By Daniel Walker Guido
"Last Man Standing" was the name of a movie. Now it's the name of the game--the home building industry's back-office software survival game.
With two of the seven leading housing industry back-office systems having been spun back to their original owners, and the other five now under new ownership, the race is on to see who can come out first with the best, most affordable, most capable, most productive, and most updated software.
While once upon a time the best software solutions were expected to rise to the top, everything changed after the great May 2000 Dot-Com Depression. Now, with very little investor funding available, Internet solutions are rapidly depleting what little cash they have on hand to upgrade systems. Having the technically best system isn't enough, anymore. Having enough cash to get by until the competition collapses is what matters.
Trying to figure out who will survive is an art as much as a science, says BuildTopia founder and CEO Stephen Porten. There is a huge clientele for home builder back-office systems, and most sales, support, and warranty software systems like his have the ability to directly communicate with these back-office systems. "The challenge is to know what is happening in the back-office market to better guess which systems will survive before spending time, money, and effort to ensure your system can communicate with theirs," Porten explains.
Of the seven BuildNet back-office systems, five--BuildSoft; Fast; TOMSystems; BuildNet Advantage, and Trueline--were purchased in a Sept. 23 bankruptcy auction of BuildNet's assets. The other two, J.D. Edwards and Lloyd's, were spun back to their original owners before BuildNet went bankrupt. All the systems are being overhauled.
J.D. Edwards has begun a long and expensive process to enable its housing industry accounting system to run on its advanced one-world server platform. BuildSoft--whose 2,500 users make it the leading builder back-office system--has already released an upgrade that takes it from a clunky, limited 16-bit system to a much faster 32-bit system.
Meanwhile, competition is increasing from other sources. Several foreign software companies have targeted the American home building back-office market. They include NewStar, a Canadian company with a low-cost enterprise resource planning (ERP) system, and SAP, the German software giant, a provider of collaborative e-business software.
In the near future "there will be two or three software services remaining, each with its own niche, to handle all the front- and back-office software requirements of home builders," says Paul Pittman, president of HomeSphere, a home building front-office scheduling, support, and services software firm. Now, with its acquisition of BuildSoft, HomeSphere has also become a back-office accounting system provider. "With the investment tap for the most part still tightly closed off, the race is on to update and become the best available system, gain more market share, and survive. We intend to survive."
In early November, HomeSphere released BuildSoft Version 3.56. The new release is Windows 2000 compatible; can process new 1099 and W2 forms; has updated purchase order, work order, and accounts receivable invoice formats; and boasts new 32-bit ODBC capability that allows the user to view accounting data with MS Excel, MS Access, and Crystal Reports. HomeSphere doubled BuildSoft's technical staff to 12 to handle maintenance of client systems. The new release will be given to all BuildSoft clients at no additional cost. Pittman says a future price increase for service is possible.
Meanwhile, Fast has already increased its rates. While BuildSoft was developed for small builders, Fast is geared for medium-sized builders. New owner Michael Holigan recently announced a substantial increase in the monthly fees paid by Fast's 252 clients to underwrite the costs of an expensive system overhaul. Holigan is president of MH2 Technologies, a home building front-office software system.
Craig Hardy, vice president of finance for Perma-Bilt Homes of Las Vegas, says his Fast monthly maintenance fees will nearly double from the $2,600 he has been paying. Hardy says Perma-Bilt is willing to pay a higher monthly fee if Holigan will use the additional revenue to update and improve the software and provide peerless maintenance service. "If Holigan makes Fast the industry leader he says he will, then I will accept the higher rates," Hardy says. "This industry badly needs a state-of-the-art back-office system with excellent service."
Holigan explains that when he bought Fast, its fees "were priced from 30 cents to $14 per active unit [a home under construction or remodeling]. Some [clients] were paying too much, and a number were paying too little. We could have moved everyone up to $14, but instead, we moved everyone to $11." Holigan says 160 home builders who are Fast clients attended his introductory meeting to introduce the new management. Holigan says the builders "all agreed that the total income Fast has brought in is insufficient to continue it as a viable business. We explained that we will spend millions to build the next version, but they, the users, have to pay a rate that covers the cost of maintaining the current system. They agreed."