PeopleSoft’s John Igoe Keeps People in
The High-tech Real Estate Management Equation
John F. Igoe knows a thing or two about managing real estate assets in the high-tech arena. As vice president, facilities and real estate, at Pleasanton, Calif.-based PeopleSoft Corp. (www.peoplesoft.com), he manages a portfolio of 1.8 million sq. ft. (167,000 sq. m.) in facilities throughout the world. In October 1999, PeopleSoft, a leading developer of enterprise application software, announced its intention to acquire The Vantive Corp., Santa Clara, Calif.; Vantive develops customer relationship management solutions.
Prior to joining PeopleSoft, Igoe was director of design and construction for 3Com Corp., where he was responsible for 1.3 million sq. ft. (121,000 sq. m.) of construction at three campuses in California, Illinois and Massachusetts. He also has held real estate management positions at Octel Communications Corp. and NeXT.
Working in such technology-intensive positions would foster a certain detachment in many managers. But John Igoe says the concerns of employees and the business unit managers he works so closely with drive his decisions.
Site Selection: A lot of work is taking place in the area of real estate portfolio management — how to view and optimize real estate assets. What are your thoughts on the need for a more complete definition of portfolio management?
John F. Igoe: Some people look at portfolio management as asset management, and there is the whole concept of property management. One way to look at it is that there is a responsibility within the corporate real estate realm to have accountability for the housing and care of employees and operations. Within that broad responsibility you have the operation of the environment, that is your heat, light, power and security — a lot of that falls into the property management area. And in terms of assets, the real estate itself, you have the question of location of buildings and exit strategies relative to those buildings. In the case of space you’re renting in a particular location, it’s making sure you’re paying a fair and reasonable rent, that your operating expenses are in line and all the things that are part of the day-to-day task of ensuring that the company is being financially prudent with regard to its cost of real estate.
Some believe that portfolio management is keeping track of different locations, making sure that you have the lease expiration dates down and are taking proper note of those and renegotiating where you need to. I think of portfolio management as being broader.
Right: John F. Igoe, PeopleSoft Corp.
SS: It is essential that corporate real estate executives work effectively with business unit managers to achieve mutual goals. What is the key to making this happen effectively?
JFI: Communication is the key. There is nothing more important in the responsibility of the corporate real estate executive than the relationships with business unit managers. At the end of the day, our ultimate responsibility is for every employee, consultant, contractor and anyone else working in a PeopleSoft environment. The individuals at the top of that hierarchy, if you will, are for the most part the business unit managers. They, primarily, are responsible for enhancing shareholder value. It’s their business plans the execution of them. So we need to make sure we’re supporting all the things that need to get done. In a high-tech company, especially, growth can be spectacular on the upside, and it can flatten out very quickly. You have to have working relationships with the business units so you can be proactive in meeting their needs.
We have two [practices] here at PeopleSoft. One is to ask our planning group to establish on a regular basis communications with the business unit managers and their key administrative support. We build a relationship with them, which is very important, so they have confidence in us. This is very important from a planning standpoint. Secondly, we are very fortunate in that we use a model with a financial controller assigned to each of the business units, and we are joined at the hip. We stay as close to them as possible, because they know exactly what’s coming down the path, such as a heightened emphasis on development in the field. That model gives us the best possibility of success. In cases where the business unit managers themselves may be very busy, we always know we can talk to the business unit controller.
SS: Many corporate real estate players complain about a dearth of technology that can meet their needs. Yet numerous real estate management systems are on the market. Where is the disconnect?
JFI: As far as I’m concerned, the single most important piece of software that a corporate real estate executive needs is that which enables him to know on a very current and accurate basis what the status is of inventory of people and places in their locations throughout the world. We’re in a people business, and we’re here to support the productivity of our employees, consultants and others.
Computer-assisted facility management (CAFM) systems are the most important tool relative to assisting the corporate real estate manager in managing their space inventory. Most of these systems can import computer-assisted drawing (CAD) files from wherever you are. There are plenty of these systems in the marketplace. The key to them is that they have to be ‘integratable.’ You need to be able to integrate the CAFM system with your HR database and also your financial database. That’s where a lot of them fall down. You need to be able to track movement of your existing employees a well as the hiring of new ones. Being able to tie in a CAFM system with an HR database, which is tied to your IT group and finance group, and everyone is working with the same data.
Not having that in place is a burning hole in the industry’s support right now. There are not too many systems out there that accurately provide that type of interlink — a seamless flow of relevant information. At a higher level, the whole information technology department, human resources and finance as an organization need to be of one mind and always sharing information and working with each other. At the end of the day, we’re in business to support our people. If I provide them space but they have no IT connections, they can’t do their job. And if we don’t create the environment with people from HR involved, giving us their organizational development concepts and so forth, then that’s won’t work. And if finance isn’t involved so we’re being prudent relative to the stockholders’ value, then that doesn’t work either. We all must be involved.
