When Accruent CEO Mark Friedman was a commercial real-estate broker in the early 1990s, he regularly saw clients get cheated by landlords because someone in the accounts-payable department hadnt read the lease carefully enough.
For example, a company might have received a $5,000 invoice for snow removal from one of its landlords and simply paid up, not realizing the contract actually required the property owner to foot the bill. "Its death by a thousand paper cuts," Friedman says.
Plugging those nickel-and-dime leaks was Accruents original mission. Its software tracks the terms of multiple contracts in a searchable database and automatically generates alerts for contract-renewal dates. The system can exchange data with a customers external financial systems to automatically pay monthly rents and calculate other costs (such as rents per square foot), and red-flag any charges that arent specified in a contract (say, snow removal).
While Accruent has attempted to broaden its software to manage all kinds of contracts, most of its customers—including Dollar General—are retailers that must monitor leases for hundreds of individual stores. Panda Restaurant Group, which runs 650 Chinese takeout restaurants nationwide, expects the Accruent lease-management system to help it save $500,000 this year identifying improperly levied maintenance charges from landlords, says Donna Wanser, senior counsel for real estate.
However, she adds, "You really need to have the information entered uniformly to use it efficiently." Panda first tried to input the data itself using temps, then enlisted Accruent to finish the project, Wanser says. Extracting data from paper contracts is, in fact, a key piece of Accruents business: The company farms out such jobs to 250 workers in India, the Philippines and Vietnam.
Accruent now has 270 customers, 120 of which it added with the acquisition in May of Chicago-based National Facilities Group (NFG), its primary competitor in the commercial real-estate software market. That makes Accruent a sizable player in the rather puny segment for contract-management software, which AMR Research expects to be $246 million in 2004. "Its kind of the land of the munchkins right now in this market," says Pierre Mitchell, an AMR analyst. The opportunity today, he says, is too small to attract serious attention from big enterprise software vendors like Oracle, PeopleSoft or SAP.
Rick Stoneking, Rite Aids senior director of real-estate accounting, says he was comfortable picking small, privately held Accruent because its venture-capital investors have pumped $38 million into it. He says Accruent has improved the quality of its software after being "a little weak" delivering customizations Rite Aid had requested two years ago. "The good thing is, once you make them aware of a problem, theyre very willing to work with you."