One thing is clear: Silicon Valley is high on the future of construction technology. Realizing there are potentially billions of dollars at stake, these tech titans are betting like never before on everything from user-friendly apps to virtual reality.
How big? Construction-technology firms grabbed up $10 billion in investment funding from 2011 through early 2017, according to the McKinsey Global Institute. Investors are showing strong interest in mobile and cloud-based collaboration platforms, online marketplaces for equipment and building materials, and solutions leveraging drones and AR/VR. Innovative start-ups are honing in on new applications and tools to radically change how construction companies design, plan and execute projects.
While exciting, many of these tech developments seem to be a futuristic pipe dream for an industry where technology adoption is still lagging. In fact, more than half—54.4 percent—of companies say they still do not have the budget to research new tech, according to the 2017 Construction Technology Report (ConTech) by JB Knowledge. The report, based on responses from 1,974 industry professionals, found construction firms are wrestling with a lack of IT staff, budget and management reluctance. In fact, contractors are still only allocating 1 percent of their annual sales volume to IT.
What is Driving Tech Investment?
For some, booming tech investment may seem counterintuitive considering the industry is wrestling with more than a few disruptive issues. For starters, the construction industry is struggling to seek out more than a 1 percent annual productivity gain. Add to this a critical labor shortage due to an aging workforce. On the one hand, these issues serve as a validation for the necessity of tech playing a bigger role in the construction industry.
Still, these factors may not be moving the needle in the near-term. For many contractors, the cost of adopting new tech outweighs its potential benefits. Others are just not ready to move out of their comfort zone. A 2016 KPMG survey found that only 8 percent of companies viewed themselves as “cutting-edge” while nearly 70 percent viewed themselves as “followers” or “behind the curve.”
So what is driving investment? As one of the least digital industries around, investors see a wealth of upside in this untapped market. Many cite growing project complexity and the high cost of construction as key reasons why the construction industry will, ultimately, embrace technology in a big way. They see a future where projects are run much more effectively with user-friendly apps that enable real-time communication among crews using hand-held and mobile devices. They envision 5-D BIM—3-D digital representation of a project overlaid with detail on scheduling and cost—working together with augmented- and virtual- reality technology to create a seamless workflow.
Digital Technology Gaining Traction
For many contractors, incorporating futuristic tech into their daily routine may still seem far-fetched. However, the steady drumbeat of investment in construction tech serves as a reminder that productivity-enhancing technologies can come in all shapes and sizes -- from BIM to digital takeoff and estimating tools.
The good news is that many contractors are starting to realize the time and cost efficiencies are worth the investment in technology. Project complexity is driving the need for sharing of real-time project information between the office and the field. Estimators and project managers are always looking to improve their speed and efficiency. Moving from paper to digital is viewed as a key way to improve productivity and rely less on paper blueprints, designs, orders and punch lists.
In fact, for the first time since 2014, the ConTech Report showed a slight decline in manual data entry where contractors are opting for software. Although it was a very small drop; <1 percent—this could serve as a tipping point for an industry where time is money. In addition, MGI’s 2017 Construction Productivity report revealed a digital adoption rate of more than 44 percent and planned adoption within the next three years of up to 70 percent.
Ready to begin your digital transformation? Takeoff and estimating software is a great place to start if you’re looking to improve your bid accuracy and bid-to-win ratio. Contractors, if you haven’t gone digital in the pre-construction phase, On Center Software can walk you through the process. Read our free eBook, An Estimator’s Guide: Assessing and Picking the Right Software, to get step-by-step advice to get started.