Oracle sees blazing changes on Europe’s horizon: “Combine globalization’s thrust, the e-commerce surge and the Euro’s emergence, and you’ll see e-commerce blow through Europe like a whirlwind. The single currency has amplified the velocity of change, broadening and flattening the playing field. E-commerce is impacting our own European operations in a big way, and it’s spreading to other European firms as well.”
So said Tim Caiger, Oracle’s UK-based vice president of real estate for Europe, the Middle East and Africa, following a seminar at the 2000 MIPIM show in Cannes, where he mapped out the change wave rippling across the European Union.
For example, Caiger noted, “Purchasing used to be labor-intensive — taking calls, consulting catalogues, emitting requisition orders, getting approvals, etc. It was a paper cycle with 16 separate functions. Now, our suppliers upload catalogues onto the Internet; staff can scroll through, pick what they want and use Web requisitions to send requests through the approval chain.
“Once it’s approved, the order goes to the supplier, who delivers and sends us his bill electronically and we pay electronically. It’s fast, accurate and efficient. And it’s proved to reduce costs by 20 percent.”
E-commerce’s impact on Oracle’s administration, sales and distribution is turning property use on its tail, he said. Maximal automation of services is expected to get more from less.
Goodbye, Willie Loman
Caiger, in fact, sees IT revamping how most companies transact business:
“Take the selling situation,” he explains. “Companies like Ford and Boeing are putting purchasing requirements to auction, so far more sellers can compete; and with worldwide price transparency, buyers gets savings from more competitive prices. And more producers get a chance to sell. So everybody benefits.”
Oracle’s sales force is evolving as well.
“Auctions and unassisted selling are replacing the door-to-door salesman,” Caiger explained. “Salespeople can no longer broker special discounts. We see them evolving into a consulting arm advising current users and future clients. We’ve got 1,000 consultants for 40,000 sq. ft. (3,600 sq. m.), eight to a desk. That’s a dense environment, but one major accounting firm is feeding 13 consultants through each workstation.”
Seasoned U.S. distribution firms are moving in to capitalize on Europe’s surge of Net-generated product distribution, Caiger explained.
“We are already beginning to see more centralized distribution, with warehouses at railroad junctions fanning products out over the continent. I see U.S. distribution companies with a lot of experience in this already moving in to handle Internet-ordered goods.”
Customer Support Goes Online
Follow-up functions are also feeling the change.
Noted Caiger, “As clients are guided to Web-site information, after-sales service is becoming self-help service. Traditionally, our technical support has been by telephone and labor-intensive. With e-commerce, we’re finding there’s a shift of formerly labor-intensive, essential services, particularly expert customer support, to our self-help Web sites.
“So despite strong business growth, staff needs will remain flat. Self-help should eventually rise to 60 percent of our support work, with an obvious decline in staff budgets. Firms can now be more productive with fewer assets and less space commitment.”
Other firms are following suit:
United Parcel Service has shrunk its 84 financial order centers to one main center and 15 satellite centers, and cut a two-week order cycle to two hours, Caiger explained. Xerox has reduced purchase-order costs from US$150 to $25.
The revolution is also affecting bean-counters as Oracle simplifies finance and administration.
“We’ve consolidated our finance department to one Dublin center with reduced headcount,” Caiger explained. “The center keeps better track of spending and pays our European staff electronically. No more pay slips.
“But we’re not alone,” he added. “Cisco’s COO was quoted recently as saying they close their global books on a daily basis and make business-plan adjustments whenever required. That’s the kind of flexibility that is revolutionizing the way businesses are being run.”
IT Shrinks Space Needs
While information technology has magnified Oracle’s customer-education capability, it’s shrinking space requirements.
“We have 100,000 people taking advantage of our customer education program, 24 hours a day, 365 days a year,” Caiger noted. “We deliver interactive courses on their own sites. In the UK alone, we train about 40,000 persons a year, [but] we’ve closed 12 of our 40 classrooms.”
The whirlwind that’s transformed Oracle’s European space use will spread to other firms, Caiger said. But national regulations and per-sq.-ft. space costs will impact how companies evaluate per-employees and per-sq.-ft. costs; smaller may not always mean cheaper.
Said Caiger, “Space usage is a moving target and depends on which European country you’re talking about. You have to look at overall costs as well. In Munich, the buildings have no air-conditioning, and each employee must be no farther than a certain distance from a window. But in Germany space is cheaper. We’re down to 130 sq. ft. (11.7 sq. m.) per UK employee, but compared to Germany, it’s twice the sq.-ft. cost.”
E-commerce and the digital revolution will also likely modify overall European space usage, though individual national constraints will affect this change.
“We’re moving towards wireless buildings in the UK. And radio technology will obviate the need for suspended floors and CAT 500-megabit data cabling,” Caiger said.
But new technology won’t shorten work hours, says Caiger. Instead, fewer people will produce more, often from remote areas that suit their lifestyles.
“We’re moving towards the 24-hour office, where work life and personal life fuse — one-stop shopping, where employees can fix or eat breakfast, do dry cleaning, have photos developed, grab cash or go to coffee bars to meet or work.”
Developers Feeling the Heat
Users will lean on developers to deliver buildings more user-friendly to 21st-century tenants, some observers assert.
