At the Large Board Forum at the NAR's Chicago convention last week, Supra was a hot topic. The company had announced its intention to discontinue support of older systems and encourage adoption of a new key that supports older lockboxes as well as segues to newer lockbox models, due next year. The most advanced of the new systems requires members to purchase a Palm Pilot/Supra hybrid product with a new key, plus lease instead of purchase the access software, a plan that has many association leaders objecting that six years is too long to lease any new technology. What's wrong with having a nice little business where products last longer than they should? According to Greg Burge, CEO for Supra - plenty. Find out why in this exclusive Agent News interview with publisher Blanche Evans. B.E.: Did you tell your association customers that you would no longer support older electronic lockboxes after April 2002? Some associations feel that is a breach of their contracts with you. G.B.: From our perspective, Supra has and will continue to honor all contracts. It would be inappropriate to get into discussions related to the interpretation of contracts. We believe that we are fully compliant with contractual obligations. It is not out intent not to live up to contracts. B.E.: Are you a monopoly? G.B.: That's an interesting question. By definition we are no more a monopoly than the real estate industry. What we have done is a less than adequate job of communicating Supra's message to our customer base and the way we did it shut off communication with a number of customers. They believed in the message they received that it was an arrogant message, and many of them ceased to consider the value of the direction we were going because of the way we presented that message. B.E.: Some associations are calling you a monopoly, and now you want them to upgrade to new products before the useful life is over on older products. G.B.: I take personal responsibility for that. In 1990, we went to the industry with a message that said we believed the current systems in use did not provide the highest level protection for the home seller. We began an education process and brought every major association to our plant and provided information and solutions, and through the process our electronic system became the system of choice. I believe the situation today is very similar, but we didn't use the same process of educating. B.E.: What went wrong? G.B.: Instead of bringing customer to the plant and dialoguing with them, they heard we are going in this direction and that after a certain date we can't get this particular product anymore and you are forcing us to upgrade. They are also saying if you haven't educated us yet as to why, then what they heard was not the value proposition. Some believe there is no single customer who is under original service agreements that had six to seven-year terms, and none have been told that they had to upgrade. What we have provided some customers are service extensions or support extensions and the disagreement revolves around their misinterpretation that the service extension means you intend to guarantee them that we would continue to build product. GM may agree to give you a warranty but there is no guarantee they will continue to build that particular model. B.E.: Is there a shortage of current lockbox models? G.B.: There are more lockboxes than are required to support the active number of listings. B.E.: So you are saying that the hardware and software agreements are different, and that a software contract doesn't obligate you to continue making the hardware. G.B.: There are some customers that believe that because they have a 6-year service agreement that it obligates us to build the hardware for another six years. B.E.: So what's at issue? G.B.: Our intent - the strategic direction we have is that the ultimate customer of the real estate industry and Supra is the homeowner client. The viability of our product is not determined by the board, broker or agent but by the homeowner. When the real estate agent asks for authorization to put a keybox on a home, that home owner is entrusting the Realtor with the key to their home. There is an inference that the homeowner is trusting the judgment of the agent that the system provides a proper level of control over that key. In 1992, in Houston, a mechanical key fell into the hands of unscrupulous burglar and the home of the mother of a local NBC news anchor was robbed. The story hit all major networks in 24 hours. The general public said you didn't tell us a lost key could be used on every home for sale in Houston. The board president said we are going to steps to disable those boxes. If the keybox system couldn’t meet appropriate standards for controlling access to properties, then our new system could shut off a lost key in 30 days. Any keys that represented a risk, keys from agents who got out of the business, or lost or stolen, and that system has been in place by all the major associations for over 11 years. Our view is that there is a new standard available and that the new standard is daily or weekly update of the keys, and through using new affordable technologies such as the Internet, we have put a system into place that allows a board to shut off a key on a daily or weekly basis. If an employee left and they had control of a key to a building, what would be the policy of the business related to that key? They would ask the employee for the key back. If the broker didn't get the key back and they would change the locks on the building. One could find it difficult that protection for office equipment is immediate, but 30 days is the standard for real estate? Next to the MLS, the keybox system provides the highest level of productivity that any agents use. So the cost of agent to not having the system, unless we adopt new technologies to provide