Technology Planning With the Looming Recession (and the Cost of Doing Nothing)

As uncertainty lurks in the future of the U.S. economy and, subsequently, construction industry spending, contractors are taking different approaches to technology as a path to modernize their operations to better compete in the near- and long-term future.

Lower construction spending, labor uncertainty and an overall cooling of the economy have contractors discussing how to best prepare for and weather any potential recession or downturn. However, with the construction industry in the midst of a technology transformation, contractors also know they will need to be technologically prepared to meet modern demands — recession or not. Hoarding capital for future technology investments or moving forward on system and process upgrades now offer two unique perspectives on how to best scale the next wave of technology adoption. 

Both strategies mirror an effort to stay on top of technology and create efficiencies, especially in a time where some may pull back on spending in the information technology sector. Jason Pelkey, Gilbane Building Co.’s CIO, told Construction Drive that a long-term IT strategy doesn’t allow for volatility to turn it astray. “If you play the spike game where you fund technology only during the good times and you cut it way back during the recession times,” he says, “it creates a spiraling effect.” 

With that in mind, contractors fall into three categories: 

• Those who move on technology upgrades when they see uncertainty looming;
• Those who store capital to upgrade technology during a slow time; and 
• Those who stand pat with old technology and manual processes

A Sense of Technology Urgency

It is the latter group that could soon find themselves at a significant disadvantage. The cost of doing nothing doesn’t come cheap. Companies hesitant to implement technologies that the industry is demanding — like integrated, cloud-based construction collaboration and management software —may soon not be able to effectively meet modern project demands. An Aberdeen Group report says 35 percent of contractors today are still suffering from redundant data, 28 percent have systems that can’t track business processes and 23 percent lack the ability to collaborate, all while dealing with inaccurate data. 

Not only are these companies’ processes bogged down in efficiencies, but the struggle will intensify when growth opportunities arise. Ross Finch, operations development manager for Encore Electric of Lakewood, Colorado, said his company recognized an antiquated system rife with inefficiencies that was holding back the 800-employee firm1. “I’m convinced that our system was one of the reasons that we were able to retain more margins,” he said about the company’s upgrade to a cloud-based ERP system designed for their specific construction needs. “It would have been so painful to have gone through that extreme growth with the old system.” 

For the sake of the future — uncertain or otherwise — investing in technology while you still can create valuable opportunities to efficiently and effectively stay a step ahead of the competition. “We’re always trying to get 1 percent better or 5 percent better,” said Gregg Shoppman, principal at FMI Corporation, a consulting firm specializing in construction. “Well, you’re not going to get there using the same methods, so you’re going to have to leverage better technology.1”

Amazingly, there are still a large number of contractors that have not taken advantage of recent software and technology advancements available to them. With most industries advancing their technology initiatives at breakneck pace, those still resisting might find themselves at a competitive disadvantage to their peers that do modernize. 

The Benefits of Change

Contractors that have modernized operations and embraced technology are already realizing that a tech upgrade can have many benefits. Among them:

• Updating to cloud-based systems can significantly streamline processes and workflows, helping office and field staff not duplicate efforts or rely on manual processes
• Embracing the cloud has also helped contractors take significant strain off of IT departments and helped ease costly IT investments by allowing cloud vendors to store and manage data, provide automatic software updates and providing consistent backups of data should a disaster or security breach occur — ensuring the business keeps running.
• Integrated, collaborative software solutions can better connect everyone involved in projects — from project teams, to back-office staff to field-based crews to external contractors and vendors to owners and architects
• Modern software ensures timely, accurate data to better understand real-time job costs and progress, stick to budgets and timelines, find ways to maximize performance and profitability, and better estimate and plan for future projects
• Intuitive mobile technologies are mitigating project and safety risks, reducing costs and time spent on tasks, and allowing contractors to work quicker and smarter in the field

From providing a single source of data across entire project teams to improving cash flow by reducing time spent tracking and managing invoices to optimizing labor and equipment, the use of technology helps an industry that has traditionally been the least accustomed to technology find increased productivity and profitability. 

A Hobson & Company study conducted with Viewpoint clients, for example, concluded that modernizing with an integrated enterprise resource management (ERP) system could be worth up to a 7 percent increase in revenue gains, 36 percent cost savings and 57 percent improvement in productivity  for a firm with $10 million in annual revenue with a 5 percent gross margin that completes around 20 projects per year.

“When it comes to the question of whether to update ERP systems, no decision is actually a decision,” said Scott Rosenbloom1, vice president of product strategy for Viewpoint’s Spectrum ERO. “Kicking it down the road puts contractors at a disadvantage in the industry. They need to understand that they can’t really afford to put this off.”  

Interested in learning more? Contact Viewpoint today to see how modern construction technologies can help streamline processes, simplify work and net better, more profitable results.