When Lucernex started in 2000 we were the first store lifecycle management (SLM) solution to deliver our entire application as 100% Web-based, delivered as an Application Service Provider (ASP) solution. In reality we did not know it at the time but we were actually a Software as a Service (SaaS) vendor even then (according to Wikipedia it was coined in a February 2001 article written by the Software & Information Industry’s (SIIA) eBusiness Division). The difference to end users is largely invisible (except in the lower price) but to a software vendor the difference drives flexibility, costs (hence price to end-user) and focus. The next step is “Cloud Computing”, a buzz word for a service that provides equipment to host applications while doing all of the IT management on a secure environment optimized for performance and scalability.

Since this is not an article on the differences between ASP, SaaS and Cloud Computing in general, I will summarize very briefly below and refer the reader to Demystifying SaaS vs Cloud for a more complete discussion. In truth there are hundreds of these articles and even they don’t all agree.

Application Service Provider (ASP) – Web-based, hosted version of an application. Separate databases and servers for each client. ASP is much like the old model of selling software where the application was put behind a client’s firewall but instead, with ASP, the application is moved inside someone else’s firewall.

Software as a Service (SaaS) – multi-tenant databases and shared architecture. The vendor typically owns the hardware. SaaS can be delivered in a vendor’s data center, a collocation center or a true cloud computing environment.

Cloud Computing – Software applications that are delivered in a Cloud Computing center which take advantage of new technologies like virtualization and SAN storage to deliver optimal bandwidth, response times, storage and IT management. These centers typically use massive enterprise hardware owned and serviced by the Cloud center. The software vendor simply leases space in the “Cloud” and sells access to clients.

In the context of an IWMS solution, what is the difference between “ASP”, “SaaS” and “Cloud” and what are the Pro’s and Con’s of each one?

“ASP” solution

An application delivered in a browser that is running on hardware dedicated to one client and hosted by the vendor somewhere.
Pro’s
1. Control – For user companies that believe that having the software on servers dedicated to them makes it more secure (which is a fallacy in this writer’s opinion) and more “their own” ASP or even self-hosting is for you.
2. Freedom of customization – If money is no object and you want to take an application and customize it to do what you want it to do and not work with the vendor to increase specific functionality in the core product over time, ASP is the best way to do that. Did I mention it will cost you A LOT more once you customize?

Con’s
1. Expense – Having dedicated equipment is by its very nature expensive and you will never come any where near utilizing its full capacity. You will need to pay IT people to maintain servers just for you without any cost being shared across identically configured servers serving an identical purpose.
2. Upgrades – Having the application on servers dedicated to you is the same as if you had them inside you own firewall. If you want to upgrade, the project of upgrading will cost you. If you make even one small customization that means the upgrade will need to be custom built for you. Again, this equals a much higher cost.
3. Performance – Technology advances quickly. Even if you depreciate your servers over 3 years and replace them immediately upon full depreciation, you will never be able to keep up with advances in technology that increase performance and trying will cost you a lot of money.
4. Security – Sorry to all those IT departments out there that sell the value of in-house hosting or ASP’s on the basis of security but no one can secure data better than a facility that is in the business of securing data.

“SaaS” solution

An application delivered in a browser that is run on 100% shared equipment and hosted by the vendor in their data center or in a collocation facility on specific servers owned or leased by the vendor. The software vendor typically maintains all equipment and software.

Pro’s
1. Lower cost – Cheaper than ASP as shared equipment means users share the cost of the equipment, bandwidth and IT resources for maintenance.
2. Stability – When a vendor has ALL of its customers on a cluster of servers you can bet they will do everything in their power to keep that environment stable.
3. Upgrades – Upgrades are free and fast. When the vendor applies upgrades all users get them. The only exception is for users that add customizations into a SaaS environment which may require additional cost as the vendor will have to uniquely test the user’s environment for every upgrade.
4. Security – More secure than ASP if hosted in a collocation facility.
5. Focus – SaaS, when compared to ASP, allows the software vendor to focus more on software development and less on IT and client by client differences in code.

Con’s
1. Performance – For much the same reason that client IT departments can’t keep up with new technologies that improve performance, SaaS providers can’t either. Since the software vendor owns the hardware or leases it and maintains all hardware, switching to newer, higher performing software can be tough. A properly architected vendor data center can largely overcome this with virtualization and other newer technologies.
2. Security – No more secure than a client in-house hosting if inside the vendors own data center. In fact, for smaller vendors it may be less secure than in-house client hosting. Hosting a SaaS solution in a collocation facility is far safer.
3. Scalability – Again, if properly architected, a SaaS provider can be very scalable however it is still not going to happen as fast as it can in a Cloud center.

