It is a big step for many companies to implement an IWMS and to simply establish a single source of all location data. It can advance a companies effectiveness substantially with that first step of IWMS use. Once this has been done successfully though, users of IWMS systems start to come up with ideas of how the system can be used to further improve their internal processes and evaluate success. By having all the data in one place, hopefully organized by location, users can begin to apply decision tools to make better decisions.
Without doubt, one of the most important decisions that can be supported by a location-centric IWMS is site selection and lease renewal. For most companies with large portfolios of revenue generating real estate, the selection of the right site is the key to their success and deciding whether to keep a lease or move to a better site is just as important.
To make that decision a manager of real estate needs to evaluate a number of factors; most importantly current or projected revenue and expected cost. A real estate manager with an ROI estimate that they can trust can quickly and effectively make good decisions that can lead to successful sites.
However most IWMS solutions don’t really provide the appropriate data to produce a trustable ROI. To do this effectively an IWMS must have sales prediction that is accurate and complete, thorough cost predictions.
Some IWMS solutions that serve companies with revenue generating locations effectively may include the ability to integrate a prediction engine or an in-house model to produce trustable sales prediction. These models are very often developed in-house over years of trial and error, often in the form of complex MS Excel financial models. Sometimes the models have been produced by a vendor that specializes in producing highly accurate sales prediction models that customers can integrate into user friendly mapping tools like Buxton’s Scout. Either way, Location-centric IWMS solutions can usually utilize the results of a sales prediction model though, in some cases, this can be a very expensive integration.
An accurate and trustworthy prediction of total cost is even tougher to get into an IWMS. Once again time-tested models of cost typically are developed in-house using MS Excel or come from a vendor like Lucernex’s Lx LseMod solution.
Building and maintaining the sales prediction model and the cost model can be a difficult proposition. Without a professional software organization applying tested development and quality assurance procedures maintaining integrity in a model can be very difficult. To make matters worse, a mistake in what is typically a very complex cost model may not get discovered until an audit at which time it is way too late. Lucernex has been called on numerous times to provide our Lx LseMod Corporate Lease Analysis product after some disaster caused by a “minor” error in a model that resulted in years of inaccurate reporting.
For several years now we have seen this same issue play out in organizations looking at IWMS solutions or just after implementing our IWMS. The power of having that trustworthy ROI is enormous and an obvious value to any location-centric real estate organization so Lucernex and other IWMS vendors would often try to move the clients sales and cost modeling tools inside our IWMS or integrate the results into the IWMS for reporting or dashboard views.
The problem with this strategy is three fold:
1. it can get very expensive. Replacing a client-modeling tool usually means some amount of customization even for highly configurable tools. Integrating it is often just as expensive as few IWMS providers have tools to effectively integrate Excel models,
2. Even if you effectively integrate an Excel model you often lose the real time value of the data,
3. Once you introduce integration, especially with a desktop tool like Excel, or you introduce customization, you have an interface to maintain over time, which is both expensive and risky.
At Lucernex we struggled with the best solution for this problem for years in our attempt to provide a trustworthy ROI model for each site under consideration inside our Location Performance Management IWMS. We tried a number of different methods including all of those listed above. About 9 months ago we endeavored to take a huge step forward in solving this problem, which led to our purchase of Least Cost Solutions (maker of LseMod ). LseMod has been the leading tool in corporate real estate since 1995 for every type of real estate portfolio manager out there whether its retail, industrial, corporate, education, hospitality, healthcare, finance and banking or economic development. However, buying LseMod did not solve the problem either because it too is an MS Excel financial modeling tool. So we had the expert modeling tool but had not really improved the process by much as it was a separate desktop based tool that required integration just like a client Excel modeling tool.
In the second quarter of 2010 we will have finally solved this problem. We have successfully integrated Lx LseMod into our IWMS Lease Analysis module as a server side application with the integrity and flexibility of both products intact. Furthermore, in developing this technology we figured out how to launch any client Ms Excel model as a web ready, server-based application inside our IWMS. This will mean clients will now be able to use their time tested financial modeling tools or our Lx LseMod tools inside their Lx IWMS to produce real-time, trustworthy and thorough cost prediction including GAAP and SOX impact and a host of other critical factors.
So we have solved the cost side of the ROI prediction puzzle. In my next Blog I will tell you how we are solving the Sales prediction side and taking another great stride towards putting the “Performance” in Location Performance Management.