homeowners to provide the best affordable solution, then we believe the homeowner may reject that tool as an appropriate way to control access to the property. So as original equipment contracts expire, the system needs to be upgraded. B.E.: Did you tell any boards that they had to use a Supra-PDA? G.B.: All of the keyboxes in use (2.3 million) are the 82 model. Even though that product line is 11 years old next April, all of the new keys are compatible to this 11-year-old product. None of the keyboxes require replacement. We could have introduced a new system that required new boxes, but all they have to do is upgrade the keys. That option is the display key or dkey which operates with old boxes and with new boxes that we are introducing in 2002. It can be programmed at the board's choice daily and weekly, and we can upgrade those keys to daily update. The agent has a second option - the eKEY. We have worked with Palm to provide an interface to the Palm 5x so that an agent can use that to open old boxes and the new box and they have the option to contract with us for information services, with the MLS's approval. This is portable access - they are carrying with them an electronic subset of the old MLS book, and again that is optional product. The dkey is replacement for current key. B.E.: What are the associations up in arms about? That you have to use a Palm? G.B.: Based upon the user interface the most effective was Palm. Because we have to build a customer interface between Palm and older keyboxes, the most effective was the Palm. If the boards are willing to upgrade to new keyboxes we could support a wide variety of PDAs, and we intend to support other hand-held devices. B.E.: What about the lease/purchase question? G.B.: There is a rumor that we will not sell our product and that is false. Let's don’t call it a lease, but a service contract. There have been numerous boards who have told us that we don't want to be in the business of owning hardware. What they said is we want you to provide the system on a monthly fee basis. The majority of MLS vendors do it that way, so what we did was we put together a program that allows us to come into an association and provide keybox services for a fixed period. The board has no financial risk if membership declines, and there is no risk in billing or collections of fees. The boards also administers the system for us, we can build in at their option an administration fee that we rebate to them for providing them services at the local level for us - distributing the new keys, training, handling return of keys from agents getting out of the business. This service agreement that the agent signs up for is a six-year agreement . It is completely cancellable, and can discontinue service by returning the product to the local board. There are some boards that have strategically said we don't mind owning the system and we are going to use the system as a source of revenue and here's a conflict point. There are numerous boards whose six-year term has expired and they are no longer paying any monies to Supra except a nominal amount for support of the software system, but they have left the keybox fee in place. For example, we are getting $3 an agent per year to $6 a year, meanwhile we recommended to every board that you don't go to a zero fee so you should save those monies for the next upgrade, but they haven't all taken that approach. Some have chosen to eliminate the lockbox fee, while others have left the fee in place but we are not receiving that money and it is a significant source of revenue for some associations. The agents think we are receiving these funds and we aren't. Because of that, we started giving customers who are no longer under original equipment agreements notice. We have told them two years verbally and given them one-year written notice in advance that we will discontinue the manufacturer of the 82 keybox for those customers no longer under original equipment contract. If they have used a product for six years and signed some service extensions, and we cannot fulfill that service extension, we will refund monies paid for that extension. I Now, if they are into the eighth year, we go to them and say we are discontinuing the old boxes for customers who are beyond their old equipment contract. You adjust for inflation, and there has been a nominal increase in keybox services for an eight-year term. In many cases when they were installed, they had to buy all the product. Today, the only thing you pay is the first-year service key for the dkey. Now those old boxes, you get to keep those, and the new key is not more expensive than it was in '92 or '93. B.E.: So the new key provides more security for the homeowner. What else can it do? G.B.: Let's don't use the word security. This isn't a security system, it is an access system, but the new key does provide more secure access. With the old product, if you want to find out who has been to your property and left mud on the carpet, you have to drive out to the listing and read the keybox with the key, download it over the phone and drive back to the office. Time and gas wasted, at least $50 a trip. Agents averaged spending in excess of $5 per month. The new system eliminates the need to go to the listings. When you put your display key on your modem, it calls our computer and tells us where it was that day. B.E.: A parting shot? G.B.: We believe that we share a common objective with the industry to insure that a critical tool remains a valuable tool to the ultimate user, the homesellers. We believe this provides an affordable solution while providing a significant productivity tool previously unavailable on our first electronic system and we are hopeful that our 40-year reputation in the industry will allow us to continue to dialog with customers as to the importance of this upgrade to all users of the system.