IT is also enhancing the payroll system to allow for earlier reconciliation and adding a "geo-coding" application to study demographics for new club locations, while fortifying systems with antivirus and denial-of-service protection tools and installing QoS (Quality of Service) software. On the team's wish list is an entirely redundant hot site that could take over in the event of an outage. Last year, local construction crews cut Life Time's fiber connections six times.
Also on the wish list is an entirely new accounting system. Some executives complain that the current Solomon system tracks only individual purchase orders and can't group the orders by project. Will Sullivan, Life Time's new vice president of marketing, says the current system hinders his ability to create for his department an agency model, under which other departments are treated as clients and are billed for services.
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Turning Point
IT execs had to move fast when they realized the Microsoft tools they were using didn't support forms and other features necessary for MMS. Expenses soared when Life Time had to hire Java and WebLogic developers.
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"I'll exaggerate the process," Sullivan says. "If you want to buy a pencil, you need a PO. If you want to buy a pen, you need a PO. If you want to buy a piece of paper, you need a PO. There are three different POs. If you want to know how much you are spending on office supplies, you can't figure it out. I need accounting to move from a PO system to a project system."
The current accounting system also relies on paper approvals. Sullivan wants electronic POs to be generated automatically as work orders are created, and he wants to approve POs online.
'House Got Cleaned'
Sullivan is one of several new executives brought in to help expand Life Time faster. Sullivan spent many years in marketing at 3M and founded his own agency, which he later sold to Saatchi & Saatchi. CFO Mike Robinson, a 17-year Honeywell veteran who most recently served as CFO of electronic billboard marketer Next Generation Network, was hired in March. Hard-charging CEO Bahram Akradi plans to bring on a chief operating officer within the next six months.
"We hit the $150 million mark, and the house got cleaned," CIO Zempel says.
This period of rapid growth--revenue has grown about 35 percent each of the past few years--has endangered not only Zempel's job but also the jobs of all 48 Life Time IT staffers. Zempel has no formal IT training--he started in the gym business at age 18, "handing out towels and scrubbing toilets" at U.S. Swim and Fitness, where Akradi was a part owner. The CIO was nearly squeezed out in July 2000 at the urging of a venture capital investor.
"The VC was unimpressed with the talent we had, inasmuch as it wasn't the traditional coding types of guys," recalls Shaun Nugent, who was Life Time's CFO and Zempel's boss for six years before leaving last fall. "We didn't have anyone on the staff who had 'been there and done that.' It was a hodgepodge of local people we had pulled together."
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Purse Strings
IT now represents 25 percent of corporate general and administrative costs. The CEO wants to drastically reduce that percentage--while driving IT to support the company's aggressive growth plans.
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The investor also expressed shock at how much Life Time Fitness was spending on MMS, calling it a "misuse of funds," Nugent says. Nugent hired his own auditor, Les Wanninger, the former top IS exec at Pillsbury and now a University of Minnesota computer science professor, who ultimately sided with Zempel and his team.
"My opinion was, 'They're doing the right thing and going about it the right way,' " Wanninger says now. The company's biggest problem was that it wasn't tracking costs in a way that could be easily understood by all stakeholders, he says. For instance, the $25 million figure includes infrastructure upgrades that were necessary even if MMS didn't exist--things like network buildouts and new servers. So when officials cite that figure for MMS development, it sounds like an irresponsibly large number.
Zempel's job would be challenged again, in December 2001, and this time he would have to fight for his whole team. In a meeting between Akradi and Oracle CEO Larry Ellison to discuss a possible deal for Oracle to resell the MMS software, Ellison offered to take over Life Time's IT operation, promising a 5 percent annual savings by using Oracle software. Ellison's offer was a surprise not only to Zempel but also to Oracle's sales team, Zempel says.
Perhaps more surprising was Akradi's reaction: He began to seriously consider the offer. "Now it was me against Larry," Zempel recalls.
Over the next 45 days, Zempel and his software development chief, Bertch, met with Akradi weekly to discuss whether Ellison's plan was feasible. Zempel detailed how Oracle's plain-vanilla software was not an equal replacement for Life Time's customized business systems and that any savings would be offset by having to overhaul the company's processes to comply with Oracle's out-of-the-box software.
Akradi ultimately told Oracle he didn't want to throw away Life Time's systems, he was keeping his team, and Oracle would have to customize and integrate its software into Life Time's existing infrastructure. Talks broke down, and the IT staff was spared.
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