For many construction firms in the United States, an increase in information technology (IT) is inevitable.
According to survey results from a recent study conducted by the Associated General Contractors of America (AGC) and Sage Construction and Real Estate, industry firms are prepared to increase investments in IT in 2016. The survey was conducted as part of AGC’s 2016 Construction Industry Hiring and Business Outlook.
Forty-two percent of respondents invested at least one percent of their revenue in IT last year, up from 32 percent in surveys conducted over the past two years. The same percentage of firms report they already have formal IT plans in place, while an additional 11 percent will put this year.
Earlier this month, Sage’s Jon Witty discussed the study’s findings on a conference call.
“[C]ontractors faced with qualified labor shortages are not planning to expand their headcount as ambitiously as last year,” he said. “Their alternative is to find ways to do more with their current staff. So it’s not surprising that contractors are increasing their investment in IT as a way to achieve higher productivity.”
However, he said that even with a 10-percent increase in the firms spending 1 percent or more, the construction industry spends the smallest percent of revenue on IT compared to other major industries, according to research company Gartner.
Sixty-nine percent of contractors outsource some or all of their IT. “Outsourcing is most common among smaller firms, which are more likely not to have any in-house IT staff,” said Witty. “More than three out of four firms under $50 million in revenue report that they outsource their information technology. This confirms our experience at Sage where we are seeing more contractors moving their back-office systems to remote data centers that are managed by third-party IT service providers.”
The cloud is becoming a staple in construction technology. According to the survey, 59 percent of firms report they use, or plan to use, cloud-based software. Most firms are also using technology to collaborate on construction projects, with 71 percent using file sharing sites to share information with owners, subcontractors and other project partners. Forty percent are using more sophisticated online collaboration tools.
“[The cloud] is becoming more relevant for contractors, because of the speed at which issues on the job site need to be communicated, escalated and resolved,” said Witty. “The faster the resolution, the faster everyone makes money on the project.”
The move to the cloud has raised concern over security, which is the main reason 23 percent of firms have yet to adopt cloud-based software.
“This is a valid concern, but especially for companies that have homegrown systems that are exposed to the Internet,” said Witty. “Often times we see that with some early adopters of mobile technology, there is a lack of understanding regarding all the aspects of security. Commercial cloud-based software should be certified by a third party that it meets ISO 27001 standards for securely managing sensitive company information. Contractors should always look for this certification when evaluating cloud-based solutions.”
One of the fastest growing categories of cloud- based software adoption is with collaboration systems, which Witty said is essential in today’s construction environment.
“We expect both the adoption and sophistication of cloud-based collaborative tools to continue as project owners and general contractors have a greater expectation for collaboration among all the project team members,” he said. “In the area of winning work, contractors continue to experience increased competition for jobs, and are investing in software to help them win more business.”
Witty said that while the construction industry is not known for being an early adopter of IT technology, the overall adoption is increasing.
“I believe that we will see continued adoption of technology as a strategic competitive advantage and as a way to deliver a superior experience with higher levels of both clarity and communication to project stakeholders,” he said.