Some builders are using systems innovations to help them weather a cooling economy. By Michael Bordenaro
The slowing economy and the crash of some high-profile dot-coms have left some builders skeptical of the Internet and advanced technology in general. But a number of builders believe that being connected is more important now than ever; in fact, they're responding to a contracting economy by increasing their spending on back-office and Web site technology. Some are making big investments, while others are taking incremental steps.
William Ryan Builders, a Schaumberg, Ill. based company that built 600 homes in 2001, is investing heavily in back-office technology. "The big builders are making many technological advances that will save them money in the supply chain and save them cycle time," says William Ryan, company president. "If we can't be like them, we won't be around." Ryan has implemented New Star back-office software and switched from AutoCAD to an Argo Vertex for 3-D modeling, both of which are Internet-enabled. To ensure Web site maintenance, Ryan is now hosting it in-house.
A more incremental technology adopter is The Forecast Group (just bought by K. Hovnanian) in Rancho Cucamonga, Calif., which built 1,500 homes last year. One reason Forecast is taking it slowly, according to vice president Mike Dwight, is to keep technology from getting between the company and its customers. "We want to make sure our technology enhances that relationship," says Dwight. While he is committed to linking sales and marketing with purchasing and construction, he is only willing to spend the time and resources needed to make sure that any new software dovetails with existing systems without disruption to the business.
An unexpected partner in this process is Shea Homes, which builds in Forecast's geographical area, but for a different demographic. "Our friends at Shea were kind enough to refer a solution provider," says Dwight. In fact, big builders have done a lot to create a market for service companies that mid-sized builders can use to their advantage. "If public builders would have waited around for this technology, we would have missed the boat," says Tom Lucas, vice president of marketing for the Phoenix-based Del Webb division of Pulte Homes. "But if I were with a smaller company, I would look into using third-party solution providers instead developing something myself," he continues, mentioning companies such as MH2.com, an online project management service, and eCalton.com, an Internet business development company for home builders.
Some builders have become more efficient by using technology providers for just part of their business. Engle Homes in Phoenix, which builds more than 3,500 homes per year, uses Homesphere.com, an online provider of collaboration tools, to post plans and bids online. But its project management and scheduling system was developed in-house. "It's easier than you may think to get everything to work together," says Engle's Mark Upton. Like others who remain committed to technology, Upton sees a clear payoff: Engle generates almost $2 million in annual revenue per employee, much of which he credits to the intelligent use of back-office technology. "We're moving ahead at a faster pace now than even a year and a half ago," he says. Web reformers
The back office is just half the equation. A good Web site is crucial during a recession, when companies compete for fewer customers. That's why Engle recently upgraded its site to let buyers save their favorite home styles and features, make appointments, and track home availability. "When the economy dips, it is possible to find good values, and we feel buyers will use the Internet to look for them," says Christine Selby Snow, Engle's marketing director.
Atlanta-based Morrison Homes, with more than 2,600 homes completed last year, is also beefing up its consumer site. "We need to keep buyers on our site longer by making it richer and more robust, while at the same time making it easier to navigate," says John Rymer, vice president of sales and marketing. But he adds that the emphasis has changed. "A lot of the shine has worn off the bell," says Rymer of the Internet. "A year ago, we were all distracted by the potential. Now we're doing a lot of things that aren't romantic but are important." The infatuation with Flash programs has been replaced with a policy of updating prices and options daily. "We want the information on our site to be fresher than a loaf of home-baked bread," he says.
Houston-based MHI, which builds 2,200 homes per year, also names fresh content as a key ingredient of its sales strategy. According to Brooks Volls, director of marketing, today's software can give mid-sized companies a Web presence like that of large builders at much less cost. For instance, MHI uses an Internet-enabled Access database system, which Volls says makes the site easy to maintain and update. Of course, the key to getting the most bang for your technology bucks is knowing what you want from them. "Look at what is available, how much you are willing to invest, and what tangible results you expect," says Gary Tisch, MHI's CFO. "Are you approaching technology for technology's sake, or can it help you be more efficient in building a house?"
According to Tisch, MHI measures every incremental benefit. "Saving a nickel or dime per square foot doesn't sound like much, but when you build enough homes, it can be substantial." The benefit of not losing materials, or of selling $200 upgrades that a paper process may have discouraged, is hard to quantify. Tisch believes that new technology will make it easier, but the real test will be in how mid-sized companies fare compared to their bigger brothers in the near future.
Michael Bordenaro is a freelance writer based in Chicago.