Why should home builders care about information technology (IT)? Well, when IT is properly tied to business processes, it helps field supers stay on schedule, professionalizes the salespeople, and strengthens communications with subs—all factors that can help home builders double productivity without adding staff. Unfortunately, based on the results of a survey we conducted with Specpan, home builders have yet to fully embrace ITas a strategic tool.

Small builders (building fewer than 300 homes a year) spend less than 0.2 percent of their annual revenues on IT (see “No Comparison,” page 422). More than 10 years into the launch of the World Wide Web, roughly 60 percent of small builders have Web sites, but only about 13 percent of those who run sites manage Web-based collaboration platforms for suppliers and subs (see “Still Marketing Fare,” page 426). When you look at the whole group surveyed, slightly more than 7 percent run collaboration applications.

Big builders (building more than 300 homes) also don't tend to spend much on IT. On average, big builder IT spending is well below 1 percent of annual revenues, between 0.4 percent and 0.6 percent. And while all 147 big builders surveyed run company Web sites, just 34 percent manage Web-based collaboration platforms for suppliers and subs, a low number for such sizable companies. But before we spend anymore time tearing builders to shreds for their lack of IT expertise, could it be that the numbers tell only a small slice of the story?

Average IT spending as a percentage of annual revenues in 2005:
Average IT spending as a percentage of annual revenues in 2005:

HIGH FRUSTRATION Jim Janco, vice president of Montgomery Homes in Broomfield, Colo., thinks so. For Janco, whose company builds about six to eight homes a year and hopes eventually to build about 15 to 20 homes a year, what the data doesn't quantify is the frustration level among builders. Janco says most home builders would love to deploy an integrated software system that helps them manage the home building process, but such a system doesn't exist.

“There's no product on the market that will take a builder from plan development into actual budget building into a sales tool and convert a package to write a sales contract,” says Janco. “There are programs like FAST and J.D. Edwards that get you close, but you still need a translation to run the reports and create the purchase agreements,” he says, adding that “small guys like us are not going to take the time and money to try and integrate everything.”

Craig Schweikart, a consultant from Shinn Consulting who works closely with builders on technology projects, says the home building industry is begging for a white software knight.

“This market is hungry for someone to take a leadership role,” says Schweikart. “Someone who can capture the imagination of builders will gain huge market share,” he says, adding that builders may finally change their minds about IT when the market turns and they are unable to stay profitable by simply raising new-home prices.

For now, the white knight is elusive. At press time, a handful of big builders were meeting to discuss the possibility of developing a standard system. Not much has happened with Oracle since it finally bought PeopleSoft last year, and the SAP deployments, while somewhat successful at Morrison Homes, are expensive and cumbersome.

Software maker Latista has a sales and operations system that may work for big builders, but the company has only a few builders using the software thus far and at press time was still unsure if it was going to build an accounting system from scratch or partner with another software company.

On the small builder side, about 44 percent of our group uses either QuickBooks or MasterBuilder, far from a single integrated solution. And the old standbys such as Timberline/BUILDER MT, BuildSoft (now BUILDER 360), and Constellation, which absorbed FAST, NewStar, and Computers for Tracts, were plodding along, still promising a full system sometime in the next year or two. The Canadian group Reflex Real Estate Solutions says it has an integrated solution, but it will have to prove it. And Microsoft entered the fray with a big public relations blitz last summer, but it will take several years for the software maker to establish the Solomon accounting system as a serious player with eternally skeptical home builders.

Learn more about markets featured in this article: Chicago, IL.