Feb 01 2008

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How big is the AEC SaaS market?

Suvendu, commenting on my first SaaS and construction collaboration in 2008 predictions post, asks “do you have an idea about the market size of SaaS for Construction industry?”

I suppose the answer to the question depends upon how you define the market and then how you measure it…. So, sorry if this is quite a long answer….

Look at numbers of users, seats, etc?

This is fraught with difficulties. While some construction collaboration platforms are sold on a per-user basis, most of the leading UK systems adopt a ‘looser’ approach intended to encourage take-up and collaboration. Typically, these providers offer their systems on a per-project or per-programme basis, placing no limits on the numbers of users. However, getting accurate figures on how many users each system has is very difficult (I have written about this before – here and here, for example), as some vendors give no information about take-up of their systems at all. Others (BIW [my employer] and Asite spring to mind) are quite open about how many users they have registered, but even these figures need to be treated with care.

One cannot, for example, simply total the published figures and arrive at a total user population for all systems: given that many users may be involved in multiple projects each requiring use of different systems, some users may each be counted several times each. It can also be difficult to distinguish between people who actually log-in to use a systems (active users) and those who are simply registered as users just in case they might need to log-in one day but never do (non-active users). The time period is also key. Since 2000, for instance, around 100,000 users, from across 10,000 organisations, have been registered to use the BIW platform, but active users back in, say, 2001 may no longer be active users, or they may have moved jobs and re-registered (more double-counting). As a result, instead of counting users, BIW has begun to focus on metrics indicating volume of usage during each financial year, eg: number of user sessions, total number of documents and drawings published, etc (we should be publishing some new figures shortly).

Then there’s the potential user community…. The construction industry is the biggest sector of the UK economy, with 186,000 private contractor firms, according to the 2007 Construction Statistics Annual. More than a third of these are one-person outfits; only 6,000 of them have 25 or more employees. And this excludes 23,500 professional firms – where, again, there is a similar preponderance of small and medium-sized enterprises – and the materials producers and component suppliers, and the all-important customer organisations. So, over 200,000 firms in the industry itself, and over two million individuals, plus clients and supply chains. It’s a huge market and that’s only thinking about the UK….

Look only at SaaS collaboration?

While my interests are mainly focused on what we currently describe as construction collaboration technologies, there will doubtless be other SaaS-based applications that could be deployed within the AEC market. For example, some AEC firms will doubtless be using SaaS-based Customer Relationship Management tools (eg: Salesforce.com), accounting/ERP (eg: Netsuite), human resources, e-commerce, etc; some may even be tempted away from reliance on standard Office software by Google’s SaaS-based Google Docs suite. When the SaaS revolution is potentially extending right across the enterprise, then the AEC market opportunity could be collossal.


Look at AEC SaaS revenues?

I could make a reasonable stab at estimating the value (ie: revenues generated) of the leading UK construction collaboration technology vendors. In my presentation at the Construction Computing Show 2007, for example, I calculated the combined turnover of seven providers – BIW, 4Projects, Business Collaborator, CTSpace, Asite, Styles & Wood’s StoreData division, and Aconex‘s UK operation – was somewhere around £18 million in 2007.

However, treat this figure with great care. For instance, this figure:

  1. excluded Autodesk Buzzsaw and several of the smaller AEC-focused vendors (eg: Cadweb, Sarcophagus, ePIN, e-Box, etc) for whom I can glean little or no financial information
  2. excluded vendors of more generic information management solutions that might also be used for construction collaboration (eg: Union Square‘s WorkSpace, Microsoft SharePoint)
  3. made no allowance for revenues generated from providers’ training and consultancy services (as distinct from SaaS subscription income)
  4. made no allowance for income related to other products or services (eg: Business Collaborator’s Sedex activities), or from non-SaaS implementations (some vendors offer this as an option for customers who prefer to host the software themselves)
  5. may include revenues generated outside the UK, but accounted for by a UK-based parent

Clearly, even if you focus just on one geographical market, it is difficult to make an accurate estimate.

Relate SaaS collaboration to the size of the industry?

The AEC industry is one of the biggest sectors of the UK economy. It contributes about 10% of the UK’s gross domestic product, an annual output of over £100 billion (£113bn in 2006, again according to the 2007 Construction Statistics Annual). OK, a significant proportion of this relates to repair and maintenance rather than new-build, and there will be a large number of projects where use of a collaboration platform just wouldn’t be economically feasible, but the figures are still mind-boggling. And, even assuming that expenditure on construction collaboration technologies is included in these figures (and assuming the £18m figure is about right), it amounts to a tiny fraction of a percent (about 0.016%, if my maths is right) of total UK output.

Then, again, you could add together all the values of all the different national markets around the world…. north America, mainland Europe, Middle East
, Asia Pacific….

Look at the construction values of the projects where SaaS solutions are deployed?

An alternative approach would be to work out the total capital value of the project and programmes where SaaS construction collaboration solutions are being used. Several vendors have used this ploy over the years, partly because it tends to give an impressive-sounding multi-billion figure. Aconex, for example, says that “Clients have selected Aconex for projects valued at over $180 billion” (I assume that’s Australian dollars – in which case it’s about £82 billion or US$160), while Cadweb claims a more modest US$15 billion.

As with the other methods, it can be difficult to compile reliable figures. For example:

  • Are we talking about total project values, or just the costs of the elements where the collaboration tool is used?
  • Do project values include land acquisition costs, professional fees, etc?
  • Who, if anyone, provides the project value? (In my experience, some customers can be reticent about giving a total project value, and if you are dealing with a contractor or other supply chain member, they may not even know the total figure – just the figure for the contract or package with which they are involved)
  • Framework agreements may cover programmes of work worth many billions, but the tool may only be deployed on some, not all, of the programme.
  • Similarly, enterprise deployments may allow a firm to use the solution on all of its projects, but there will always be some where it is just not economic or practicable to do so. The vendor might seek to suggest that its application is supporting a £100m workload, when the actual figure might be half or less that figure.

Permanent link to this article: http://extranetevolution.com/2008/02/how-big-is-the/

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