More Tech Consolidation, Fewer Options

CoStar Group has announced it’s acquiring Visual Lease for $272.5 million. The latter has software for accounting, reporting, and lease management. As GlobeSt.com previously reported, Visual Lease will become part of CoStar’s data and analytics database to boost integration opportunities with technology players and improve relationships with accounting service and real estate firms. Plus, CoStar said the purchase will offer all-size companies more lease management and provide a boost to the company’s real estate manager unit.

All well and good. Companies in all areas of tech regularly go through mergers and acquisitions, whether to replace or augment capabilities, eliminate a market competitor, or bring in technical staff without having to recruit individuals. The acquired company’s owners and investors assumedly get something out of the purchase price.

The one group not automatically included in the exchange of values are the customers who made the acquired company’s success possible and whom the acquirer may expect to pay the new owner.

This is where buying software — which these days is usually licensing, a form of renting — gets tricky. There is no guarantee of anything past a formal contract that offers access to the software for payment. Eventually, that existing agreement will come to its natural end. There might be a new one for what is essentially the same software and services, only under another name. Or it might be greatly changed, not just in branding but in function, associated services, and likely price. It could be integrated into some more encompassing — and expensive — offering. Put out of its misery to make way for a competing application the buyer already had. Possibly morphed so far out of what it once was that it is no longer fit for how a customer used it.

This is why any CRE company using software should consider two things. One, keep attention on the roadmap from any vendor, whether the original or one that acquires what you use. Look at where they’re going and what they might offer or maybe take away in the future. An example is the big change many vendors made starting in the early 2000s. Over time, they shifted from payments for new versions to annual rental fees that would ultimately be called cloud versions, when you could no longer pay for a license that you could stretch out for years.

The other is to constantly monitor what competing vendors offer and understand what it would take to switch. What data do you need to keep locally that a current vendor might want to keep on its site, making a change more difficult? Consider if there are particular times, with companies moving in different directions, that lend themselves to swapping vendors. Also, how long it would take to make a change and get up to speed with the new software?