Prospects for the homebuilding industry are bullish for 2018, with a 7.9% projected increase in single-family starts throughout 2017, according to NAHB. Beyond a rising housing market, low unemployment, and a booming stock market that has rapidly grown buyers’ savings, there is a remarkable growth catalyst in our industry that deserves credit.
Technology has reinvigorated the homebuilding industry, enabling builders of all sizes to compete on a more level playing field. Increased competition has resulted in more diverse architectural offerings, improved energy efficiency, expanded design options, and innovative home features. It has also dramatically improved the consumer experience, and recent buyers are touting these benefits to the next wave of homebuyers we are expecting in 2018.
These improvements are occurring even as builders streamline their businesses, accomplishing more than ever without increasing staffing levels. Individual professionals in the industry are performing at peak productivity—from the front-line sales staffs to the back-room accountants—and technology is at the forefront of it all. An industry that was once perhaps overly cautious about adopting cloud computing, system integration, on-site mobile capabilities, and enhanced data security is now embracing technology.
What’s driving the shift?
I believe three primary factors have brought us to this industry-wide embrace of technology:
- Management of family-owned businesses is transferring to younger generations. As Generation X and millennials are increasingly occupying leadership roles, their experiences and comfort levels with technology are driving adoption. The younger generations (especially millennials) grew up with the Internet, and imagining its applications is second nature to them. For example, to a baby boomer, the idea of manually adjusting a thermostat when the temperature inside is too cold seems natural. It’s what they do. Millennials intuitively think there should be an app for that, and hence, Nest Learning Thermostat was born.
- Our experiences as business and personal consumers are changing the paradigm. Two decades ago, many of us believed we would never provide our credit card numbers to an online vendor like Amazon. We were right in being cautious, and our instincts still serve us well, but technologies like encryption overcame our concerns. Today, the experiences we have in business using Salesforce solutions or Google Drive online storage service, and the consumer experiences we have at the Genius Bar at Apple Stores and through Amazon Prime have raised our standards for a positive customer experience. At the same time, social media has made it imperative that we focus heavily on the customer experience. So now homebuilders are delivering experiences on par with the best companies in every industry. Every phase of the experience, from exploring models online to making option selections as a home is being built, has been re-envisioned.
- Technology (and cost) is trickling-down. As in every industry, the largest, best-capitalized organizations are usually the first to adopt technologies. Best practices evolve and technologies improve and become more affordable. Gradually, midsize and smaller organizations begin to follow the trail that has been blazed for them.
Four technologies are leading the way
Cloud computing: We did our first cloud installation in 2009, when we began to offer it as an option to on-premise hardware and software. The last on-premise installation we performed was in February 2016. A decade ago, our industry had many concerns about data security, technology, and performance. As the technology evolved, these concerns dissipated. Today, the cloud has enabled builders to operate with a lean IT staff, since there are no servers or hardware to maintain on site, nor software that requires manual updates. Everything is automated or taken care of by vendors, from server maintenance to realtime data delivery. This has dramatically improved operations for homebuilders, who are now making quicker, more informed business decisions and responding faster to customers’ needs.
The cloud is also the impetus behind the next three technologies:
System integration: Complete integration of all the software components a home builder uses is achieved through an ERP (enterprise resource planning) solution. This has become arguably the most critical component of builder efficiency. An ERP, like MarkSystems homebuilding software from ECi Solutions, integrates all functions, processes, and people across a single database. This enables superintendents, accounting, sales, purchasing, and field personnel to be able to access the same documents and data. It eliminates redundant tasks and the mistakes that occur when functions operate in silos.
With system integration, everyone is on the same page, from the buyer, to the staff and the back office, to field personnel and trade partners. An ERP solution is a communications system with accurate information flowing back and forth between all involved parties. This saves builders from making costly mistakes like building in the wrong specs or options, and suffering the diminished profitability and poor customer impressions that arise from such mistakes.
Data security: Ransomware has been a catalyst for customer conversion to cloud-based systems. We converted a customer from a competitor who had to pay a hefty ransom. Another customer lost a month’s worth of data from an on-premise solution because a backup had not been performed or was done improperly. We have seen many hard drive failures that resulted in data loss, as well. With the cloud, not only are data backups done regularly, and automatically, but data security software and protocols are always up-to-date. In addition, the cloud model enables builders of all sizes to afford the required levels of protection against cybercrimes of all sorts, from phishing emails to hackers. In a data-intensive industry like ours, no builder can afford to be vulnerable to cyberattacks.
On-site mobile capabilities: This technology works with the ERP to automate sharing of all essential documents in realtime to everyone involved. Builders provide realtime data to their trade partners now, whereas in the past, they had to send out purchase orders through the mail or have someone drive to the construction office to pick it up. Service orders, work orders, and purchase orders are all delivered electronically. If a customer requests a change to the house, it goes out to trade partners in the field immediately on their mobile devices.
Buyers are also well-connected to the process through the combination of an ERP and mobile computing technologies. They can see available lots and make choices, as executives get dashboard views of trends in lot interest. Through each stage of construction, buyers can make or change selections, rather than being limited by longer cutoffs. Once a change is made, everyone in the build process can see any schedule changes that impact them. Corporate office personnel access pertinent updates on their desktop and field personnel, subcontractors, and suppliers see the changes on their mobile devices in the field.
Mobile computing enables buyers to follow the construction process. Builders can post progress photos of the house on the buyer’s portal. The buyer can see the foundation after it is poured, the framing, and the electrical and plumbing systems being installed. The builder can flag milestones in the schedule that will update on the buyer’s page, calling attention to exciting developments like the roof or windows being installed. Through each stage, the buyer can see a list of options and can make decisions during the construction process. This keeps them engaged, excited, and likely to share their positive experiences with friends and family.
Across America, the builders that embrace these technologies most are among the market leaders. In tandem, these technologies improve internal communications and business planning, while improving the customer experience and boosting the profitability of every home sold.
Scott Duman is president of the Residential Home Construction Group in the Building & Construction Division for ECi Software Solutions.