by JEFF WEISS, CMiC
This article was originally published to the CMiC Construction and Capital Project Management Blog on February 02, 2016.
Construction project management, accounting and other core aspects of operational oversight have evolved significantly in the past couple of decades, and technology's evolution has been firmly at the center of these trends the entire time. The sector has had to weather a wealth of storms in the past 10 years, including one of the more significant recessions in the history of the United States that struck construction firms and real estate markets as hard as any other area of the economy.
Interestingly, spending on technology among construction firms has been largely cold since 2010. For example, ENR reported in 2012 that the construction sector was in "dead last" with respect to technology spending compared to other industries at that time. Unfortunately, the figure cited in that article from Gartner was 1.6 percent of total revenues allocated to technology investments - far lower than most other sectors - and the rate is not necessarily increasing.
The most recent JBKnowledge survey found that the level of IT spending compared to revenues dropped to 1 percent in 2015, according to For Construction Pros. One must wonder why construction firms are not putting more of their budgets and resources into advanced accounting and management solutions that can dramatically reduce their waste and risk while driving productivity, efficiency and even the success rate of contract acquisitions from the public and private sectors.
This is even more baffling when looking at the sector at large, and the firms that have been the most sustainable and effective in their pursuits. Simply put, competition is not going to become less intense in the construction market any time soon, and the firms that have the strongest handle over their projects, accounting and other management frameworks will likely end up on the top of the market. Signs of this are extensive in research and news today.
A quick example
The Columbus Dispatch recently ran a story on Danis Construction, a company that is now 100 years old and has been a major player in the Dayton, Ohio, landscape for that entire tenure. The source pointed out that the firm has been involved in so many projects for the city that it would be difficult to walk a block in any direction and not see its buildings, infrastructure and more, while the work it has completed sprawls outside the boundaries of the municipality as well.
At the same time, the news provider pointed out that the city and construction company have had to overcome immense challenges related to economic turbulence throughout the past 100 years, including the Great Depression and the most recent recession. According to Columbus Dispatch, the transformation of technology has certainly played a major role in Danis' performances, sometimes presenting challenges and, in other situations, opportunity.
Simply put, it would be exceedingly difficult to sustain a construction business for 10 years, let alone 100 years, without a keen focus on riding the waves of technology trends. Today, some of the most advanced, intuitive and approachable solutions are now available to assist leaders in the sector with process improvements pertaining to construction project accounting and general management, and they should be treated as mission-critical before long.
In a story about a new bachelor's program for construction professionals, Prajakta Dhopade, a contributor to Maclean's, explained that the responsibilities of modern employees are transforming quickly. What's more, the author pointed out that an estimated 250,000 construction professionals will head into retirement in the next decade in Canada alone, and that the sector will be facing immense challenges with respect to hiring at the end of that period.
American firms will be facing similar challenges, and need to begin preparing for this hit soon. According to Dhopade, technology institutes are increasingly looking to improve their construction-related degree programs to prepare the future workforce for the tasks at hand. This will need to include at least some information and education on the interaction between modern management technologies and construction project oversight.
In that same vein, construction firms that are not confident in their project managers' or accounting professionals' abilities to properly use the technological solutions available to them should certainly begin considering the prospect of deploying training programs. In many ways, technology can be viewed as a profound weapon that can be used to improve corporate continuity and performance, but the solutions must be used properly to have a positive impact.
One more sign
The construction industry can benefit from more specialized accounting and management technology, and it would be very difficult to make an argument to the contrary. With reports showing that leaders are, on average, putting around 1 percent of their revenues into these solutions, the time is now to wake up to the importance of having the right technology in place as soon as possible to handle modern challenges.
Virtually every other industry is putting far more investment into technologies. For example, International Data Corporation reported that spending on digital transformation technologies is set to expand at a compound annual growth rate of 16.8 percent between 2014 and 2019, at which time expenditures will exceed $2.1 billion globally.
The analysts spoke to why this movement is such an important one to watch, regardless of which industry a firm might fall into.
"Digital transformation is not just a technology trend, it is at the center of business strategies across all industry segments and markets," IDC Group Vice President Robert Parker asserted. "Enabled by the 3rd Platform, digital transformation represents a critical opportunity for companies to redefine their customers' experience, achieve new levels of enterprise productivity, and create competitive advantage. Enterprise investments in digital transformation will constitute the majority of growth in technology markets over the next five years, making it a priority for technology vendors as well."
Construction leaders should consider working with a reliable managed service firm to get the right accounting and other solutions into place as soon as possible, as failing to do so could represent the first step toward a competitive disadvantage.