In our previous blog post, Clareity Consulting pointed out that “data shares – at least in most markets – are not the answer.” That doesn’t mean that they are not a useful tool for MLSs for solving issues relating to Overlapping Market Disorder – including creating consolidated data for MLS and IDX/VOW use, helping to eliminate duplicate fees, and more. Clareity has, in fact, helped several clients to establish data shares in our industry where it was not feasible to merge MLSs for political reasons. However, data sharing provides limited benefits in comparison with MLS consolidation, and it’s not as simple as some who just look at the technical aspects of it might think. While there are some very successful data share arrangements, in recent years some data shares arrangements have collapsed as organizations run into the complexities that they thought they were avoiding. There are a variety of areas of conflict that occur when a data share is set up:
Initial and Ongoing Costs
Data shares most often fail because of costs, especially because of the vendor and staff time needed to maintain the data share which are unanticipated and cause tensions between groups. This goes beyond having a vendor charging to map the data from one system to another as it moves from one system to and from the other. For the data to be usable in one compilation, it really needs to be as similar as possible in both systems. That means ideally having similar property types and statuses, as well as field names and field values – especially how amenities are grouped. If that’s not done, searches and reports can become ungainly. What seemed simple really ends up taking long negotiation between data share parties. Then, over the longer term, data share parties will want to make changes to their fields – in a data share those can’t be made without coordinating between the two systems and potentially incurring additional cost. This is not just vendor time and cost – but it takes leadership and staff time to maintain. It can be frustrating when one group wants to make changes and there is push-back from the other(s). With the consolidation of MLSs, one goes through this process once, decisions are made, and then the single MLS is more efficient moving forward.
Many questions related to data use must be answered before MLSs establish a data share. For example:
- What data is shared between the MLSs?
- How may subscribers use that data?
- How may each association and its MLS use the combined data?
- For what purposes can each license that compilation?
- What happens if there is disagreement about a use?
- How is each group responsible for protecting the data?
- How is copyright registration handled?
- What happens in event of a lawsuit over copyright infringement?
- What happens to the data and all the derivative uses (statistical reports, CMAs, AVMs, etc.) if the data share is ended?
These are complex matters, and groups end up needing a rigorously crafted Intellectual Property Agreement to reflect their eventual understanding. Even when MLSs have taken care to articulate this type of agreement, there have been legal conflicts. One might think by avoiding MLS merger in favor of a data share, MLSs are avoiding complexity – but that’s just not the case. In fact, it’s more likely that two or more MLS decision-making groups will end up in conflict over data use than if the region has a single group. This issue doesn’t necessarily go away even with regionalization – unless it is clear in the process of company formation that shareholder associations no longer are the decision-makers with regard to data use – that is an MLS function.
Rule Conformance and Compliance
Creating a data share is not just a matter of aligning fields and statuses, and coming to agreement over data uses but also aligning on both rules (both validation rules and display rules [IDX, etc.] and compliance checking. If this isn’t done the groups end up competing on who has the “easiest” rules and least stringent compliance – which leads to bad data for everyone, inconsistent display practices that cause tensions between groups, and more. Even when groups agree on a common set of rules and compliance practices, differences in rule interpretation can cause tensions. Consistency of enforcement matters, especially for multi-office companies. Frankly, it’s easier to have one MLS compliance groups than two. Again, a data share is about a lot more than something the vendor can just do for you.
This is a scary area to discuss, because anti-trust concerns can appear so quickly. Just like there can be competition on rules and compliance, there can be a race to the bottom on price – and subsequently on quality of service. Though the data share can create “MLS of choice”, one cannot avoid this issue by setting pricing or boundaries – again, one enters anti-trust territory.
Ease of Use
If the data share just involves “Reciprocal Access” between MLS systems or the addition of another “overlay” system, rather than sharing data from one MLS system to use inside another, subscribers must learn a new system in addition to their MLS system. These types of data share solutions also do not allow the subscribers to leverage the shared data in their native MLS for use in statistics, CMAs, prospecting, etc. That’s a substantial limitation!
In a “Shared MLS System” type of data share, one must still establish a governance structure for managing the system – and we’ve seen tensions flare up between MLSs over the years even when this is done. Sometimes, depending on the governance structures set up around the shared system, there are also governance delays as decisions are brought back to each shareholder. Sometimes important decisions take months – or are never made.
When a regional MLS is formed, associations can focus more on association functions – the reverse is true by adding data share complexity, as association staff people are typically more involved with a data share. With a regional MLS, one can leverage buying power – but rarely with a data share (the exception, to some degree, being a few larger MLSs sharing a system). With a regional MLS one can apply the buying power to improve product and service scope – but not with a data share. A data share doesn’t necessarily result in reducing the number of data feeds needed by participants – unless all broker-desired uses and licenses are agreed to as part of the data share. The same goes for the benefit of uniform rules and enforcement for brokers – that doesn’t just happen automatically with a data share. And, for those brokers that want to stay involved with governance and committees, the data share doesn’t reduce the MLS to one organization. From another perspective, software vendors still have to deal with the 700+ MLSs – data shares do not significantly reduce the barrier to innovation that maintaining so many MLSs – each with their own data licenses, compliance processes, etc. – creates.
MLSs need to fully understand the pros and cons of various forms of MLS cooperation – including the various forms of data shares and regionalization – before choosing a strategy.
Clareity Consulting believes that there are various situations where a data share is the right tool – and it is a tool we will continue to leverage for clients where it is the right solution. By understanding potential issues, like those listed above, some issues can be avoided. However, a data share has much of the complexity of creating a regional MLS – it is in some ways more complicated in the long term, as described above, and it lacks some of the advantages of consolidation. That is why, where possible politically, consolidation is more desirable. Also, many of the brokers we have spoken with and surveyed want fewer MLSs, and data shares are a way that MLSs try to avoid consolidation. “It’s good enough,” some people would say. But, with the pace of today’s innovation and tomorrow’s competition, “good enough” may not be good enough for long.
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