“Cloud” solution

An application delivered in a browser that is run on 100% shared equipment and hosted at a Cloud computing center on massive enterprise servers owned by the Cloud provider. The Cloud centers utilize virtualization to ensure fast response times and no downtime of application servers and use SAN’s to ensure database scalability and speed. The Cloud provider manages and maintains all equipment and software.

Pro’s
1. Expense – By removing all of the IT service cost from the SLM or IWMS vendor as well as the hardware cost associated with ASP and SaaS, the SLM or IWMS vendor can offer much cheaper prices to end users. The total cost of ownership to the end user will be lowest with a Cloud offering.
2. Performance – Cloud centers are going to employ any proven new technology that improves performance and all customers of the Cloud center will benefit.
3. Scalability – By its very nature a Cloud center is all about scalability. As long as the vendor system architecture support virtualization of the front end and real time redundancy on the back end, use of a Cloud center will mean almost immediate scalability.
4. Security – A Cloud centers business is protecting data. They have the best people and tools to ensure data security.
5. Focus – Cloud, when compared to SaaS or ASP, allows the software vendor to focus completely on software development and not on IT or custom coding. This means more functionality and much quicker turnaround on feature requests.
6. Customer Service – Software delivered in the Cloud is more consistent than ASP and higher performing than SaaS. The vendor can more easily and quickly solve problems and fix defects.

Con’s
1. Ability to customize – Most vendors who deploy into a Cloud center won’t allow customization unless the client pays a high fee to maintain and manage that customization. Newer offerings like “Custom Cloud” from Salesforce are built specifically to allow end user custom environments – but again, at a much higher price than the shared solution.

SaaS applications like Salesforce.com have become very common and popular. The same is happening, albeit more slowly, for more traditionally behind the firewall applications like SAP, or desktop applications like Microsoft Word, both of which are now offered as a service. In the SLM and IWMS industries, applications have been ASP or SaaS for several years. The same can be said for the Property Management market, read
Property Management Software Sure Is SaaSy by Chris Thorman on his SoftwareAdvice blog.

Cloud computing is now here and can further advance the savings while promoting product development and customer service by SLM and IWMS vendors.

Shameless Plug

Lx Retail has been a SaaS solution since before the term was coined though it was also sold as an ASP solution to some clients. We recently moved into a Cloud Computing center and can now offer Lx Retail in the Cloud. As we are the low cost provider of enterprise real estate solutions and have had to manage some of the largest data sets from the largest retailers over the years, we decided it was time to further optimize our application and launch it in the “Cloud”. As a result we have seen dramatic performance improvements and our scalability is nearly infinite.

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Previous IWMS related Blogs

What is IWMS anyway?
IWMS? It’s Location! Location! Location!
The Power of Location Management
IWMS – Why so expensive?

In my last Blog I discussed use of Lease Analysis integrated into IWMS to provide the cost side of an ROI prediction tool. Cost is only half the data needed however, an accurate and trusted prediction of sales is equally important.

Sales prediction modeling is a tool used by real estate organization with multiple revenue producing sites whether it is direct sales, cell phone contracts, walk-in patients, investment clients, or tuition payments. In all cases a picture of “the customer” must be produced, usually based on past location results or a client defined picture of their customer.

Building these prediction models is an art and requires a sophisticated statistician as well as knowledge of the industry and available data. There are a number of companies that specialize in producing these models and some, like the market leader Buxton, have software tools that include their models providing a visual, usually map-based, view of market opportunities. Many clients also have analysts inside their walls to build and maintain their models. In-house models, like cost estimation models, are very often built in MS Excel and then loaded into some mapping technology like Streets and Trips for use by a few users with seta licenses for that software. In-house models, while likely accurate at some moment in time, generally do not take advantage of the most up to date data and rarely utilize the most up to date technology for disseminating the results of the model.

To come up with a trustworthy and accurate ROI Prediction for any site you need to have an accurate sales prediction model. The quality and accuracy of the model comes from years of experience building models for companies in retail, restaurant, hospitality, healthcare or whatever specific sector your company is in. There are few companies who are capable of providing a really meaningful and accurate picture of “the customer”. However when you invest in developing a model that fits your organization you should make the most use of it. Most real estate organizations will use the sales prediction model and, using a combination of tools usually involving MS Excel, compare the sales prediction per site to estimated cost to figure out the ROI or IRR for that site. This process is rarely real-time, usually involves multiple steps and is often open to error through human keying and re-keying.

As far as I know there is no real estate software solution on the market that has both a time-tested cost projection tool and an accurate sales prediction model fully integrated into it in a real-time manner. If it does exist it is likely custom built for the customer (which means expensive).

