CALIFORNIA BUILDER BRIAN ENNIS was growing frustrated with his software provider, whose product he'd used for more than seven years. The software used to be top of the line, he says. Then a few years ago, the technology company stopped making improvements and seemed to lose its customer focus, he recalls. “They would make promises and wouldn't follow through. It was killing me,” he says. “I knew what efficiencies were possible.”
Ennis also knew what he wanted. The founder and president of Porterville-based Ennis Homes, which built 400 homes last year in California's central valley, wanted handheld capability for software on the job-site to coordinate scheduling with his trade partners. He wanted to be able to publish information to many people at once so they would have real-time info about whether they should show up on site or not. He wanted to enter information just once into a database, and then post it to an extranet that was linked directly to the system, “instead of having to take 14 different steps to copy the information you've already entered.”
Ennis first considered putting a small group together to buy a software company. He kicked that idea around with a few other builders who shared the same frustrations, as well as members of Colorado-based Shinn Consulting, who asked, “Why do you want do you want to own the software? Don't you want to just control it?”
In Search Of A Partner In March 2002, after many conference calls, three other builders, all with revenues of at least $20 million, stepped up to take the risk: Adam Cristo, president of Cristo Homes in southwest Ohio; Howard Hirsh, CFO of Keystone Homes in Willow Street, Pa.; and Todd Lambers, CFO of Bosgraaf Homes in Holland, Mich. Together with Ennis, they put up about $50,000 each to form The Technology Enhancement Project (TEP). The team retained Shinn Consulting to aid in finding the right technology partner.
In the middle of August, they all met in Denver to draw up specifications for exactly what the software would do. There were at least 20 different functional areas where their demands needed to be met and integrated into one package: scheduling, purchase orders, and sales. Ennis recalls that none of them had ever done anything like this before, but their vision was clear.
There needed to be an “executive dashboard” where all information about a project would be displayed visually: what revenues were coming in, what costs were flowing out. Benchmarks needed to be built into the system. Each module had to be flexible to accommodate the different ways different builders conducted their businesses, such as different accounting methods they used. But the modules also needed to talk to each other: The sales module needed to interact with the warranty module, as well as with accounting and marketing. All the data, entered only once, must be able to be replicated throughout the system and exported to a spreadsheet.
The specifications—a document of more than 10 pages—were sent to five major software companies that serve the home building industry. The TEP group received responses from four. Then the group spent a year interviewing the four companies, which included on-site visits.
At the end of September 2002, the team compared all responses to figure out the best fit. “We took a long-term approach,” explains Ennis. “We didn't want the best software on the market today. We were looking for the best software company a year or two from now.”
The company they chose, admits Ennis, did not offer the best technology. “Frankly, there was a software package that was better than the one we chose in terms of features and functionality,” Ennis says he believes. “But the company we chose was very open to taking suggestions about where the software should go.”
The unselected rival was a “great” company, Ennis emphasizes. “It's been around a long time; it's a very structured, very disciplined business. But they have such a large and very focused user group, so we didn't feel we'd be able to have much influence on their game plan. Their business plan was set many years ago.” TEP decided to go with a company that Ennis said he believes was “a little more flexible, a little more progressive.”
TEP's choice, says Ennis, could help everyone leapfrog from the positions they were in to where they wanted to be in a few years. In January 2003, TEP informed HomeSphere, of Golden, Colo., that it was the chosen company.
The Handshake Certainly one factor weighing in HomeSphere's favor was the appreciation its CEO, Jim Waldrop, had for keeping up with the expanding demands of the home building business. Waldrop had spent more than a decade with Pulte Homes in the big builder's headquarters in Bloomfield Hills, Mich. In 1983, Pulte developed the first industry-specific, back-office accounting system for the home building system, he recalls. Waldrop left Pulte about 12 years ago as executive vice president to found HomeSphere, which aims to serve the technology needs of small and mid-size builders. The company now employs 45 people nationwide.
Waldrop says he was impressed with the level of detail that TEP brought to its evaluation process. He recalls that it took HomeSphere two weeks to gather the information just to respond to the Request for Proposal (RFP). His team specified how HomeSphere's home builder oriented software package, BuildSoft Enterprise, incorporated back office accounting systems, enterprise resource planning functions, general accounting tools, job costing applications, purchase order and work order management, job scheduling, and traditional accounts payable and receivables, as well as payroll.
Waldrop was aware that the product constantly needed to improve. “Builders are becoming larger in scale and need more functionality,” he says. “They need detailed job costing, better purchase order management, and flexible scheduling tools.” Once a builder goes beyond 50 or 100 units, accounting packages such as Quicken and QuickBooks become inadequate, Waldrop says. But, he adds, many builders remain with Quicken-type products because there are not many other products on the market.
HomeSphere's team demonstrated the software's capabilities to TEP, and in August, received an on-site visit from Shinn Consulting's Schweikart, accompanied by Ennis and Ennis Homes' CFO Chris Kemp. “They spent a whole day with our entire team,” Waldrop recalls. “Then there was another round of financing and interviewing. That was in the first week of December 2003. While I don't know, I have to assume that they did something similar with other companies.”
The Partnership In January 2004, at the International Builders' Show, TEP announced its alliance with HomeSphere by establishing a one million dollar endowment fund to enhance HomeSphere's BuildSoft Enterprise software package. The partners claim that this is the first time that builders are involved with developing and funding the software that its members will use. As TEP and HomeSphere establish an advisory board, they say they hope to develop and drive industry standards for data exchange, purchase order standards, online commerce, bidding, alliance buying, and the seamless sharing of financial and building process data. The products will eventually be commercially available to builders outside the alliance.
Waldrop says HomeSphere might not tap the endowment fund at all, though he certainly appreciates the financial security. “What was important to me was that they stepped up and put up some evidence of their commitment into an endowment fund. The relationship we've struck is essentially is a win-win deal for all: We work together to build this enhanced technology platform,” says Waldrop. TEP has no equity interest in the product, but the builders will help develop it and co-manage it, he explains.
Ennis was pleased with the group's process and its progress. “Four builders were better than one,” he notes, and the collaborative efforts invested should pay dividends beyond the friendships and relationships they established. Indeed, he was beta testing a new handheld software application in March and says he was pleased with the improvements. Ennis is optimistic that builders will have a fully functioning package relatively soon. “I think we will get there in about a year,” he says.