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Unleasing Potential You Already Possess

By Tom Steinert-Threlkeld  |  Posted 2003-10-01 Print this article Print

If you aren't using technology to drive down real estate costs, get your house in order.

When new sales and support hires arrive at Carreker, the $149 million supplier of financial software encourages them to work at one of two places: at home or at a customer site.

Now approximately 40% of the company's 580 employees work out of their homes. This doesn't just let workers get closer to their families or their customers. With real estate running from 100 to 200 square feet per employee in typical companies, that's 23,000 square feet of office space or more each year a company of Carreker's size does not have to rent, buy or maintain. In effect, an entire office building can be kept off a balance sheet. That doesn't mean anything gets hidden from shareholders. It's just not there.

"Telecommuting" used to be seen as a sop to free thinkers who wanted a better home and work balance. Forget that. Now, smart companies are figuring out which workers and managers really need to be in the office for daily face-to-face collaboration and pushing the rest out the door, even when they're still on the payroll.

Fueling this drive are wireless networks, more miniaturization of computers and even the replacement of mobile machines by the oft-maligned smart card.

The proliferation of wireless hot spots soon will lead to mesh networks that cover all but the least populated parts of the U.S. economy. Smart workers will become "always-on nodes in ubiquitous networks,'' as Chris Shipley, organizer of the Demo Mobile technology showcases, puts it.

Virtual private network technology will secure those connections, and computing will get ever more portable. A startup called Antelope is using 1.5-inch disk technology to produce a device slightly bigger than a handheld assistant. Slip it into a skin and it's a laptop. Slip it into a cradle at a desk and fire up a full-sized keyboard and screen. Sun Microsystems takes it a step further. Just carry around a Java card, it says, stick your chip-bearing plastic into a reader anywhere your company operates, and instantly pull up your personal desktop and files from a company server, in exactly the same arrangement you left them at your last stop.

Suddenly, bricks and mortars can be held to the same sort of strict performance benchmarks once reserved for manufacturing, sales and distribution operations.

Create a full inventory of all your holdings, rental payments, construction in progress and other costs, and make them perform. Whether it's a set of Microsoft Excel spreadsheets with tabs or a J.D. Edwards/PeopleSoft real estate database on which you get started, get started.

The "key performance indicators" are simple, really. Cost per square foot and cost per employee should be going down. Revenue per square foot should keep going up. Every week, month and quarter, your brick bat should be evaluating alternatives for the space currently in the portfolio; every time a lease or commitment is up, the ratios should improve as new real estate—or no real estate—is taken on.

Is this too obvious? Everyone's doing it, you say? Well, managing real estate matters, even on a project basis. The Limited, for instance, pays $1 billion or so a year in annual rent for its six fashion store lines. Getting a new store open 15 days ahead of schedule is 15 days additional days of revenue countering the rent.

If you are conscious about the productivity of your real estate, your overall productivity is likely to reflect it.

Look at Cisco Systems. Key metrics for the dominant provider of routers and hubs for "ubiquitous" computing are such items as expense per person housed and real estate expense as a percent of revenue. You judge the coincidence, but it also generates $547,000 in revenue each year for every person it employs. The next closest competitor does half that, CEO John Chambers notes. Sure, Cisco's been hammered. Investors value it at $142 billion, down from $335 billion in May 2001. But that still is more than its 10 biggest rivals combined.

Just as information officers manage portfolios of technology projects, sorting by the highest potential returns, an executive will manage the real estate portfolio. If you don't already have a chief real estate officer, get one.

If you have an edifice complex, get over it.

Tom was editor-in-chief of Interactive Week, from 1995 to 2000, leading a team that created the Internet industry's first newspaper and won numerous awards for the publication. He also has been an award-winning technology journalist for the Dallas Morning News and Fort Worth Star-Telegram. He is a graduate of the Harvard Business School and the University of Missouri School of Journalism.
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