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F E A T U R E

And Now For the Heavy Lifting

July 8, 2002
By David Joachim

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"Not One More Dollar"

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	Introduction
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	"Not One More Dollar"
	Introducing.On Location
	Weights and Measures

Zempel now faces what could be an even stiffer challenge. He and his team must continue to support Life Time's growth with no additional staff or funding. Today, IT represents 25 percent of Life Time's corporate G&A (general and administrative) costs--a high percentage for a company in an industry not considered to be technology-oriented.

"The direct mandate to Brent is, not one more dollar per year," Akradi says.

Still, the challenge could turn into a rare opportunity for Zempel. Following a demonstration of MMS at an International Health, Racquet and Sportsclub Association conference last year, Life Time executives say they were flooded with requests from competitors to license the software. Life Time is developing a packaged version of the software through a venture called Averisoft--it claims to have several promising customer prospects--and it's considering spinning off the unit as a separate company that would sell to any business that needs to track member rolls.

But Life Time executives say they're not quite ready to commercialize the MMS software. Akradi likens MMS as it stands now to "a very capable and strong chassis" but adds: "A CEO isn't going to spend $20 million to buy the chassis."

Even so, Akradi and Zempel describe the prospect of a spinoff in similar terms--as a consulting firm, modeled on the Sabre reservation system company American Airlines started, that would customize MMS for other companies and build their innovations back into the software for the benefit of the entire industry. Such a plan would also convert IT to a revenue-producing consulting unit rather than a corporate budget line.

Changing of the Guard

Life Time replaced its captains of finance, marketing and HR in the past six months, and a COO will be hired shortly. The CIO has had to fight for his job at least twice in the past two years.

The plan also might lead to faster payback for the $25 million investment, a number that surpassed even the highest estimates early in the project. Says Nugent, the former CFO: "Bahram was an incredible critic of our spending. He thought we were from Mars. He was angry at us for doing it. He wanted to go back to bookkeepers at each of the clubs."

Indeed, $25 million may seem like a reckless expense for what was a $100 million to $150 million company. But Akradi is betting that, like an expensive Ivy League education, the investment will pay off when Life Time Fitness grows up and is operating 100 clubs in dozens of metropolitan markets instead of the current 26 in six states.

"We are going to have $1.5 billion of assets deployed in bricks and mortar," Akradi says. "At that point the $25 million in infrastructure will not be a big number at all."

David Joachim is Network Computing's Editor/Business Technology. Send your comments on this article to him at djoachim@nwc.com.