AEC IT and SaaS spend growing?

US research hints at growing investments by construction businesses in ICT, with strong interests in mobile and cloud-based technologies.

Almost since I first encountered what we now describe as cloud-based computing in the construction sector (in 1998), I have been monitoring trends in its adoption and use. In the early 2000s, for example, construction businesses under-invested in IT, and there was widespread reluctance in many construction organisations to let commercial software providers manage their data on their behalf.

SaaS tipping pointBut, over time, this reluctance has reduced. Web-savvy IT managers and directors in many construction businesses realised that their core business was about undertaking construction projects, not running expensive and constantly expanding IT infrastructures. Moreover, they were able to transfer the risks and responsibilities of securely managing data and applications to outside organisations for whom this was their core business (in some of my industry talks, I use a graphic, right, which suggests the tipping point came around 2012). Simultaneously, some businesses in the traditional construction software sector began to switch from providing feature-heavy, on-premise applications with huge up-front license fees to delivering software that could be accessed remotely via browsers and mobile apps on a pay-as-you-go subscription basis.

AEC SME research

These trends continue to influence construction software buying habits. A research snapshot undertaken in late 2017 in the US by Software Connect looked at the current technology and software uses—as well as future plans of 158 construction industry professionals from small to midsize (SMB) businesses in North America. The key findings published in January 2018 included:

  • Expect drones to be commonplace. 26% of SMB construction professionals are already using or plan to use by 2020.
  • Expect larger tech budgets. 81% of respondents plan to spend more on technology over the coming year compared to last.
  • Project tracking, estimating, and job costing are the most commonly required software functions.
  • Software ease-of-use is king. Cited as the most important factor when purchasing new software, even over software functionality and cost.
  • Construction software buyers are more willing to review cloud-hosted software. 5% more than all other industries.

Research by Gartner in 2012 suggested construction businesses spent, on average, about 1.2% of revenues on IT (making the construction industry one of the lowest spenders of all industries). And several reports on digital transformation (see the Mckinsey Global Institute 2015 and 2016 reports on the US and Europe, for example) show construction lagging just about every other industry sector. So it is gratifying to see signs that some construction businesses are planning to spend more on IT – the Software Connect survey found around a third (32%) of US SME construction businesses planning to spend more on IT.

Increased ICT expenditure

Construction is forecast to be a $14 trillion [c. £11 trillion] global industry by 2025. If the global construction sector raises its ICT spend to the level – c. 2.5% – of many manufacturing sectors (perhaps encouraged by exhortations towards greater standardisation and increased use of offsite manufacture techniques to deliver built assets), then total construction industry spend on ICT might be around $350 billion [c. £270 billion] by 2025.

Of course, not all this spend will relate to construction-specific applications. Many businesses already invest heavily in datacentres, internal hardware and the desktop, laptop, tablets and mobile devices used by their employees. Back-office applications and standard office tools, plus expenditure on telecommunications and IT support, will also eat into ICT budgets. But new ICT investments will also need to be made in training and in integration with legacy systems – the Software Connect survey identified three main obstacles:

  • Insufficient commitment of resources
  • Field-based resistance to large-scale implementation
  • Incompatibility with legacy systems

The survey’s commentary cites 2016 research by the UK’s BRE Academy which identified a digital skills gap in construction (I wrote about this research in March 2016 in relation to a construction skills research project, SkillsPlanner, on which I was then working). And I repeatedly remind conference audiences that the UK BIM programme is just part of a much wider reform initiative which is far more about changing industry cultures, people and processes (90%) than about implementing new technologies (10%).

Cloud-hosted software

Software Connect Mobile useSoftware Connect asked its survey respondents if they’re “open to reviewing cloud/hosted software” and found “construction businesses are especially open to cloud-hosted software (typically 5% more likely than other industries).” Openness was around the 87% mark, while 58% of SMB construction professionals said their business at least “sometimes” relied on mobile or tablet-based applications.

This is a useful update on research undertaken by Capterra in 2015 which showed SaaS tool adoption had grown to almost half, with a “pretty big explosion” anticipated as more people adopted mobile working.

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