[From iSource Business, June 2001] The term construction usually evokes images of cranes, masses of rebar and that great smell of wood that's just been circular sawed by a whining machine. And while that kind of activity remains the backbone of construction, that world, just like every other industry, is being affected by the Internet. The same hands that grip a stack of blueprints usually end up clicking away on a mouse and keyboard by the end of the day.
The construction industry is a bit contradictory in nature. While it's a huge part of the economy (some $450 billion worth, according to Mark Pursell, senior director of business development at Associated General Contractors, a construction trade association), it's largely fragmented. The range of companies includes everything from the literal mom-and-pop company with a severely limited information technology (IT) budget to monolithic firms with offices worldwide. That fragmented nature is both a positive and a negative facet when it comes to e-procurement and supply chain enablement. On the negative side, Michael Bell, senior analyst at Gartner Group, explains, The whole construction and real estate industry has been very slow to adapt these models, in part because this industry is very local, and it's based on relationships and tried-and-true processes that have served this industry well for decades.
On the Bright Side
The positive side of fragmentation is that smaller companies, not saddled with layers of bureaucracy, are able to install and implement Internet initiatives more quickly than their larger competitors. The same small size that keeps many companies from being able to employ economies of scale also allows them to react more quickly to new developments. Instead of an unwieldy committee full of dissenting ideas and agenda, only one or two people need to be convinced to make a change.
Construction also benefits from the tangible nature of the business. If Microsoft ships a new version of Windows a little late, it might suffer a little embarrassment in the press, but otherwise, it's mainly a case of revising production schedules. That's not the case when a shipment of steel is on the way to a job site and someone has to decide what to do with it. Pursell says, In general, construction companies are better at making decisions than other parts of the economy, because of the nature of business that they're in. You either build the building, or you don't. You either build the highway, or you don't. Construction is a little more concrete than quantifying a cost-reduction initiative.
Can't We All Just Get Along?
And while the construction industry stands to drive out some costs by moving procurement online, it's the collaborative arena that holds the greatest potential. As Pursell explains, what he terms Internet-based construction involves, Everything from pre-project activity -- finding work, bidding on work, providing estimates -- to the communication, collaboration, data-gathering and data-generating that happens before the work is secured, before a bid is accepted.
Pursell goes on to point out that certain aspects are common to all construction companies, regardless of size. No matter the scale, information has to be exchanged, documents have to be shared and plans have to be approved or changed. He believes that's where the greatest potential lies. Using blueprints as an example, he says, We're all familiar with those big blueprints that are cumbersome and expensive to deal with. Now there are technologies and services out there that eliminate the big blueprints, and the process becomes completely electronic.
Michael Bell agrees with Pursell's assessment. He says that Internet-based tools are an opportunity to take the very complicated, multi-part process that's capital-intensive, cost-intensive and time-intensive and bring the power of a Web-based application to that process by standardizing around common templates, of having document exchange almost on an instantaneous basis, of bringing a coordinated and standardized approach in the context of the Web.
How much of an impact will this ability have? Bell mentions exponential timesavings. People are talking about how things that used to take weeks, days or months will now take hours or days. That kind of streamlining frees up assets to move on to new projects, allows clients to move in sooner, and drives savings to the bottom line.
The Web really flexes its muscle in terms of design and project management. Rather than wearing out service trucks and cell phone batteries getting approvals or changes, companies can center project development over the Web. Now an engineer out of town can check blueprints from his hotel room, rather than waiting until he's back in his office. Pursell explains, There are a number of companies providing some excellent products where they have taken the construction process and allowed the construction team to come in and easily set up a single database-driven project management space on the Internet. There are different levels of authority and administration, but they all know where to go to get the latest information on the project and to keep the project moving.
The construction world also stands poised to buck the disintermediation trend. Bell believes the future will see the increased importance of the middleman, whom he says will serve as an independent, honest broker. He states, We think the Web is going to empower the intermediary with all kinds of tools, templates and communication capabilities to enhance their value proposition to the tenants on the one hand and the owners on the other.
Bell has an optimistic view of the future for enabled construction, particularly in regard to what he calls an efficiency revolution. We're just at the beginning of that, and this industry is even further down that curve than others. We have a lot of runway for this industry to begin to absorb this technology and make it part of the process.