Driving a Nail into the Construction Market

Construction companies are demanding more from their software.


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Low-interest rates have fueled a construction boom for several years, especially for homebuilders. As the buildings continue to go up, accounting resellers and vendors are trying to meet the changing needs of the industry. At both the International Builders Show and the World of Concrete Technology in Construction Show, David Moyer, director of partner sales for Best Software's Timberline Office, saw a steady increase in software demand. "We found homebuilders are increasingly being weighed down under their business processes and are looking for remedies. They had definite needs in mind, and were ready to make the investment when they found the right solution to meet those needs. That is, they were not just 'tire kicking,'" says Moyer.

Eric de Jager, director of product management for Microsoft Business Solutions' Solomon line, agrees, "Companies are growing, and they want more software. I've been having more conversations with partners per week about the construction market than ever before. They've increased five times more in just the last couple of months."

For those in construction, the main concerns are the growing amount of information and documents that they must contend with to complete a project, while at the same time being able to watch the numbers during the process, rather than at project's end.

Partner Insights

"There is a continued desire for integrated systems, in addition to complete systems or suites covering everything from initial sales contact to closing," says Moyer. "Granted, integrated is a much-abused word. Perhaps, just the ease of getting data from one project to another without the hassle is better."

This is where products such as Intuit's MasterBuilder, Best's Timberline Office, and Microsoft's Solomon-and the resellers who handle them-are answering the demand for new software.

Doing More with Less

Knowledge is the difference in competing effectively in this market, says Steven Mulka, a founder of Atlanta-based SIS. Hiring industry professionals has been a key factor in the 30 percent annual rise in his company's sale of construction software and services.

"Our knowledge of the middle tier of the construction market gives us an edge," says Mulka. "We understand what our customers want and how to deliver it to them."

An MBS reseller, SIS has more than 60 construction clients, who account for more than 85 percent of its revenue. The company uses Solomon to integrate financial accounting with project management. Another success factor has been the ability of SIS to tailor Solomon to the needs of its construction clients, rather than requiring them to adapt their processes to the software.

"SIS blends people, process, and technology to help our customers improve their business performance. In today's construction market, margins are tight and companies must be able to manage more projects, more effectively, with the same or less staff. Our experience with working with clients on installing new software systems and Microsoft Business Solutions allows us to deliver successful software projects on time and on budget," says Mulka.

The bottom line is that construction companies want to reduce risk, improve performance, and increase efficiency so they can handle more business.

For example, SIS worked with a large mechanical contractor who had been using a Unix system and needed to replace it to support growth. The company wanted the new system to incorporate all the business rules and logic of the old system, including a complicated structure to allocate costs back to the company's five divisions.

"The technology was old, and couldn't use modern tools to get information. Our customer had the choice of rewriting the system or purchasing Solomon out of the box. Solomon would do 80 percent of what was needed," explains Mulka.

SIS worked with the client to develop a custom interface, "so the project managers could update budgets on a monthly basis, and share it with all the company's divisions. Solomon is flexible enough for us to tailor solutions to the customer's business processes," adds Mulka.

This engagement took over 12 months and included training for 150 employees. Such large projects cost approximately $300,000. "Things are now keyed in once in real-time," says Mulka.

Meanwhile, Carolyn Chasteen, principal of Denver-based Cardamel Consulting, is averaging approximately three construction implementations per month. She feels the biggest challenge facing construction clients is getting all the company's information in one place.

"Most companies have an accounting system, a construction system, and then pull everything together on an Excel spreadsheet, often reentering data and producing financial statements from there," says Chasteen. "Our goal is to make it possible for all data to be in one place, and the data is only entered once."

Chasteen, who founded the company last year, combines Microsoft Solomon with Rockville, Md.-based BuildTopia's suite. "BuildTopia allows homebuilders to coordinate business processes and manage projects. BuildTopia's suite covers all phases of the homebuilding process, from collaboration on initial designs to warranty administration after the homebuyer moves in," adds Chasteen.

Cardamel, a BuildTopia reseller, also sells BTAccounting, which is Cardamel's package for integrating BuildTopia and Solomon. "BuildTopia works well with Solomon due to the strength of the Solomon Project modules, and because it is easy to customize," she says. "We have a set of customizations that come with BTAccounting that makes the Solomon application more homebuilder-centric."

BuildTopia's suite includes BTBuilder, which offers sales functionality, project management, bidding and purchasing, subcontractor management, scheduling, and job costing, while BTService, a stand-alone or integrated application, meets homebuilders' needs for customer service and warranty management. In addition, BTSubcontractor Center allows builders to instantly send field workers updated schedules, options lists, and work orders, as well as change orders the moment they are approved.

The combination of Solomon and BuildTopia's suite works well for Cardamel. For example, the company assisted Covenant Development, located in Grand Terrace, Calif., a homebuilding company that has completed more than 345 units, and is currently working on more than 10 real estate projects, which encompassed about 1,200 additional units. Cardamel implemented the entire BuildTopia suite, including BTBuilder, BTService, BTSubcontractor, and BTAccounting, in combination with Solomon's financial and project modules.

Previously, CDI utilized manual processes, often cutting up to six checks for each vendor working in multiple communities or projects. With the automated system, it has been able to cut one check per vendor. The software has also given the builder better control over operations.

"With many builders, if you ask them, 'How much money did you make on lot 56?' or if you ask them what their margin was on a base house versus options, they shake their heads and guess," says Chasteen. With the new system CDI knows its margins on base houses and options on every lot. It is also able to allocate indirect costs, overhead, sales and marketing, land development, and other soft costs back to each lot so the company knows the costs of constructing each house.

Cardamel took Covenant's financial management system live in 30 days, at a cost of $25,000 for software and maintenance, and another $10,000 in consulting fees.

Not everyone is completely enthusiastic with Solomon's capabilities for construction. "Solomon has always had project management, but when we were trying to fit into a construction company, all the bells and whistles that Timberline had were missing," says Reagan Stanley, a partner with Stanley Stuart Yoffee & Hendrix, a long-time Solomon reseller based in Maitland, Fla. The company is adding capabilities through Spitfire, an ISV product that integrates with Solomon. Stanley predicts that the combination of software is going to propel Solomon sales in the booming Florida construction market.

The Construction Landscape: Growth Ahead

A study conducted by Decipher for Intuit predicts the construction industry will continue to grow over the next three years. In fact, over the next five years, the 500 contractors surveyed expect the construction industry to grow by 12 percent.

Those surveyed included a mix of general contractors, both residential and commercial, as well as subcontractors. The sizes of the businesses ranged from $1 million to $25 million annually. Results were broken down by region.

The three-year growth projections were highest in the West and South-30 percent and 38 percent respectively. Those in the Northeast, Southeast, and Midwest expect growth to range from 8 to 10 percent. The Southeast participants project the highest growth rate for the industry in the next five years, 16 percent, compared with the study average of 12 percent.

Those in the West and South also projected the greatest budgets for technology investments, and cited plans to build their office infrastructure (new systems and/or software) as the top business change to meet three-year growth projections. Western and Midwestern respondents plan to make the largest investment in integrated business management systems in the next three years (46 percent and 44 percent respectively). Southeast companies plan to make a 23 percent investment, those in the Northeast expect a 35 percent investment and it's 37 percent for the South.

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