Construction businesses have to meet urgent needs for new housing, commercial and government facilities, and public infrastructures. Coming out of the pandemic, they face high expectations from clients, increased costs and shortages of critical supplies, and a lack of skilled talent. The right business management technology can make it easier for construction companies to run and grow a profitable, efficient, competitive business. In a series of five blog posts, we take a closer look at industry conditions and how a software solution delivered by Sikich can help companies thrive.
In our previous post
, we considered important developments that impact the construction business. Today, we gather the most critical capabilities that need to be present in a business management software system designed for construction companies.
Transcending legacy technology
When it became possible to restart construction activity during the pandemic, many companies still had to find a way to enable their office employees, managers, and executives to work from remote locations in order to keep the business going. Often, alarms went off when companies realized how inflexible their technologies were. Even if they could purchase and actually receive mobile devices for everybody during that time of delayed deliveries, their software applications were not always ready and secure enough to allow remote access.
Many construction companies had begun and operated for years by using solid, but relatively entry-level financial and productivity software running on-premises. Their technology was often already strained before the pandemic. It threatened to slow business down unless they modernized quickly. For many, that meant thinking about the potential and opportunity of cloud technology and about what software should help a construction company accomplish.
Four key goals for construction software
Based on our experience in the industry—Sikich has more than 560 construction clients—and what we have heard from analysts and construction companies, construction software needs to help companies address four critical concerns:
- Ensure profitability. You have to be able to manage your finances to meet your revenue goals and achieve sustainable margins. Project performance has to deliver the right financial results. You need to be able to invest finances and resources in profitable growth.
- Enable productivity. Project managers and business executives should have anytime, anywhere access to management capabilities and information. They also need to be able to meet and collaborate internally and with clients, architects, regulators, and others securely and whenever they wish. Automation should replace routine office tasks whenever possible, allowing employees to do more valuable work.
- Mitigate risk. You need to be aware of possible financial and operational liabilities related to clients, vendors, subcontractors, and projects, so you can address them proactively. Your processes and policies have to meet regulatory mandates for business management, worker safety, environmental standards, and other conditions. As much as possible, you should be able to eliminate human error resulting from flawed judgments, conflicting data, or outmoded processes.
- Provide visibility. This is a fundamental requirement for the three business drivers of profitability, productivity, and risk management. Visibility needs to be pervasive throughout your business, for everybody who plays a role in it. In the areas of their responsibility, people need actionable insight based on real-time information. They also need to understand how to find collaborators, tools, and data that can help them.
According to McKinsey research
, construction companies can still achieve margins between 20 and 30 percent if they reengineer their operations for best profitability, the first goal we listed. Honing in on profitability, nine critical values or financial metrics matter most, and your business software should help you track and manage them:
- Job cost estimates
- Contract values
Limitations of specialized software tools
Traditionally, construction business managers would access a variety of software systems to identify these values: project management tools, financial and accounting systems, customer relationship management (CRM) solutions, or an enterprise resource planning (ERP) system.
Many of the software products widely used in construction companies have significant drawbacks. Some popular financial and business management systems are perfect for small companies with basic requirements, but they cannot scale as companies’ workforces and projects grow, especially if they operate multiple offices and do business across geographical regions. Some of these products are easy to learn and use, but they don’t reflect the world of construction, which means companies using them have to compromise and make do with less functionality than they should have.
Other software may be designed for one area of the business, such as project management, but lack integration with company financials, HR, and other critical systems. Or, products are too highly specialized for a particular construction discipline, like HVAC installers or public-sector builders. Several software products offered as comprehensive construction ERP systems really are a best fit only for home builders.
When it comes to visibility and business insight, the struggle for construction companies continues with many of these software products. To gain reliable, real-time intelligence about their business, they almost always need to purchase additional solutions. They then have to find a way to integrate data sources and business insight tools and make analytics and intelligence available to the people who can benefit from them. Or, if they don’t integrate their business intelligence software and data repositories, they are enforcing more redundant data entry with all its inefficiencies, errors, and overhead.
What do ERP and cloud have to offer?
On the other hand, construction companies are appropriately reluctant to consider large, complex ERP systems that may provide all the capabilities they need, but require high investments, lengthy deployments, extensive training, and hands-on IT management at all times. Except for very large construction enterprises, the ratio of cost to benefit is not healthy. For many of the same reasons, construction firms don’t often task developers with building customer software just for them. Planning, preparation, and effective collaboration to build such a solution typically demand more financial outlays and resources than many companies are ready to dedicate to a development initiative.
After giving thought to what functionality construction software should offer, you also have to consider where it should live. Clearly, deploying the technology on-premises may limit its usefulness, especially if you don’t have a skilled IT team to support the construction software system and its users. Also, unless you run a state-of-the-art data center—and what construction companies does?—it will be difficult to provide anytime, secure access to your digital resources for people on project sites or working at other remote locations.
Speaking for the cloud
These two arguments would favor the cloud, but they are not the only ones. Cloud software favors the best possible quality. Today’s leading providers of cloud-based software keep their technology current and secure with frequent updates and enhancements, often at a published schedule. Software updates are generally automatic and don’t require IT or users to take any extra steps. Data protection is also superior: Backups take place automatically, and you can expect dependable service levels for the uptime of your applications and the availability of your data.
Also, you don’t have to purchase, provision, secure, and manage servers, storage, networking and communications hardware, unless you have compelling reasons to keep certain data or software capabilities on-premises. The cloud providers take care of the infrastructures their systems and clients need, and, given client’s expectations and the competitiveness of their business, tend to provide outstanding service quality in securing the resources and making computing and storage capacities available as businesses require. That means you can add functionality and storage space at very short notice, and scale down when you no longer need them. With the cloud’s usage-based billing model, there is no upfront investment; you only pay for what you actually consume.
The anytime, anywhere cloud advantage for users
Users can access cloud technology anytime, as long as they have a connected device. Many application providers have created robust, intuitive apps with outstanding usability. Some of them come with offline capabilities—they can be used even when they cannot connect to the cloud, and the software syncs data between the device and the cloud data center when connectivity is available again. At construction locations, connectivity can be chancy, so the ability to use your software offline could be a real asset.
We now have several criteria for what you should look for in construction technology. It should be at home in the cloud, with apps on mobile devices and unrestricted, secure access for users. It needs to combine specific construction functionality with finance and business management capabilities. It also needs to give you visibility of the business by means of tools you can adapt and use. Finally, it should also be easy to learn and navigate, allowing both sophisticated and nontechnical users to get better at what they do without distracting them.
Now we can translate our software wish list into a practical, easily deployed solution. In the next post, we’ll describe what that looks like.
Taking the next step
When you decide it’s time to find out how modern technology and deep industry expertise can help you run a successful, profitable construction business, here are some next steps: