Ross Perot Jr. of integration company Perot Systems challenges builders to adopt back-office strategies now, before it's too late.
Most builders have been slow to invest in information technology products or services. The reason is simple, according to Ross Perot Jr., president of IT giant Perot Systems Inc.: simply keeping up with competition is sapping all of a company's attention and energy. But it is during good times that companies need to invest in change, Perot, who keynoted the tecHOMexpo at the International Builders Show, recently told TecHome Builder.
THB: What is the role of Perot Systems in terms of working with residential builders.
PEROT: We have about five or six residential clients that we work with today, including KB Homes.
THB: Are you running their full information technology infrastructure?
PEROT: KB is not quite full. It's a strategic partnership and a long-term relationship. And we do project work for a lot of the other builders.
THB: What is the state of technology in the building industry now?
PEROT: The building industry is a $250 billion industry; and terribly way behind on technology spending. This industry spends 1 percent of revenue on technology, while the average industry in this country spends 3 percent. We're looking at a big under-investment.
THB: Why is there such an under-investment in technology among builders?
PEROT: I think a lot of it is because in the homebuilding industry, companies are just trying to keep up. You've had a fabulous 10-year boom, the best decade you've ever had in homebuilding. As long as you're making your revenue goals and profit goals, you don't have to look in the basement to figure out how we're going to save some more money.
But as soon as there is a little slow down, that CEO has got to look around and say, "Wait a minute: my main business has plateaued. I've got to keep delivering earnings." There are millions of dollars [of potential savings] there in the basement.
THB: What are some traits of good technology investments?
PEROT: You're going to have to have a common enterprise resource planning (ERP) system, a common email system, good hardware strategy, and good technology procurement. A couple of [homebuilding] companies are good at using technology. KB is very good.
THB: How does a company improve its technology profile?
PEROT: [Start by assessing your technology inventory and spending. Ask yourself some questions.] If you're a $10 billion firm, ask yourself how many different PC platforms do you have? Do you let each regional office bid, or do you centralize your buying power and buy all of your units at one time? Also, you've got cultural issues you've got to work your way through; corporate change issues you've got to work your way through. It's painful.
THB: What are some examples of companies that use technology well that builders can learn from?
PEROT: You look at the great best-of-breed firms in the country Wal-Mart, GE, Home Depot, Dell Computer—they've embraced technology. They lead it. Technology is a part of every strategy. Homebuilders are going to have to follow these other industry leaders if they're going to keep up.
THB: Why are builders so slow at adopting technology. This is not a new message?
PEROT: I was a developer first before I took over a technology company. It's hard to get [developers] to worry about the back office. You're doing deals. You're surviving day-to-day. You're working with your clients. It's the nature of a developer. But as the big mega homebuilding companies mature, they're going to bring in professional managers; they're going to start to bring in guys that have all the skills and all the training. We talk to executives today and they're starting to hire out of GE, out of Wal-Mart … probably starting to hire from outside the homebuilding industry. And they're going to start to outsource their non-core competencies like technology. We hope to win a lot of business in the homebuilding industry over the next decade, as companies mature and need our services.
THB: What has been the impact of the economy over the past couple of years on investments in technology?
PEROT: Homebuilders have had great years. Our other clients have had real recessions. In recessions, the smart ones clean up the back office and invest in technology. Most cut all budgets across the board, so their technology group is under invested.
THB: What is happening now in the IT industry that will impact on the homebuilding industry in the next few years?
PEROT: The number of custom applications that homebuilders have today is stunning. We have all these custom apps that are very expensive to build and maintain. We then have packaged software, which has really not yet been adapted to the homebuilding industry. But the big change on the horizon will be open source.
THB: What advice would you have for homebuilders?
PEROT: A lot of it is just data mining. Take the thousands of homebuyers that you have. What have you learned from them? Has anybody data mined warranty claims, identified trend lines, and changed building processes to avoid those warranty claims? How about your happy customers? How do you stay in touch with them? How do you sell options and upgrades to them? Do all your customers have your email?
THB: What other predictions do you have for the building industry?
PEROT: The next big challenge will be to get electronically linked into your municipalities, where all of your building permits are done online, and all your site inspections can be done wirelessly. You've got a whole public sector interface with builders that has started in certain communities, but has yet to spread across the country.