This month marks the first time in the last two years that the bulk of recent news within the home building industry can be said to be trending positively. Consider:
- Both new and existing home sales saw their fourth consecutive monthly increases in July, rising 9.6% and 7.3% respectively
- The Pending Home Sales Index of the National Association of Realtors® rose 3.2% in July, it’s sixth straight monthly increase.
- New home inventories for July stood at 7.5 months, down from June’s 8.5 months due to higher sales volumes and continued caution among builders
- Home prices are stabilizing, with 15 out of 20 cities returning higher home prices from May to June
If you’re still in business as a builder and are reading this now, you’ve probably done everything you could to position your company to be ready as the market improves. You’ve cut back on staff, reduced land holdings, slashed inventory and eliminated costs across the board. What could possibly hold you back? Well, for too many builders, the weak link is software. For home builders all across the country, the software systems they rely on to keep the processes moving efficiently are woefully inadequate to the task, and may be the difference between a successful turn around and years of additional struggle.
The myth of “Integrated Software”
The sad truth is that the idea of “integrated” software is, more often than not, just that: an idea. The idea is a good one – take different software programs (tools, really), and make them somehow talk to each other so they can share information. Generally, the idea is accomplished through a device called a process bridge, which is another program (or programs) whose job it is to try to identify those pieces of information that have changed between two different data bases, and to somehow put them back into synch.
Certainly a reasonable idea, if you’re trying to “integrate” two different products. The real horror occurs as you add products and capabilities. Each new product that needs to be “integrated” increases the complexity by an order of magnitude, until finally a builder can spend more time managing the information flow between his “integrated” software modules than building houses!
Think about it this way: how many places in your company does the customer’s name appear? It’s in the sales system, the construction system, the purchasing system, the warranty system, the accounting system, the scheduling system, not to mention the hundreds of spreadsheets you’ll still have to use to try to keep everything together. What are the odds that all of those different data bases have exactly the same name? What happens when the name changes? How much work do you have to do to get it all correct?
Real-world experience bears this out
At last year’s International Builder’s Show, the NAHB held a very informative educational session that really highlights this problem. Entitled “Moving Toward Integrated Software: When is IT the Right Time”, this program featured a panel of builders who each discussed their experiences in implementing “integrated” solutions. Each of the speakers seemed relatively satisfied with the outcome of their efforts, but when you delve deeper some glaring differences arise. Of the 4 panelists, the software programs in use broke down like this:
- One builder, at 100 homes in 2008, used two packages with two databases and
some degree of integration. - Two builders said they used only one software product. One of these was a small (12 to 20 units) custom builder. Intriguingly, the other was a high-volume (570 units per year) semi-custom builder that had recently been acquired by national builder.
- The 20 unit custom builder, on the other hand, named 10 separate software products, almost one for every department in the company.
The differences here are obvious. When one software product can meet the needs of every department, your ability to share information is incredible. With one data base, each piece of information exists only once; there’s no need for “integration” in the traditional sense, because every process and program uses exactly the same data. Now you’re eliminating duplicate data entry by eliminating duplicate information. For the high volume builder, the ROI was obvious and immediate, increasing profits by $1,000 per house. As the panelist said, “That’s big money.”
The bottom line is the Bottom Line
But that’s really just the start. Using a single software product across the enterprise reduces costs and improves efficiency at every turn. For example, “look and feel” are identical from one function to the next, significantly reducing training costs and improving cross-training capability. Maintenance costs are dramatically reduced, as is maintenance effort when there’s only one package to update. And troubleshooting problems between modules is eliminated; with one product, you always know exactly where the problem lies, and have one single help desk for support.
On the other hand, the more separate products with separate data bases you try to factor into the mix, the more work you and your staff have to do to keep it all in synch. That’s work that you’re not doing to improve quality, or increase sales, or reduce cycle time. It’s wasted work. And in this economy, no builder can survive by wasting time.
