October 26, 2010

Risks of upgrading Lease Administration Software alone or as part of an IWMS

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IWMS expert and Lucernex President, Joe Valeri (see Joe’s management summary here), discusses the risks of upgrading your lease administration software.

Whether you have realized it or not, the “Y2K” of the lease administration market is upon us. When the new FASB guidelines get approved, virtually every company with lease administration software will now have legacy lease administration software that must be replaced. Most, if not all, of the products that have been out for more than a few years will either not be upgraded due to the age of the core technology or ownership changes or will be replaced by their vendor eventually with what is truly a new product, not an upgrade.

As such it seems wise to consider the risks before replacing a key system that you will likely keep around for 5 to 10 years, depend upon to ensure leases are properly administered and that can impact your bottom line.

Risks

Risk 1: Blindly upgrading with the vendor you currently have; if the cost of upgrading is as high as implementing a new solution then is it really an upgrade?
Some vendors are already offering “upgrades” promising that their new version will eventually support the new guidelines. In most cases these “upgrades” are completely new products and have to be as the FASB changes cause a structural shift on how lease data is structured. Before you “upgrade”, stop and ask questions about new hardware, new operating systems, data conversions required (meaning a new database). It will be very apparent that you are not upgrading but replacing your old product with a completely new one, meaning a new implementation just like buying any other solution. Why not stop and consider all alternatives?

Risk 2: Will you maintenance costs go up significantly after the upgrade with no real ROI?
This is really an extension of the last item. The FASB guideline changes will certainly get your CFO to sign off on an upgrade but why not deliver an ROI with this system replacement like you would have to with any other? “FASB’s making me” should not be the entire story; get an ROI!

Risk 3: Buy from a vendor promising to support the new FASB regulations next year with no proof they know how.
I realize this one is self-serving as Lucernex is the only company who has actually verified that our upgraded financial engine will support the new FASB guidelines, but, really, how do you know a vendor can make the changes. These changes are structural, not something a simple upgrade can handle. Having been part of a team that has gone through the laborious task of interpreting the planned FASB guidelines and their impact on data structure and core formulas, I can tell you this is no simple task, requires months of planning, a great architecture and months more to develop.

Risk 4: Buy from a vendor who has no experience with your existing system and the way the data is structured; how do you know they will succeed?
We expect that over the next two years, as the lease administration replacement market gets really busy, that new vendors will show up to take advantage of the opportunity. Also, small vendors with historically lower market products will try to move up market and sell larger firms. You need to not only look at the product you are buying but who will implement it. The folks who implemented your existing system likely know your data the best. Many of those original vendors and their staff are no longer with the company that owns the products (for example Accruent owns SLIM and RetaiLease but did not create either and employs few if any of the original experts of those products). Again, it’s self-serving, but the creator of SLIM created Lucernex’s Lease Administration solution with input from experts from Tequila (creator of RetaiLease) and Siteseer. Make sure to consider WHO will be implementing your new solution, as their knowledge of your existing system and data will make the process cheaper and far more accurate.

Risk 5: Wait until the new FASB rules are out then upgrade or buy.
This is something we have been hearing a lot and its concerning. If even half the market plans to do this, and every major vendor is involved, there will be long waiting lists to get the product you want and the implementation team you want. You won’t get to choose the best product and the best vendor but the one that’s available to get it done before your deadline. Do you really want to buy the product and vendor that has time or do you want to buy the best one to fit your needs? Remember how much ALL Cobol programmers were going for and how the price got higher as Y2k got closer?

Risk 6: Buying a point solution.
Lease Admin is part of an integrated real estate process; arguable the most important part, why would you want to detach the data from the rest of the process or have to design custom integrations to get the data working together. Many IWMS solutions now have lease administration and rent accounting and a few of them are actually designed for the highly complex retail leasing market. If you are re-implementing anyway, (and as I said earlier, even if they call it an upgrade, its not) why not look at implementing a Lease Admin solution as part of an IWMS solution. While there are some good point solutions out there, if you plan to ever implement an IWMS why would you buy a point solution that does not allow for a quick addition of other IWMS modules in the future? It can replace not only your lease admin system but other point solutions like your project management system, site selection, market planning, capital project management, facilities management and even, in a few cases, your GIS/Mapping solutions? You can often get an ROI on day one just through system replacements.

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Risk Mitigation – aka, Shameless Plug

1. Lucernex staff includes the creator of SLIM, along with top implementers for SLIM, RetaiLease, REM and SiteSeer. We might even have the people who implemented your existing system on staff. When we designed our new Lease Administration solution, Lx Contracts, we brought together experts in SLIM, REM, RetaiLease and Siteseer to make sure we could deliver all of the great functionality users expected from those systems. That design was then merged with the IWMS data structure and launched as part of our IWMS solution or as a stand alone solution, all sharing one platform, one code base and one database.

2. We are so confident we can convert your data that Lucernex is offering free data conversion of SLIM, REM, RetaiLease and Siteseer products. No strings attached, if you have a standard implementation of any of these products we will convert the data from your legacy system into Lx Contracts for free. OK, one string attached, you have to pay for Lx Contracts.

3. We have created the financial engine that will support the new FASB guidelines and had it CPA verified. This is something we are announcing publicly this week. Our internal lease analysis and lease accounting experts have labored to create a new version of our financial engine that will support both the new and the old FASB guidelines. We will release it first inside Lx LseMod Corporate in Q4 and then inside Lx Contracts in Q1 2011. We had all of the formulas verified by an independent CPA and are opening a Beta period on the engine mid-November with select customers.

4. Lx Contracts latest release was specifically designed to handle both the current and new FASB guidelines. This bears repeating, Lx Contracts was designed, from the ground up, specifically to handle the old and new rules including comparison reporting to allow for impact analysis. Unlike most, if not all other IWMS vendors, we built all of our products and modules ourselves on a single platform and single database which makes our cost to implement, total cost of ownership and system performance unbeatable.

5. We provide SaaS Lease Administration and IWMS solutions that can deliver an ROI not just a cure for the FASB changes. We can help you make the business case to your CFO in a way that will WANT him to approve your project.

Previous IWMS related Blogs

What is IWMS anyway?
IWMS? It’s Location! Location! Location!
The Power of Location Management
IWMS – Why so expensive?
IWMS in the “Cloud”
How Capital Project Management fits in an IWMS
What makes one IWMS easier to implement than another?
Why building real estate software in house is no longer financially feasible