UK-based construction collaboration software-as-a-service (SaaS) technology vendor BIW Technologies [my employer] grew its turnover 27% to £7.3 million in the year to 30 September 2008, it announced yesterday, with profits more than doubling to £1.1 million; the value of unrecognised revenues in the order book was up to £12.77 million (see news release). On both turnover and profitability metrics, this was an acceleration on BIW’s 2007 performance.
Echoing my view last week that the Economic climate will accelerate SaaS, BIW CEO Colin Smith says:
“This year has been our most successful to date in terms of revenue and profits. We operate in the SaaS sector, which is recognized as being relatively recession-proof, because there is much less up front investment required from clients, its low risk and there is a faster return on investment, therefore we should do well even in these difficult economic conditions.”
BIW’s figures maintain its significant lead among the UK-based vendors, and echo the strong performances achieved by SaaS competitors in the AEC market such as Australia-based Aconex (see 25 November post) and UK rival 4projects (14 July post). But could this year’s rosy numbers be the last high-growth figures presented by any business in this space for a while?
The end of the good times?
While the SaaS model SaaS gives visibility and resilience to a company’s forward revenues and cashflows, all of the construction collaboration technology vendors are working in increasingly tough market conditions. The current downturn is having a savage effect across the construction industry and its technology providers cannot be completely immune. Companies (eg: Pettifer) are going into administration weekly, people are being laid-off, and many projects – particularly in the private sector – are being cancelled, postponed or mothballed (including PFI projects – see CNplus).
With fewer ongoing projects around, software providers will face stiffer competition. Sadly, this may manifest itself, as elsewhere in the AEC sector, in clients and their project teams trying to cut costs by awarding work to the cheapest provider (a high risk strategy, particularly if the vendor ultimately cannot afford to keep trading at those rates, or if the chosen technology isn’t reliable or functional enough to meet the scale and complexity of the challenge). Alternatively, clients may simply decide that they can manage their projects using conventional tools such as email, CDs and piles of paper (again, a risky, short-termist strategy that opens the way to claims and disputes about late, lost or inaccurate information – with no secure audit trail to show who did what and when).
On the upside, clients may be even more conscious that they need to maintain tight control over construction budgets and programmes. Teams could decide that they want the security of a reliable project control platform to speed up processes, eliminate waste and rework, and to keep everything on track.
However, as I wrote last month (see Recession and the construction SaaS providers), potential customers must look closely at the financial resilience of any vendors they shortlist. Some providers – particularly those reliant upon small customer bases working in depressed sectors – may be unable to withstand a prolonged downturn or significant downward pressure on fees.