Having a real time ROI on every site under consideration would allow for quick, effective decision making on site acquisition and would allow those negotiating leases to see the real-time impact of a change in lease terms on the site ROI. This would give any company a strong advantage in good or bad economic times and, if used over the long term, should substantially increases overall location profitability.

Shameless Plug

My last Blog discussed how Lucernex had labored to overcome the common problems associated with simply integrating desktop MS Excel based financial models for lease cost analysis and sales prediction.

Having solved the cost side of the equation with Lx LseMod online, we set our sights on overcoming the sales prediction side. Last week we announced a partnership with Buxton, the premier predictive modeling firm in retail, restaurant, hospitality, healthcare and government.

One of the most important goals of this relationship was to bring the technology containing predictive models inside the Lx IWMS Location Performance Management Solution allowing Lucernex to provide a real-time ROI prediction tool for every site under consideration. In its first version, the ROI predictor will focus on leased properties followed quickly by an ROI predictor for owned properties.

To learn more go to the Lx Location Analysis page.

Get Lucernex Blogs sent straight to Outlook or iMail or any other RSS Reader!
Click here to subscribe

Previous IWMS related Blogs

What is IWMS anyway?
IWMS? It’s Location! Location! Location!
The Power of Location Management
IWMS – Why so expensive?

Reasons some vendors IWMS Software can get expensive

There are actually several answers to this question depending on the vendor you are looking at. I don’t believe it is appropriate to mention other vendors in a negative light so I will simply characterize them into groups and potential buyers will need to ask the right questions to ascertain where we all fit. Several vendors, particularly the really expensive ones, fit into many of these categories.

Huge Infrastructure

This is the most obvious one. Some vendors have grown rather bloated with staff. There are good reasons for this (lots of customer service or new product development) and bad reasons for this, which may provide evidence of potential problems including:

• huge Professional Services staffs – which may indicate a heavy implementation and long term services cost
• large product management and maintenance development staff – usually indicates there are many legacy products to maintain due to the companies move across different platforms as they matured. This is a problem as it typically restrains their development progress on their IWMS as they struggle to maintain many old products
• large development staffs in professional services – might indicate a likelihood of heavy customization needs

Many OEM licenses to pay for

Most vendors have chosen the “easy” way out when needing to add core components like reporting, workflow or dashboards by partnering with another software vendor to include that partner’s product within their solution. In doing so the IWMS vendor promises a specific dollar amount per sale or a percentage of each sale back to the partner vendor. This DOES often give them excellent functionality in that area but it comes with a cost per sale, a cost to maintain over time and adds another layer of complexity to managing the application over time for both the IWMS vendor and the customer. Note, I am not knocking this model. While Lucernex has decided not to use OEM partnerships to this point (with one minor exception) so that we can keep our prices low, this method does provide a short cut to really good functionality for some vendors; however it does add to their cost.

Heavy VC / Private Equity Firm involvement

Venture Capital and Private Equity Firms are in business to make money. They do so by gambling on a group of companies they invest in or purchase with the hope that a few of those companies succeed and repay their investment in all of the companies (including the failures) plus a hefty profit. To get these returns they of course will drive their companies (from their seats on the companies board) to increase profits to increase the companies’ value for an eventual exit (typically a sale to larger firm). Once again, I don’t knock this model, some companies have to do this to stay alive and others want to do it to accelerate their growth. As a result, however, prices have to be higher to meet these loftier profit objectives.

Many mergers to pay for

All software markets consolidate as they grow and the IWMS market is no exception. If you look back through press releases you will see several of the large vendors have been formed through multiple mergers and acquisitions. This is done to strengthen their offering and widen their customer base. Lucernex did this recently with our acquisition of Lease Cost Solutions (LseMod). Acquisitions come with a cost and an expected return on investment, which has to be factored into the products pricing (especially if you are backed by venture capitalists).

Requires extensive implementation services

This is typically the cost that is best hidden by the more expensive vendors. Proposals typically provide very vague pricing for implementation and require a discovery session to come to a real price. This is a valid need as it is impossible to provide a defensible price without knowing what the customer really wants. However, in most cases, the implementation (short and long term) cost far exceeds the software price! Customers can easily get fooled by a price, commit to a vendor and then find out the implementation cost is 2, 3 or even 4 times the cost of the software. This is especially true with vendors who are not Location Centric and have to customize or heavily configure to meet unique customer needs.

For those of you shopping for an IWMS ask these two simple questions to get a real idea of what implementation services will cost:

1. Do you offer any fixed priced implementations? If the vendor does and is willing to give you details, even if it does not fit your exact needs, it will give you a very good idea of what you will get for your money.
2. What is the typical ratio of services to software cost? For example in Lucernex’s case we are typically 1 to 1, meaning our services cost is typically equal to the software cost (and that’s not due to an expensive product cost either!). Having worked for or with several of the pricier vendors I can tell you their real cost of implementation is typically 2 to 4 times software cost.

