- The recession economists have been anticipating for a while is yet to be realized.
- But there is an economic slowdown measured by GDP compared to the fourth quarter between 2020 and 2021.
- The slowdown and gloom regarding the outlook for economic growth shortly negatively impact budgeting for businesses.
- The current trends in planning for construction technology and budgeting could be a shock when companies try to reach their objectives.
There are a few construction beginnings.
It was reported that the Construction Market Forecasting Service (CMFS) 2023 second quarter edition forecast that construction starts will increase by 2% in 2023. This is nothing compared to 2022 when the total number of construction starts was up 15 percent over the previous year.
One of the risks that the CFMS edition left out was increasing the ceiling on debt. The Dodge Construction Network Economics Group assessed the effects of two scenarios of breaching the debt ceiling created in the work of Moody’s Analytics. A short-term breach would cause starts to fall by 3 percent in 2023 and slight increases in 2024. A longer-term violation could lead to a decline of 14 percent in 2023 and 9% by 2024. While the debt ceiling crisis was resolved at the last minute, it illustrates that the construction industry is fragile.
As a recession is looming and construction begins to hold even, it is expected that the construction industry to tighten its belts wherever it can. But, the construction sector continues to pump cash into technology. “IT budgets are set to increase in 2023, reaching a worldwide total of $4.6 trillion, a 5.1% increase over last year according to Gartner projections released in October,” writes the CIO dive.
Why are companies boosting their budgets for technology?
Companies are increasing their expenditure on technology in the construction industry for different reasons. The reasons could be summarized as a boost in efficiency. “We see efficiency being gained by advancing technology, and I don’t see us slowing down our investment in technology,” says Jon Chiglo, Chief Operating Officer (COO) at WSB & Associates, Inc., an engineering firm for civil construction that concentrates on design and consultancy.
Increasing efficiency is crucial in a world where many companies face staffing issues. Companies see technology as a means to get their jobs done faster. WSB is achieving at least 20 percent more performance when rendering design in 3D than 2D, according to Chiglo.
In the AGC + Trimble live panel held in November 2022, Jon Chiglo, COO of WSB & Associates, explains why he wants to continue the investment in hardware and construction software.
In the initial days of the pandemic, McKinsey advised that construction companies had to accelerate the introduction and use of digital technologies to make them more resilient after the Covid-19 outbreak. Technology spending has been growing in the years to come.
“Technology has been a way to address the volatility and uncertainty we’re facing, which has been my attitude since 2020,” says Pat L’Heureux of Severino Trucking, an excavation contractor. According to L’Heureux has allowed the business to take on more projects while having smaller crews. “If we need to slow down our purchasing power, we have tools to make us as efficient as possible,” and not burden the team with too much.
At the AGC + Trimble live panel, which was held on November 20, 2022, Thomas Bonner, Recovery Office, Montgomery County, talks about the possibility of stretching money further by using the level of transparency construction technology, which provides him with the argument that is convincing for the increase in tech spending. The cost of purchasing the latest technology
The soaring cost of inflation has affected every aspect of the economy. As a result, getting the money to purchase the latest software may be a challenge. What can companies do to integrate new or improved technology into their budgets?
Subscription-based solutions provide the flexibility that construction companies require. The companies were bound to software that required sizeable upfront costs. “Having resources as subscriptions allows companies to try a product without being fully invested, almost like renting it out,” says L’Heureux. This is especially helpful when you require software or technology for a brief time or a specific project. “Instead of going full-in in accruing that whole upfront cost, you can use the software for really just a portion you need.”
This flexibility is also beneficial as subscription-based approaches allow companies to choose the most valuable tools. The staff can experiment with various techniques and determine which are the most effective for their needs.
“The efficiency with which solutions that are available on a subscription model can be deployed absolutely assist with the budgeting on a public entity,” says Thomas Bonner, Director of the Department of Assets and Infrastructure for Montgomery County, Pennsylvania. “To the extent that we reduce the uncertainty … using a subscription model that is paired with the contract vehicles are in place allows us to budget properly and with confidence ….”
During the AGC + Trimble live panel held in November 2022, Pat L’Heureux, P.E., Project Engineer for Severino Trucking, explains how the software-as-a-subscription model helps construction firms keep up with technology’s progress and changes the budgeting and implementation factors for new construction tech.
Collaborations that work
Companies must be cautious in choosing who they want to work with and how they will provide value. The subscription-based software model allows construction companies to look for the top technology supplier. They should create relationships when they’ve found the right software company for them. This means constantly communicating with the software company regarding what they would like from the software. Software companies constantly innovate to satisfy their customer’s requirements. If construction companies see the software company as a trusted partner to assist in growing their business, they will gain by establishing a partnership. Furthermore, changing providers can be expensive regarding time studying the software and integration into business practices.
It isn’t realistic to assume that one program addresses every issue. Businesses require multiple technology and applications to provide the problem with an overall solution. According to research by the Dodge Construction Network, about 60 percent of owners, architects, GCs/CMs, and tradespeople who specialize use up to five software applications for digital workflows. Between 22 percent and 33 percent of the same category (plus engineers) utilize up to 10 software applications to manage digital workflows.
The productivity gains gained from a point solution aren’t enough. Only through connected technology will companies be genuinely impactful. “Making sure that the various technologies] are able to communicate with each other is what I see the trend taking us at the moment and making connections between rival systems as well as inside platform … can add value to the 3D models we’re developing ” Chiglo. Chiglo.
With a digital plan to guide investments in technology, companies can become competent in their budget stewardship. This strategy will aid in removing the clutter of systems companies could build up. Businesses can benefit from taking a step back and examining issues like:
- Does this system complement/communicate with our current system(s)
- Does it improve the areas of strategic importance we focus on?
- Is the service a reliable and creative partner
- Does the software/system work? And so on.
The answers to these questions will help construction companies decide which areas to place their money into technology.
“Innovation from vendors cannot halt.”
Getting the most value from digital workflows is also a matter of training and regular use. There are many players in the construction process. If just one company involved in a project is educated on and utilizes this software program, then the advantages are diminished.
If all partners, subs, and vendors speak similar languages and use similar software, it will result in more cooperation and efficiency. Bonner says that, at times, the department must instruct the partners to utilize the various tools used by the state of Pennsylvania employs. Anyone looking to increase the quality of their “bid-ability” should learn how to work with the systems that the state utilizes. “At some time shortly, we might declare, “You must be competent to perform this task without any training. You will need to demonstrate your previous experience within the project management system that is in use.” He explains that this would help the department become more efficient.
Similarly, L’Heureux laments that his team has to look over the digital model they created several times due to the different methods (or the absence of them) that the partners utilize. Despite the difficulty in getting a more significant portion of the market accustomed to technology, L’Heureux says, “I think the innovation from our vendors … cannot halt.” A timeout for individuals to catch up will be detrimental to those actively engaged and would hinder their progress. It is the obligation of those not current to stay engaged.
Conclusion
The construction industry is in an uncertain time. The macroeconomic outlook is highly uncertain, impacting all construction industries. As the construction industry incorporates more technological advances into its operations, budgets are getting stretched. However, as it is clear, the goal is to keep spending money on technology.
The advantages of technology make it worthwhile to invest in. The subscription model helps construction firms keep up with their expenditure and allows them to spend their money efficiently.