SS&C real estate systems business unit, Quantra has slipped to a 40 percent market share, while ARGUS has grab- bed about 40 percent of the market, with Dyna trailing at about 20 percent of the market.

The point is that the software companies in the desktop financial analysis market today are in a desperate fight with each other. That means that each is and will continue to introduce new capabilities in an attempt to find solutions to problems.

The task of financial analysis Financial analysis software aims to automate a basic list of tasks for real estate financial managers, whether they work in the commercial office, retail or shopping center arenas.

These tasks include: * Developing acquisition and disposition strategies

* Budgeting and planning

* Projecting cashflows

* Planning for construction and development

* Structuring debt

* Projecting funds from operations (FFO) for REITs

* Conducting lease-by-lease analyses

* Analyzing market value for investors

* Structuring partnerships and joint ventures

* Analyzing portfolio rollups and sensitivity

* Projecting taxable income

* Forecasting values and feasibilities

* Structuring workouts

ARGUS, Dyna and SS&C's Quantra handle these tasks, which are common to all real estate undertakings.

In addition, they adapt to retail and shopping center needs with screens designed to analyze retail sales, sales volumes, percentage rents, seasonalities, common area maintenance (CAM) pools, and other issues specific to retail chain and shopping center management.

Software that works the way you work "We all do the same things, but we do them differently," says Ronnie Dean, managing director of strategic development for ARGUS.

Jeff Wells, vice president of Dyna, agrees, adding that the issue is no longer what these softwares do, but how they do it. "In the software-selection process, you might do a grid listing the features of each," he says. "But the big question is the functionality behind the check-mark. It doesn't mean anything to ask if the car has wheels. You have to figure out how good the wheels are."

Additional selection considerations involve pondering work-flow patterns: With whom do a company's financial analysts exchange data? The primary data used for financial analysis always resides in a property management software.

Source data for financial analysis comes from those systems. Not long ago, analysts had to cut and paste or even key property management data into the financial analysis software, a process that requires thousands of hours and produces errors that can throw off calculations.

Today, each of the three financial analysis software companies have found different ways to automate data input. A key purchasing consideration involves figuring out whether a supplier's way matches a user's working patterns.

Dyna addressed this problem first with a concept called Open Data Base Compliance, or ODBC. According to Dyna literature, ODBC allows users to share information with other business applications.

In other words, Dyna can import and export information to and from third-party accounting, property management, and data-warehouse database systems, as long as those systems have been written to industry standards for ODBC.

Unfortunately, it's not as simple as that. ODBC financial analysis and property management systems must communicate through a link that maps the data and causes it to flow into the proper fields when crossing system boundaries.

Dyna has developed automated links to several property management softwares.

"Our best interface is with CTI," says Dyna's Wells. "Our next best is with J.D. Edwards, then MRI. And we're working on one with Yardi."

ARGUS has approached the ODBC question from a different angle. According to Dean, the company wrote its program, called ARGUS Lease By Lease, in a proprietary database with a code language called APL, which offers distinct speed benefits when dealing with millions of calculations, a key point to evaluate when selecting a financial analysis software.

"We had proven success with APL," Dean says. "And when we went to the Windows format, we had to decide whether to write in a totally open system, or to maintain the ARGUS calculation engine and then provide another mechanism by which customers could get to their data."

The former solution would lower processing speeds, while the second would add a step to the importing and exporting processes.

In making the decision, ARGUS surveyed 12,000 customers. "We asked them how often they needed to access data," Dean says. "They told us they didn't have to access data every day, but once a month or once a quarter when their reports were due. They preferred to maintain the program's processing speed and to have some means for importing and exporting data from ODBC sources added."

In response, ARGUS decided to keep its APL approach and develop an ODBC add-on called OpenARGUS, introduced in 1996. OpenARGUS can import data from ODBC applications and then convert it for use in the proprietary ARGUS system. To make the task easier, ARGUS will soon release automated links to a full range of property management applications, including MRI, Timberline, Yardi, J.D. Edwards, CTI, and Skyline, an SS&C-Quantra product.

SS&C's Quantra financial analysis product, Pro-Ject, currently does not have ODBC capabilities. Pro-Ject has always worked in conjunction with Skyline, a property management software originally developed by Quantra. This has allowed for data integration between Pro-Ject and Skyline through batch dumps, but limited users' choices in property management and financial analysis software to Quantra products.

What's next? Hoping to halt the decline of its market share, SS&C plans to come out with two successive upgrades before the end of the year. This summer, SS&C will release Pro-Ject 2.0, with a building or property wizard that will allow users to enter information on the fly. SS&C has developed Pro-Ject 2.0 with an eye to addressing maintenance questions that have created problems for users of version 1.0.

The new release will also update from 16-bit technology to 32-bit, which will speed performance. (ARGUS Lease by Lease has offered 32-bit performance since its introduction, while Dyna is currently beta-testing a 32-bit version slated for release this fall.)

According to SS&C's Stone, Pro-Ject 2000 will arrive this fall and offer a direct, dynamic data link to Skyline as well as ODBC capabilities. Whether these upgrades will get Pro-Ject back into the game remains to be seen.

But SS&C does not plan to compete in the long term by matching enhancements with ARGUS and Dyna. According to Stone, SS&C's will use Pro-Ject as a platform for jumping the category of real estate financial analysis products to another level.

"For example, SS&C offers a product called Finesse 2000, which is a dynamic financial modeling tool used by insurance companies to forecast profit and loss and balance sheets over certain periods," Stone says. "We believe this kind of expertise will enable us to develop Pro-Ject beyond what the category now has to offer."

Using sophisticated modeling techniques to forecast option-adjusted spreads, investment companies are able to easily manage security and mortgage loan assets. "They can take something like 10,000 scenarios into a model and graph out best- and worst-case projections.

"At SS&C, we have products that do this kind of modeling for financial analysts in other fields," Stone continues. "We also have forecasting software that offers the ability to look at regional economic data or any kind of data you want and to model against it, comparing the results with data taken from other geographic regions. We feel we can pull these kinds of abilities into Pro-Ject, and we intend to make the investments necessary to getting there."

For now, retailers and center managers must open the hood and compare the functionality of features one by one when selecting financial analysis software.

If SS&C has its way, however, there may be an entirely new generation of financial analysis software on the retail and center management horizon.

Before purchasing a financial analysis software package, a retailer, center developer or property manager must find a way to determine which package is the right one. Software companies all claim to have the best package. But the best one might not be the right one.

Here are 10 basic questions that may help to evaluate competing claims:

1. Does this product offer open database compliance (ODBC). If so, how? Through an add-on software layer or direct ODBC import/export capabilities?

2. Does the ODBC function come with automated links to the buyer's property management software?

3. How does the program forecast individual leases? What is the procedure?

4. How does the program deal with portfolios of leases, including expected expenditures, reimbursements and income?

5. What is the procedure for calculating cascading common area maintenance (CAM) pools? How detailed are the related expense and reimbursement capabilities?

6. What kinds of business structures, from joint partnerships through REITs, does the program manage? How does the program deal with a buyer's particular business structures? Can it deal with individual wrinkles?

7. What is involved in developing lease-level and property-level budgets? Does the program create scenarios that show, for example, how renovation costs will affect future rent increases, cash flow, and overall property values? What steps are required to create such models?

8. Does a Windows program offer forward and backward capabilities for handling DOS files?

9. What training and technical support is available and how much does it cost?

10. It is also important to ask business partners what products they use. For example, if a property manager can develop a budget in a particular program and send that file to an owner using the same program, it will help smooth out the often back-and-forth process of budgeting.

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