According to Gartner, Construction companies with under $250M in revenue spend 1.6% of revenue on Information Technology. Construction companies with $10B in revenue on average only spend 1.1% on IT (1.6% - 1.1%). The construction industry is dead last in IT spend compared to 14 other industries measured by Gartner with National Government (10.8% - 7.9%) and Banking (7.3% - 6.2%) leading the way in IT investments.
This, is really bad. Perhaps there are better benchmarks, but I suspect that other industry IT financial benchmarks have similar rankings.
For companies that are struggling through the construction recession, under spending in IT may be a bad shortsighted strategy. According to Gartner's analysis of a report from the Bureau of Labor Statistics, 70% of U.S. productivity growth comes from IT. So under investing in IT for extended periods of time can put firms at a disadvantage against competition and may introduce risk if IT systems are operating passed end of life. Gartner also reports that 30% of net income is affected by IT economies of scale, so technologies optimized across the workforce may also improve profitability.
The Impact of New Technologies
But it might be worse. Gartner at its annual symposium held October 21-25 in Orlando highlighted the nexus of four strategic technologies - mobile, information, social, and cloud that will likely be game changers across all industries over the next few years. I suspect that will hold true in the construction industry, and may already be the case for those that have invested in these technologies.
Consider the productivity, safety, and quality improvements by mobile enabling the job site with tablet applications giving workers access to plans, punch list tools, and safety checklists. New cloud based collaboration tools should facilitate increased productivity and faster construction cycles especially in IBD projects. Finally, the entire industry can operate smarter by using new analytical tools such as Dodge BuildShare (disclaimer, Dodge BuildShare is a product developed by ENR's parent organization, McGraw-Hill Construction), or by maturing to 5d BIM models to better estimate costs, or by improving resource management through ERP systems such as CMiC and SAP.
Realizing productivity improvements, cost savings, or new revenue by applying some of these technologies requires investment, technical expertise, and a capability to institute organizational and process changes. Many of these are longer term investments with returns that will be hard to measure until there are some industry benchmarks available.
By then, it might be late for your company. There are already some companies aggressively pursuing new technology and realizing benefits. Geir Ramleth, CIO of Bechtel has developed APIs (application programming interfaces) as prescribed, simple to use methods to interface to his core enterprise data so that tablet and web interfaces can be customized to the needs of the construction project team. At ENR's July/2011 FutureTech conference, Richard Bach, Senior Vice President at Turner Construction reported that a key driver for them to consolidate ERP systems was in recognition that profitability of construction projects is correlated to the accuracy and timeliness of data.
So what technology investments will your 2013 IT budget include? CIOs, are you proposing new investments that will improve productivity and profitability? CFOs, will you invest more aggressively to insure future competitiveness? CEOs, are you reviewing the impacts of new technologies and insuring that the business strategy reflects technical opportunities and threats? If you don't someone else probably will.