Viewpoint restructured and growing

Viewpoint CEO Manolis Kotzabasakis says construction needs to change, and believes his company is well-placed to lead industry adoption of SaaS-based ‘field to back office information on the go’.

Following Aconex’s recent acquisition of SaaS construction collaboration rival Conject, there was – as usual – some debate about the implications of the deal for other vendors in the space. Some commenters (example) suggested that Aconex competitors such as Portland, Oregon, US-based Viewpoint would now struggle, and hinted at redundancies in Viewpoint’s UK operation, management changes and poor business performance.

Such views were robustly rejected when I spoke last week to Manolis Kotzabasakis – who succeeded Jay Haladay as CEO of Viewpoint in August 2015 (post) – and other senior Viewpoint executives.

Transformation and IT consolidation

Manolis, who started out as a chemical engineer working in the UK (he studied at Manchester University and was CEO of Northwich-based Linnhoff March in my home county of Cheshire for a time), was recruited to Viewpoint from Aspen Technologies where he rose quickly through the ranks from a marketing role to chief technology office. During his time there he was involved in over 20 acquisitions and saw at first hand how technology could transform business processes in traditional industries (in this case, in the process manufacturing sector).

He told me he had been excited about the potential to help construction businesses experience the same kind of transformation – “construction is one of the last major verticals needing to change” – and not just large corporations but SMEs too. He had also witnessed how the process plant industry’s IT sector had gone through a spate of M&A activity, and felt the AEC sector was already starting to see a similar rationalisation to a more select group of major players.

Viewpoint management changes

Appointed in March 2014, EMEA MD Alun Baker has now left the business following changes intended to create a functional, rather than regional, reporting structure across the Viewpoint group, Manolis said.

“Viewpoint, as a company, has been very successful given its scale, but needed to change. We had various individuals – like Jay – looking to retire or move in a new direction. Moving from regional reporting to functional reporting is the right structure for Viewpoint. Most of the significant changes have been in the US; Alun’s departure was the only significant change in the UK – he had also felt it would be better if he moved.”

Steve Spark, commercial director for EMEA and global SVP Sales, now leads the UK operation, while taking responsibility for collaboration and Field View sales in the US and in Australasia. He said headcount in Viewpoint’s EMEA region (largely comprising the former 4Projects business) grew 27% from 2014 to 2015 (some of this increase can be attributed to the December 2014 acquisition of Mobile Computing Solutions); more recently, at the end of March 2016, total headcount was up 10% from March 2015.

“We are very excited about the pick-up so far, and believe there are some big opportunities for us in the US,” said Manolis.

Acquisitions being eyed

He also said Viewpoint had been winning some collaboration deals in Australia despite Aconex’s supposed domination of its domestic market. He felt Aconex’s Conject deal was the latest sign of consolidation in the AEC software market, and said Viewpoint is looking at potential acquisitions, continuing:

“Our vision is to bring together the field with the back office. I have been excited to talk to some of our major US customers and find they share this vision. They feel integration is vital, and want our combination of collaborative tools and BIM. They want information on the go – whether on the project site or in a hotel room. Some are not ready yet for the cloud; some want it today.

“It is slightly different with ERP, so we may progress with public/private or ‘hybrid’ cloud provision of back office ERP. This is currently mainly a US challenge; we are not providing ERP in the EMEA region yet, so here we are following an integration strategy, helping our customers connect Viewpoint collaboration to back office ERP from COINS and other leading vendors. The API becomes very important to us.”

Viewpoint For Projects successes

EMEA CFO Chris Baty said the UK-based collaboration product had seen growth accelerate in 2015, with the acceleration continuing in 2016. Steve Spark underlined the company’s success in securing corporate deals:

“Looking at 1,840 deals reported by Construction Enquirer, worth around £25 billion, we are working with 95% of the top 20 contractors, and 50% of these solely use ViewPoint For Projects for all their projects. Looking at our Field View customers, 20% of these are on enterprise deals, with 20% using both products.

“We are also seeing growing interest below the Tier 1 contractors: subcontractors down the supply chain are becoming increasingly interested in using Viewpoint for collaboration – BIM has been a strong catalyst for this – and we now have a sales team dedicated to working with specialist contractors.”

Summary view

Manolis summed up the conversation:

“We now have the right people in place and we have got the basics right. Growth is accelerating and profitability is very impressive across the business, and we are encouraged by the EMEA growth, with UK growth particularly impressive. New SaaS bookings are up 50%, which will translate to later revenues – all a strong testament to Steve and his team.”

Commentary

The post-Aconex/Conject comments seemed mainly to reflect the views of bullish Aconex advocates and/or mischievous competitors. The SaaS collaboration sector is also small and incestuous, with a lot of movement between the different firms, so it is inevitable that individuals with axes to grind will sometimes take the opportunity to suggest changes are hampering, rather than helping, a rival business.

Viewpoint is a sound business with ambitions to expand use of cloud-hosted BIM-driven collaboration in its core north American market while simultaneously capitalising upon its UK business’s strong footprint to grow brand awareness and eventually sales of its ERP platform in new markets. From his time at AspenTech, Manolis Kotzabasakis has strong experience in building and extending the reach of an international software business, and Viewpoint’s strategy is strongly supported by Bain Capital who made a US$230 investment in the company two years ago. Viewpoint remains an ambitious and well-backed player in the construction software space, with a strong BIM product and wider and scalable SaaS strategy, and so well placed to capitalise upon the growing adoption of such technologies by both construction businesses and asset owners.

The tripling of Aconex’s share price since its December 2014 IPO has helped draw attention to the construction software space and there have been several large investments in the sector (in the last two years, US-based Procore, for example, raised $15m in June 2014, $30m in April 2015 and another $50m in December 2015), and Aconex’s Conject deal and capital-raising shows continued appetite among investors. However, some investors are also urging caution, particularly in relation to M&A activity – mentioned by Manolis.

Research by Deutsche Bank analysts (reported in the Australian Financial Review), for example, suggested M&A can be both a driver of earnings but also a potential risk due to possible overpaying for assets and integrating purchases; it said Aconex’s growth strategy “involves opportunistic assessment of acquisitions which presents pricing and integration risk.” And such risks can also be particularly acute in the notoriously cyclical construction sector; as we saw with the Global Financial Crisis, an industry downturn can quickly impact the revenues of businesses reliant upon a steady stream of project starts.

[Disclosure: Unrelated to this blog post, I will be speaking at the Viewpoint UK user conference later this month.]