Your Tech Provider Was Just Sold, Now What?

Businesses and houses have one thing in common -- they are all for sale at the right price. Every year companies are sold, and with each sale comes some uncertainty. More often than not, trust is the leading factor in making a decision to purchase services from a technology company and the ultimate sale of a company erodes that trust in a variety of ways. This article will discuss some of the fears along with multiple solutions.

Fears

Exclusivity

One of the most popular broker website platforms used by large independent brokers across America was booj. A key feature of the booj agreement with the broker was exclusivity. No competitive broker in the market would be able to license booj. Given that technology has a look and feel, along with features that make them unique and compelling, this exclusivity component of booj provided value to the broker for recruiting, retention, and branding.

When booj was acquired by RE/MAX, brokers on the booj system had a decision to make. Turns out most chose to leave the booj platform.

Independence

Dotloop was among the innovators moving transaction management from Web 1.0 to Web 2.0. The offering was beautiful UI—fast, easy to use and affordable. Brokers and franchises were quick to adopt the platform on the merits of these benefits. When Dotloop was sold to Zillow, that independence went away, replaced by fears that Zillow would access the transaction data. Now that Zillow has become a brokerage, that has added fuel to the building fear. Zillow provides assurances in their agreement that they will not use, access, or repurpose the data outside of providing the service – but some people to not trust their independence.

On the other side of independence is Delta Media Group, a leading brokerage platform provider. The company is owned by Mike Minard, who puts a clause in their license agreement that says that "they will remain independent." Delta Media has turned this concern about independence into a selling feature.

Too Big to Fight

One of the fears that has become more valid recently is the notion that a technology provider is too big to fight. When brokers or MLSs have more ability to pay lawyers to dispute contract disagreements, they have leverage. Most technology firms would rather support their customer than get into a lawsuit against them. This has been changing as multi-billion dollar corporations and holding companies are delivering real estate technology. For example, Stone Point Capital owns the leading technology providers in a number of real estate segments today – forms, transaction management, MLS, CMA, and broker back office. This has created a fear that Stone Point is too big to fight if they violate a contract term. Some brokers and MLSs are steering clear because of this concern.

What's the Long-Range Plan?

Another fear is the unknown. Brokers and MLSs typically voice this concern by seeing it as a problem with the long-range plan. Brokers and MLSs have seen companies change their strategy and they do not always like the change. A key example of this is Zillow and Realtor.com becoming brokers. Becoming a broker is justified as a way for brokers and agents to pay for advertising at the closing table (with a 33% referral fee). Today, brokers are operating under the fear that Zillow will begin to recruit their own fleet of agents and compete with other brokers in the market. Brokers and MLSs will long remember every CEO at Zillow on stage promising that they would never become a broker. Oops.

Marketplaces

A new concern that has emerged over the past few years is the fear of marketplaces. I am not sure if the "Amazon-ification" of real estate technology is a real term or not, but that helps describe the fear. What happens when your technology vendor starts to market and sell products and services inside of their software that happen to conflict with the broker or MLS? When brokers or MLSs license services, they want to control what products or services are offered on the platform.

Solutions

There are several solutions that have become popular with brokers and MLS that mitigate these fears.

Change of Control Provisions

Undoubtedly, every agreement that comes from a technology company will have templated text that allows the contract to be assignable in the event of a sale. If you want to mitigate your contract being reassigned, do not agree to that provision. You can amend this section of the agreement to have the right to cancel if the company is sold. Spend some time working with your legal advisors to craft this language and use it in all your agreements.

Become an Owner

There have been several recent examples of this. Howard Hanna Real Estate Services and Long & Foster Real Estate became owners of Moxi. Similarly, a group of MLSs became owners of Remine.

Operate Parallel and Redundant Systems

Software systems fail and those failures may have a significant impact to your business. It may be troubling when a software provider is sold, but it is far more troubling when the software is not available. Imagine not being able to process transactions or pay commissions, or your website and email are offline. These things happen every day in business. Having more than one solution running in parallel not only allows your people to have a choice of software, but if something really goes wrong, you have a redundant system in place.

To view the original article, visit the WAV Group blog.