CFMA Building Profits Magazine
By James M. Benham, Chief Executive Officer of JBKnowledge, Inc.
The 2014 Construction Technology Report conducted by JBKnowledge (in partnership with CFMA and Texas A&M University’s Construction Science Department) recently investigated how more than 1,000 contractors are using, funding, and implementing information technology (IT).
More than 30% of construction companies surveyed said that their 2014 IT budget as a percentage of 2013 corporate revenue is less than 1%. Interestingly, the size of the company did not impact the IT budget allocation; the majority of companies with the largest sales volumes (more than $500 million) still only allot less than 1% of corporate revenue to IT.
What does this imply for contractors, their IT departments, and their IT users (i.e., employees)? While the availability, functionality, and affordability of IT is consistently improving, attitudes toward IT spending are not.
IT Budget & Staffing Trends
Minimal IT budgets mean minimal IT staffing. Nearly 60% of the survey respondents have a dedicated IT department. And, regardless of sales volume or IT budget, the average IT staff size is 1-5 people for companies with 1-1,000 total employees. (The number of employees dedicated to IT increases only in companies with more than 1,000 employees.) More than half of the companies maintained the same IT staff size in 2013 with plans to maintain the same size in 2014. Very few companies anticipated decreasing their IT staff in 2014.
What’s more interesting is how IT strategy is perceived. When asked how their company determines the number of employees dedicated to IT:
• 60% said it is a function of the number of total employees on staff,
• 33.5% said IT staffing depends on the number of technology solutions needing support,
• 25% said IT staffing depends on the size and scope of upcoming projects, and
• 4.7% said IT staffing depends on budget allowances.
Interestingly, the size of the company did not affect this ranking. The fact that many respondents confidently ranked those factors similarly is compelling, especially since the actual numbers they submitted indicate that IT staffing is in fact highly correlated to budget.
Cloud Software for Financial Management
Since the Construction Technology Report was first conducted in 2012, the use of cloud-based software in construction has doubled. Since then, accounting has remained the least likely department to adopt cloud technology. Furthermore, significantly fewer survey respondents in 2014 reported using QuickBooks, spreadsheets, and/or manual processes for accounting than in prior years. However, the number of respondents using a custom solution more than quadrupled since 2013, indicating companies may be abandoning spreadsheets for internally developed software.
The permission rate of cloud-based construction software has doubled since 2012. However, 40.5% of the survey respondents reported that their company had no cloud security policies in place and 22.6% said that they were unaware of any cloud security policies in place; 75% of those who said “I don’t know” also reported that their company had a dedicated IT department.
Despite companies allowing an increasing amount of data in the cloud, the policies and procedures that should accompany cloud usage are not increasing at the same rate. Contractors are using a higher number of cloud solutions than ever before, opting for mobile, remotely accessible data in place of desktop applications that require installation or CD-ROMs. Construction professionals are accessing their data via private and public cloud infrastructures and collaborating across departments (and continents).
Companies are adopting more and more cloud solutions without implementing the security policies to accompany them. Data is requested, transmitted, and manipulated by an increasing number of devices, people, and companies through the cloud and according to these survey results, less and less is known about the quality and security of that data.
Many companies now store their entire financial history using cloud solutions, from accounting ledgers to subcontractor financials to project change orders. All of these data points can reveal a company’s competitive advantage and should therefore receive the utmost in data security measures. The key is not to minimize cloud solutions. A rogue employee can copy secure data to a flash drive just as easily as he or she can upload it to the cloud. The key is to give cloud solutions the necessary attention and resources to work most efficiently for your company.
For more on this topic, read “How to Identify Threats & Protect Vital Project Data” in the September/October 2014 issue.
Data Integration Trends
In addition to lacking security with cloud solutions, contractors also seem to rarely integrate their software, with only 4.1% of contractors reporting to have full integration and more than 30% reporting a complete absence of software integration. To put this in perspective, 11.9% of construction professionals that use six software applications daily have no automatic data transmission among those applications.
Since 2012, reliance on spreadsheets for data transfer continues to rise, along with the use of CSV files and e-mail. For the third consecutive year, nearly 20% of those surveyed said they simply don’t transfer data. A growing number ofcompanies are building custom solutions for data integration.
Since the cost of such custom developments increases with the efficiencies created, it is understandable that the majority of companies building custom solutions are also those with more than $500 million in annual sales. On a positive note, more companies are seeing their software providers take part in efforts to integrate with complementary solutions through organizations such as the Construction Open Software Alliance (constructionosa.org).
While only 17.1% of survey respondents do not prequalify their subcontractors, less than 10% of companies that do prequalify use a dedicated software solution. The largest percentage of survey respondents, 42.6%, prequalifies subcontractors manually via paper, PDFs, and e-mail communication.
And, the most popular prequalification software solutions also double as invitation to bid, accounting, or project management solutions. Additionally, more than 20% of contractors had developed their own prequalification solution in-house.
What Does It All Mean?
The term “Information Technology” evokes various connotations. If IT is part of your job title, then it typically means there’s soon to be a line outside of your door. If you’re an executive, IT can imply spending money for an investment that may take months or years of implementation to prove its worth. If you’ve grown up with multiple social media accounts and just as many devices, the term IT typically means groaning through manual spreadsheets or programs you’re trying to make work on your smartphone.
Why do companies need to better budget and employ IT now? (“Because other industries are doing it” isn’t a good enough answer for the industry that built the Hoover Dam without the Internet.) The answers will be found in the technologies, employees, and services of 2015 and beyond.
By now, most construction professionals are aware of innovative technology breakthroughs in the field (e.g., drones, augmented reality, virtual reality, safety helmets with headsup displays, smart glasses built into safety goggles, GPS sensors for resource tracking, 3D printing, iBeacons for jobsite communication, and smart sensors for structural monitoring). Many of these technologies will see long-lasting, sustainable applications in construction, and companies that have yet to even break through the cloud software barrier will find themselves far behind more progressive companies.
In addition, a new generation of builders eager for technology is quickly infiltrating the workforce. Antiquated systems won’t satisfy them. They’re equipped with the knowledge to bring construction companies into the next phase of technology, but they need the tools first.
Lastly, technology is no longer merely an expense line, but rather a value-add, and can even be a revenue-generating service. Clients and project owners are becoming more tech-savvy and want to see that their contractors are, too. Employing great technology, and being able to show it, adds value to every project. Value means increased ROI. Increased ROI means technology eventually pays for itself.
Where to Begin
Whether you’re a CFM with an influential voice in technology strategy, budget, and purchasing decisions or an end user requesting new construction accounting software, both ends of the spectrum can ensure that IT (or the lack thereof) is not the catalytic failure on your next project.
Keep up with the technologies currently available. Whether you’re proposing them to your employees or requesting them from your managers, test them out and know your options. Determine your IT budget, understand where the numbers come from, and start a discussion on how your company, or even just your department, fits into that budget.
Finally, stay informed on future technologies. Know where new products may fall into your company or your job description, and be prepared. If IT budgeting and staffing reach sufficient levels and the next generation of technology shows up on your monitor, then you’re the final obstacle to turning that technology into revenue. Be ready.