SS: Along those lines, is too much being made of the notion of corporate infrastructure resource strategies?
JFI: No, not at all. I don’t do a thing until I’m sure that the chief information officer is aware of what we’re doing. If that department is aware of [new projects], they will always flash me on it. When it comes to workplace environments, HR is extremely important. We have to be sure we are being consistent with what their thoughts are regarding the workplace. Is it the most productive environment?
The most important relationship that exists is that with your customers. In our case, the business unit managers or general managers are our customers. However, from a support point of view, the most important relationship our group has is that with the IT group, followed by HR and finance. Even in site location work, it’s extremely important that the IT people be involved, because so much is dependent [on technological capabilities]. It is not enough anymore to just provide somebody with a place to sit. They must have the necessary tools available, and you have to make sure the environment they’re working in enables them to be as productive as possible. One of my goals is to remove all barriers to productivity
SS: How involved are you in cost-of-ownership issues and selecting hurdle rates?
JFI: That is mainly a finance decision. Before we move forward on any project, we put together a preliminary financial model. If it’s a situation with an existing location, we look at the total cost of occupancy. In doing that, we take into account as much as possible current operating costs from an IT standpoint, because the monthly charges for telephone connections and data support are getting to the point where they’re equal to the rent cost. You don’t dismiss those factors without taking them into consideration in your model. This is a joint exercise with IT in that it might entail relocation costs, new cabling requirements and so forth — all the capital costs that they require, including their existing and projected operational costs.
SS: Demand forecasting is gaining more attention lately. How do you handle that task, and how exact must it be?
JFI: Let me tell you, that is the single biggest issue, especially being a high-tech company. First, in terms of how you do it, it takes a very tight connection with the business unit controller. That means having regular and ongoing communications with them based on mutual respect and determination to execute their strategies. Demand forecasting must be as accurate as possible, but we don’t use a set formula. The key is to work as much flexibility into every transaction that we can so that corporate real estate is not holding back the organization from moving in a direction it needs to move in.
SS: What are your thoughts on working with national service providers and networks of service providers?
JFI: That’s another key issue for us. I’ve had a philosophy in place since I came into this industry. There is such value added to individuals as opposed to national agreements or affiliations. I learn more from the individuals I deal with out in the field based on that individual relationship
PeopleSoft has a very strong culture of doing business with their customers. So a couple of the national [service providers] are our customers. I always give them an opportunity — and probably 50 percent of the time they have a great person working in the local office that can provide that superior service, so we use that company. But we do not have one single agreement with anyone on a national basis nor with the regional firms that have affiliations.
SS: PeopleSoft’s acquisition of The Vantive Corp. must have you working on a whole new set of corporate real estate issues. What issues are most compelling to you in the context of mergers and acquisitions?
JFI: It’s the role of the corporate real estate executive to be in that initial, due diligence stage an advisor. The second role comes when the deal is done, which is to be a member of the team that facilitates that transition. Having been on both the acquiring and acquired sides, I can say that the single most important thing is communication. You cannot over-communicate. A second consideration is to do
The most critical period in an acquisition is the first 60 to 90 days, when you show employees every courtesy and make the transition as smooth as possible for them. Also, because you have to act so quickly, outside service providers are extremely important. It’s invaluable to have a good one in place.
In the case of the Vantive acquisition, we are very fortunate in that the Vantive locations match almost positively city by city. In some cases, we’re in the same building. There are maybe two or three locations worldwide where the integration will be a little trickier, but for the most part it will be very straightforward.
SS: The 1990s have been an intense decade for real estate executives. They have increased responsibilities, there is the need to develop a global perspective and greater pressure to maximize real estate assets to increase shareholder value. What do you see in the next decade where these forces are concerned?
JFI: Well, I actually believe we will see an intensification of these forces. And I also see two additional forces that will be major drivers of our [corporate real estate] business. The first is technology, and the Internet specifically. The Web is changing the way we do business. We already can see this at such companies as Cisco Systems, which among other things uses online procurement now. They understand that their world is changing and we all understand more and more that this will have a major impact on facilities and real estate and the way we prepare our workspace.
The second force I would mention is the Y generation. This generation will change tremendously the work environments we now have. It’s the first generation that has grown up with the computer and has been for five years buried in the Internet. This generation also has a tremendous desire to succeed. Academic institutions tracking them say these people are better prepared academically to do work; testing results are significantly higher than those of previous classes. But members of this group also have very short attention spans — attention deficit disorder, almost. They disdain traditional views of the world and the office, and they are the first generation that sees the gold watch at retirement as crazy. They are motivated by what makes them feel satisfied.
Our response as real estate, information technology and human resources professionals is to understand these people and to see that they are productive, but we must know how to attract and retain them. They will be a major component of the work force in the years ahead.
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