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May 05 2010

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Construction IT spend still very cost-conscious

An article by Stephen Kennett, Construction is second worst investor in IT, in Building magazine (registration required) last week highlights that the UK construction sector is slowly improving its approach to information technologies, but the picture revealed by the NCC/Construct IT survey varies depending on what type of organisation you look at.

Construction firms still spend less on IT than most other British industry sectors (health was the worst performer): £2,556 per head, compared to retail’s £2,951, transport’s £4,800, and manufacturing’s £2,790.
Building-ConIT tableA detailed report is to be published next week by Construct IT, based on a survey of construction’s top 200 companies, including building and civil contractors, developers, house-builders and designers. It shows that contractors and consultants such as architects spend the least (£2,685), and house-builders and developers spend the most, with an average of £4,390. The focus on the top companies may, however, have skewed the picture as construction is, of course, a sector heavily dominated by small and medium-sized enterprises, many of which are still suffering the effects of a savage recession (the vast majority of companies have turnovers much, much lower than £100m or £150m) – a point made by a National Federation of Builders spokesperson:

“Contractors are aware of the benefits IT can bring to their businesses, particularly in terms of increased efficiencies, but the biggest barrier at the moment is finding the capital to invest in upgrades. This is particularly true for SMEs, even those with full order books.”

Prospects

The survey apparently reveals a bleak outlook for IT spending for the next three years, with 90% of firms predicting no increase in their IT budgets this year, following drops in capital spending in many firms in 2009, plus freezes on non-essential investments, reduced staffing and support contract reviews.

Having long been an advocate of externally-hosted, web-based IT, I was pleased to see that internet-based hardware and data storage services were being increasingly favoured over in-house systems. Software was the only area where IT expenditure was predicted to rise:

“Newer technologies being looked at to cut costs include “cloud computing” – shared resources that can be accessed by any internet device – and “virtual desktop infrastructure”, where all the computer applications are held on a central server remotely.”

Corporate readiness to embrace Software-as-a-Service (SaaS) has clearly changed substantially from the early-mid 2000s when it was common for organisations to be wary of web-based application service providers. But I suspect the industry’s cost-conscious tendencies will also, unfortunately, result in companies sometimes looking for lowest-price rather than looking at quality and best long-term value of a service.

I understand, for example, that some construction collaboration technology vendors are finding it a very competitive marketplace at the moment, with wafer-thin margins and downward pressure on prices. Just as with other industry relationships, I hope this doesn’t result in a legacy of disputes and litigation arising from cheap solutions that ultimately turn out to be incapable of delivering the required quality of service. As I have written many times before, purchasing SaaS isn’t just about the technologies, it’s also about the company, its finances and people, their expertise and the infrastructure they have at their disposal. In short, it’s not about the Software – it’s about the Service.

Permanent link to this article: http://extranetevolution.com/2010/05/construction-it-spend-still-very-cost-conscious/

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