Merriam-Webster defines the term Tipping Point as when "a series of small changes or incidents becomes significant enough to cause a larger, more important change."
Software vendors often use the term to refer to the point when they go from being the one placing phone calls to potential partners— to being the one receiving calls from potential partners.
As Bruce Kenny, vice president of global product development for Viewpoint Construction Software put it at the firm's recent user conference, "that tipping point has happened."
Viewpoint has been expanding its product base with acquisitions and integrating new features into its traditional accounting and operations management tools. After a $230-million round of investment from private equity firm Bain Capital earlier this year, it's easy to see why Kenny is fielding more calls about partnerships.
"We are a marketplace for other vendors because of the size of our customer base," he says. "It's a huge testament to the team to get here and it forces us to be more mature in our partnering. It forces our products to be more stable in the integration layers." Plus, the firm can enter markets through partnerships, rather than building new products on its own.
If recent chats with software vendors, construction professionals and financial executives are any indication, certain types of construction technology are also at a tipping point. And a lot of it has to do with data that suggest construction firms, especially midsized contractors and smaller, are embracing tools that modernize their systems, both internally and externally on projects.
So in an effort to help readers remain buzzword compliant, we've compiled a roundup of some key trend lines we picked up from chats with vendors, researchers, customers and technology users.
Patrick Allin, chairman and chief executive officer of Textura Corp., notes that Software-as-a-Service is relatively recent trend among contractors but is as much the future of construction technology as it is in other sectors such as retailing and manufacturing. "SaaS growth is explosive, and traditional software licensing is in a steady no growth or decline, and this appears to be a long-term trend," he adds.
Chris Daum, president of FMI Capital Advisors, the investment banking subsidy of consulting and research firm FMI Corp., says his group has seen an "unprecedented upturn in inquiries" from private equity firms asking for FMI's input to look over deals in construction.
He points to Textura's IPO last year and private equity's stake in Viewpoint as tipping points, with some caveats. "Coming out of the recession, the investment thesis is that software services to the engineering and construction industry will outpace the broader software market. So, if the software industry’s growth is expected at 7% to 8%, those who service the engineering industry might see growth of 10% in the near future.” He adds, “Private equity is always interested in getting in on the front end of a growing market." (See separate story.)
But other than firms who service the energy industry, that's about the extent of investors' desire to jump into the construction sector, he adds. Software, services and cloud technology adoption—yes, at a tipping point. Private equity interest in engineering services for the booming energy sector, still growing.
Stuart Binstock, president and CEO of the Construction Financial Management Association, says membership in the group is expected to reach an all-time high of 7,000 this year, which is a sign of strength in his wheelhouse.
"The economy is moving but it is inching forward as opposed to a big progression," he adds. And this is a good thing in his view. "I think everyone sees that there are fewer failures in the industry. Contractors have a great ability to retrench in a down economy and it's true of both union and non-union contractors," he adds.
So although the economy is improving, it's not at a tipping point, which can be a good thing for many firms in construction. "Contractors are more at risk when things are going well, because they can grow too fast."