ProBuild Raises the Bar on Technology

Jim Moody , CAE
President

Last week I mentioned my concerns about ProBuild as a competitor. This week, I’d like to comment on ProBuild’s new technology package and dig into the industry’s use of technology.

But first, I want to address comments made by some of you on last week’s entry. I’m thrilled that the column generated comments. Diverging opinions are welcomed – even encouraged. Thanks to all of you who posted. My goal is not to have the last word, and I certainly won’t pretend that I’m always right. What’s important to me is creating a meaningful exchange of ideas that provides some useful information and builds a sense of community. My only requests are that comments remain in good taste and free of personal attacks (whether aimed at me or other commenters). All commenters last week followed those guidelines.

Now, to the technology issue. ProBuild is spending millions on a new technology platform called ProEdge, according the May issue of ProSales. ProBuild has about 200 full-time staffers and 100 consultants devoted to IT and will spend about 2% of revenue (in 2008 that would have been about $88 million) on technology in 2009. The goal is to integrate the legacy systems of dealers acquired by ProSales onto one platform and then to provide data in more granular detail than is typical in this industry. Once the system is up and running, the technology spend will drop to 1.5% of sales, and the expected return on investment is 7-15%.

In contrast, ProSales notes that the majority of dealers in the ProSales 100 spend less than 0.5% of revenue on technology. Almost half spend less than 0.25%. And that’s the biggest dealers. My anecdotal experience tells me that even those low numbers may be generous for the entire industry.

I’m not suggesting that this is the year for a major technology spend (maybe it is for some, but I know so many of you are in survival mode this year), nor am I suggesting that technology is as important in this industry as it is in others. (In the ProSales article, one of the leaders at ProBuild notes that his previous experience at Fidelity Capital was in spending 22-30% of revenue on information technology. There would almost certainly be unfavorable return on that kind of spending in the lumber business.)

What I am saying, however, is that one member of the competitive pack is about to set the bar higher. This could quite possibly raise the expectations of customers. As you go forward, you might want to think about how you can get the most out of IT rather than viewing it as a necessary evil.

Have you invested in the training you need to get the most out of your existing systems? Do you have a website? Is it just a “brochure,” or can customers access their account through it? Can you track orders? What about online purchase orders? Can you invoice/receive payment online (assuming you want to do that)?

Craig Webb, editor of ProSales and a good friend of CSA, has posted a related article from Bob Wiltse on how to use IT as a sales generator on the ProSales website.

So, how do you view this information? Is ProBuild spending too much in an industry that has never seemed to need as much technology infrastructure as some others? Will they fail to see a return on the investment because the customers don’t care too much about technology? Is it wiser to minimize technology spending as much as possible?