Said one MIPIM participant. “We’ve been unable to find appropriate space in Geneva, Rome, Milan and Paris, [but] we’re now talking to developers who may be able to come up with some modern space.”
Owners of modern facilities can also expect intense pressures to provide short-term leases, Caiger noted:
“In view of the speed of change, we’re adopting a two-track system,” he said. “Some 80 percent of our facilities are devoted to core business, and 20 percent to intermediate business. Intermediate business will be rented on a pay-as-you-go basis, and core will be on longer leases — but not that long.”
EU’s Amplified Net Use Will
Up RE Market Efficiencies, Says E&Y Exec
As soaring Internet use looms within the European Union, European property players stand on the threshold of dramatic new efficiencies.
So says Andrew Waller of Ernst & Young (E&Y at www.ey.com), who told a packed seminar of European delegates at the spring Cannes MIPIM show what awaited them on the Net.
Waller limned the somewhat underdeveloped current state of information technology (IT) use in Europe by citing Real Estate Management IT (REMIT) 2000, a study carried out by E&Y and the International Development Research Council (IDRC), the world’s preeminent corporate real estate organization. The E&Y/IDRC study, which spanned 13 European countries, found that more than half of the surveyed corporations do not link their property management functions to any other systems. Roughly 75 percent of respondents were not adding property portfolio data to the Internet, intranets or extranets. And only 6 percent of the companies were using any form of e-commerce in their corporate real estate (CRE) teams.
Cautioned Waller, “The growth potential is great. And for those who don’t adapt to change, the dinosaur factor is emerging.”
According to Waller, the challenges facing European CRE players are the same ones awaiting managers bent on using e-commerce to their boost bottom lines. CRE’s first hurdle, he said, is getting top management’s attention and support. Real estate staffers who champion greater Net usage must dispel job-loss fears, he said.
Net Lowers Requirements
The Net’s real estate impact will be widespread, most analysts agree.
Adopting IT-enabled virtual offices, telecommuting and flexible work time will shrink office space needs, with companies getting more employee throughput per workstation and shifting some employees to home work settings, they say. And warehousing space requirements will dramatically drop with just-in-time manufacturing and slimmed-down delivery systems.
To successfully incorporate the Net, firms may have to get clients and suppliers invested in Web-friendly interface tools, even employing training personnel to get them up to speed, the REMIT study notes. Internet stars like Lucent Technology, for example, have project Web-site collaboration tools to educate the masses.+
European Market Hits the Web
Europe has already begun its rush to the Web for property information and transactions, Waller explained. Heavy UK property market coverage is online at www.egi.co.uk and www.estatestoday.co.uk, while www.europroperty.com provides Europe-wide coverage. A new site, www.cityoffices.net, provides London office market data, and will eventually expand across the continent.
Most European property sites are UK-based. But German-based www.myimmobilie.de serves as a real estate marketplace, while France’s www.journaldunet.fr
provides a dizzying variety of info on how, when and where to use the Net, including links to business sites.
The French are being lured into the e-conomy with the arrival of the French Web site of Charles Cohen’s Beenz (www.beenz.com), which is spreading the use of monopoly money (“beenz”) that users can amass to acquire various “gifts” on partner sites.
Despite French laws forbidding the use of such “funny money,” the Bank of France has authorized the site. And the site’s popularity will likely accelerate as French business-to-consumer sites emerge.
B2B Sites on the Rise
Already, the construction industry is making widespread use of collaborative Net tools, Waller noted. And a splurge of sites is cropping up to help all property-sector players.
For example, www.buildonline.com, Europe’s first business-to-business e-procurement site for the construction industry, offers intermediary-free access to catalogues and prices. Buildonline.com claims to cut business costs by nearly 40 percent.
Widely dispersed real estate players can store documents, which are kept evergreen for team usage as projects evolve behind hermetic password security. Buyers and suppliers can set up an electronic bazaar, where information on all manner of materials and processes is instantly available.
Elsewhere, www.bidcom.com brings major construction and real estate players together for everything from sharing information and competence to real-time buying and selling of building materials.
Said Waller, “The problem insofar as real estate is concerned is that we cannot speak of development in less than months or years, while on the Internet, a year is two months.”
E-procurement, though, is spreading to a wide swath of industries, Waller observed. In the auto industry, Ford, General Motors and Daimler-Chrysler are already moving to group Net buying. One oil firm reportedly put out pipeline-contract Web bids, and prices dropped from $110 million to $70 million in three hours.
‘Everybody Benefits’
How can firms use the Net to grow business?
Waller asserted, “On the buying side, customers have information access around the clock, 24-7-365. Consumers can pool needs and negotiate mega-discounts for mass purchases. The seller boosts sales to clients he might not otherwise have found, and buyers get lower prices. Everybody benefits. This is what Bill Gates calls ‘friction-free capitalism,’ with near-perfect market information and near-zero transaction costs.”
E-commerce, said Waller, can improve enterprise resource planning by cutting costs through business process integration. Firms can also get efficiencies by collaborating along the supply chain, while communities of like firms can get synergies through cooperation, he added.
Site Selection European correspondent Michael Sullivan
is based in Juan Les Pins, France.
Phone, (33) 493-673-877; e-mail, mbjsullivan@compuserve.com
