Facts and figures about the use of information technology in the housing industry are interesting, but often builders' comments are the best source for understanding how IT can make a difference in a construction company's success. For the 2006 Builder IT Survey—our second annual—the message in our readers' comments is clear: Information technology is gaining in importance among more and more of you. In fact, 42 percent of our 532 respondents say IT is more important to them now than it was previously. And the vast majority of those who list IT as a priority for 2007 say they plan to make the most of the ongoing downturn by streamlining their operations with the technology.
The builders in this group are on the right track. They think of their IT people less as a cost center and more as their own personal efficiency experts.
“For the past three years, we've been working so hard on growth that there hasn't been much time to add efficiencies,” says Mark Sochar, vice president of operations at Bradenton, Fla.–based Neal Communities, which closed 340 homes in 2005 but was on target for only 240 in 2006. Now that the builder is facing slower times, however, it's focusing more on cutting out wasted effort—with the help of IT. Neal's plan for this year is to improve the company's NewStar back-office system by having all options flow from the design center to the purchasing department. That way, purchase orders can be cut without human intervention.
“In the past, the options would come on a disk from our design center and would be manually entered into the purchasing system,” Sochar says. “The idea [now] is that when the customer selects an upgraded cabinet, the information goes directly to a vendor P.O.”
Another builder looking to add efficiencies this year is Hubble Homes in Boise, Idaho. Jason Huszar, Hubble's director of management systems, says the company has spent a lot of time evaluating business management software from NewStar, FAST, Oracle, and Mark Systems and plans to deploy one of those systems in 2007. Huszar says Hubble builds about 850 homes a year but that it has seen a marked slowdown in its Idaho trade area.
“While we have a backlog we can build from, we want to put in a system and the accompanying processes to make sure we get the most efficiency out of [our] business,” Huszar says. “We don't want the lack of a system to be an inhibitor to growth once the market comes back.”
WORK TO BE DONE Based on our survey results, it's pretty clear that, as a group, home builders have a lot of work yet to do in deploying technology in their businesses. For starters, the majority of builders still spend considerably less than 1 percent of sales on information technology, and only 37 percent of our group plan for IT in their annual budgets.
IT research firm Forrester Research, based in Cambridge, Mass., says such low IT spending is typical of an industry in which materials account for a large percentage of the cost of the product. Nonetheless, home building is still well behind manufacturing, which averages IT spending of around 1.8 percent of annual sales. In contrast, in the services sector, Forrester says that insurance and health care average about 3 percent and 3.5 percent in IT spending, respectively, and that the financial industry averages well over 7 percent of annual sales.
The cliché about builders is that they are technology laggards, and our survey data generally support that notion. Fifty-five percent of respondents say they don't use smartphones; 86 percent don't use Tablet PCs; 73 percent have no opinion on customer relationship management software; and a whopping 42 percent say they don't use CAD software.
“That's the most disturbing number of all,” says Craig Schweikart, a senior consultant with Shinn Consulting who is based in the Seattle area. “If they don't use CAD software, I wonder what they do for their drawings. What do they submit for a permit?”