The more location based a product is and the more user interface driven the environment configuration tools are, the cheaper the implementation should be.

Total cost of ownership (TCO)

Many IWMS buyers, when going for internal approval, concern themselves only with the upfront cost and the annual fee. While those are obviously critical, depending on the product, the long term cost of ownership may be much higher than these obvious fees if the vendor application requires customization or fails to provide easy to use client system administration tools. The more tools provided to the client to make normal changes easy for forms, pages, workflows, terminology, users and even system navigation, the lower the long term cost of ownership will be.

These are a few obvious reasons for the somewhat large price differences between the IWMS vendors. As usual, this is from my perspective as a low cost provider who has largely avoided the above pitfalls. I am sure the high priced IWMS vendors would argue that each of the above issues has actually made them a better product or a better company and they may be right! I am simply trying to provide some insight into why the differences exist.

BEWARE

Over the past few years we have competed for business across the country and have witnessed an interesting tactic that often occurs when we compete against the high priced vendors. They will present their price and then learn that a lower priced vendor like Lucernex is a finalist. They will then dramatically drop their price often to the point where they are breaking even or losing money. They do this to gain market share and try to starve the smaller vendors of revenue. It typically does not work as most customers see through it. However, some customers will go for it thinking they got a “deal”. What they get however is a vendor who will find every possible way to add change orders or to cut back their project, as they know they can’t make money on the deal any other way, and, once live, will not provide good customer service to a customer they are not making any money on.

Shameless plug

Lucernex Lx IWMS and Lx LseMod applications are very affordable and designed for low up front cost and low TCO. Our implementation projects are not only lower cost than most vendors, they include a complete training program to ensure clients can maintain and change their environment long after implementation ends to keep TCO low.

Previous IWMS related Blogs

What is IWMS anyway?
IWMS? It’s Location! Location! Location!
The Power of Location Management

My last blog discussed the very loose definition of IWMS and how it tries to describe a wide array of very different vendors. In this blog I will discuss one type of IWMS, Location Management Software, and what the different end users may need to focus on when selecting a Location Management IWMS.

What are the three things that matter in real estate – Location, Location, Location. This old adage about real estate applies to commercial real estate technology as well. The location is what real estate is all about whether you are a 2000 store retailer, a 30 building corporation, a large hotel company or a multi-building campus – everything you do in relation to your real estate is based on a location. And, managing the performance of each location to perform optimally is the ultimate goal for each location whether it’s optimizing revenue or minimizing cost.

Each industry is going to have different methods to achieve these goals based on their business goals. A retailer may focus on same store revenue growth or new store development, a hotelier will focus on REVPAR growth while a corporate occupier (owner of leased) is likely to focus on space management, cost control per location (or employee) or implementation of technology to achieve savings.

The tools each of these different users needs is therefore as different as the decision makers selecting those tools. Not surprisingly, the different types of real estate portfolio owners have organized themselves differently to reflect both their differing business processes and the importance they place on the different areas of functionality.

A retailer or hotelier, for example, will have less need for a CAFM system and more need for demographics and sales prediction. Facilities management is important to this audience but real estate selection is the business driver and therefore the decision maker is typically a real estate executive when it comes to selecting technology or other tools.

A corporate real estate department will have far more use for CAFM and no need for sales prediction. While the real estate function is important, the decision for non-retail corporate companies will typically be driven by the Facilities Management group.

According to a 2009 IWMS Connect article, this difference across many organizations is starting to blur as these roles are beginning to converge into a more “workplace” driven function.

However no matter what type of user you are, all the data you collect, work flows you manage, reports you generate, schedules you manage, work orders you cut or demographics you run are all centered around a location. Shouldn’t the technology you choose to manage it center on the location as well?

By centering on the Location you can:

• Track all entities within your Portfolio or aggregate information to track your entire Portfolio
• Track all Center information including Leases
• Track all Facilities and equipment on a Campus
• Track each tax Parcel within the Location
• Track multiple planned Locations by market in multiple Programs
• Manage all collected data for multiple Sites of interest for every planned Location
• Manage as many Construction Projects as you want on one or more tax Parcels of the same or different Prototypes
• Maintain as many Facilities as you would like across one or more Programs
• Track all Spaces in each Facility, how they are used and the associated Leases.
• Run as many Capital Projects as you need
• Administer multiple Leases and subleases on a group of Facilities or on individual Facilities
• Track all real estate related Contracts for Equipment, Land, Services, etc….
• Maintain as many Franchisees information as required in the same or across multiple Facilities
• Track all Lease income and expenses on any Facilities or Location

Shameless plug