The E-Volution Of Construction Services
A dog food company hired the best management team money could buy. It spared no expense in product development, market research and advertising. Everyone agreed the company had the best handle on the marketplace, but sales continued to lag. Its executives gathered one day to deal with this issue and sat through hours of PowerPoint presentations explaining market and industry trends. Still, nobody could quite explain to the CEO's satisfaction why sales were far below projections.
Then, a tiny voice peeped from the rear of the room. "Dogs don't like it."
That classic business joke is apropos to the construction industry's posture toward the Internet, which seems to have everything the construction industry needs.
Construction is a business involving an enormous amount of data, drawings and paperwork generated by people working for many different employers, often spread out geographically. RFPs, RFIs, RFQs, bids, plans and specs, memos and minutes, submittals, change orders, purchase orders, permits, engineering reports, inspection reports, punch lists, etc., etc., etc., must be communicated to disparate project participants in a timely manner.
Miscommunication leads to mistakes, and even small mistakes can have big consequences in construction. Communicating via the Internet is an effective way to reduce those mistakes. Information can be transmitted rapidly and simultaneously to all interested parties, with access restricted to only interested parties, and receipt automatically verified. Web-hosting resolves the problem of software incompatibility among project players, and with hand-held devices coming to the fore, project information can be updated in real time. Yoav Etiel, senior vice president of marketing for the construction software and online firm Bentley Systems Inc., came up with a figure of $400 billion in savings that could be realized if the construction world could adapt Internet technology efficiently.
Etiel spoke at AEC Systems 2000, an annual conference and trade show devoted to computerization in the construction industry. This year's version was held in Washington the first week of June, dubbed "From Bricks to Clicks: e-Solutions for the AEC Industry." It was built around dot-com firms that host various construction services over the Web. By one count, there were 175 Web sites devoted to permitting, bidding, procurement, project management and other construction services, with more being born seemingly every day. Dave Weisberg, president of Technology Automation Services, told an audience that at least $450 million in venture capital had poured into construction Internet companies in the last two years. Many of those companies were among the 245 exhibitors at AEC Systems 2000.
Anyone who sat through one of their demonstrations of project management via the Web went away wondering why anyone would ever again want to put ink on paper. It is this industry's version of the perfect dog food.
Online LaggardsExcept, the constituents don't seem to like it very much. Or, as one general contractor said in a Q&A session during one of the AEC Systems 2000 conference programs, "Most of my subcontractors would rather kiss a rattlesnake than right-click a mouse!"
Colorfully put, but it's unfair to blame the subs. Project management via the Internet has to be a top-down affair. The Bechtels and Fluors of the world are forcing the issue on their project participants, but second- and third-tier GCs and CMs with revenues under $100 million are still doing things the old-fashioned way by phone, fax and meetings.
It's why the prestigious market research firm Forrester Research predicts that by 2004, construction industry e-commerce is likely to total less than 11 percent of total construction spending, compared to about 25 percent in the business world at-large. It is not a revolution taking place in this sector, but a gradual e-volution.
Put in proper perspective, it's only been about five years since e-mail and e-commerce came to pass for most of us. The dazzling displays at AEC Systems 2000 would have seemed impossibly advanced to any of us touring the aisles circa 1995. Time gets measured in different terms these days. Being "slow" to adapt means being months behind the curve rather than years, or years instead of decades.
What follows are capsule summaries of some of the exhibitors I visited with at AEC Systems 2000 whose services seem especially pertinent to PM readers.
TradePower.comScheduled for launch in July, this new online procurement venture is noteworthy in that it targets the MEP (Mechanical, Electrical, Plumbing) trades, and focuses on transactions between contractors and wholesalers, as opposed to vendors directly. Some observers blame the absence of local distributors as one of the underlying reasons for the slow progress of online procurement. Electrons are good for processing orders, but incapable of actually delivering goods to a jobsite when needed.
TradePower is an outgrowth of three companies that have long played a role in MEP construction and procurement: Trade Service Corp., the PHC pricing service; Trade Service Systems, its electrical supplies sibling; and Estimation Inc., producer of mechanical contracting estimating software. Those three companies will operate as subsidiaries of TradePower. Tom McVeigh, former president of Trade Service Systems, is TradePower's CEO, while Estimation's president, Mike Llewellyn, now holds that title with TradePower.
TradePower will begin with a database of 10,000 customers already using the services of one or more of the three component companies. "We have industry knowledge and integrated systems already in place," said Llewellyn, citing a competitive advantage over other procurement dot-coms that are preoccupied with signing up vendors and customers.
NetClerk.comNetClerk, in January 1999, was the first company to streamline the permit process by taking it online. At show time it claimed relationships with some 500 building jurisdictions around the country, and expected that to grow to 2,500 cities by year's end. NetClerk is also looking to expand its services into licensing. This is an online service with real value for PM readers.
"Every installation of a water heater requires a permit from the city where that installation will take place," said co-founder and CEO Jon Fisher. "Every city has its own permit application and process for accepting that application. Many of our customers process 50 applications a day through our system. Navigating this process the old way has been horrific for them."
Also exhibiting at AEC Systems 2000 were two upstart permitting Web sites, Permits.com and PermitsNow.com. This infusion of competition is a good sign that someone has come up with a better mousetrap.
BidBuyBuild.comIts descriptive name pretty much tells the story of this dynamic Web site, geared to commercial-industrial MEP contractors. Contractors can submit RFQs, receive bids and generate POs online. Executive VP Gerald Lieberg and Senior VP - Sales and Marketing Lawrence Hadding both come from construction vendor backgrounds, and that expertise shows.
BidBuyBuild.com is privately held and has received venture financing from Chicago-based divine InterVentures.
EqualFooting.comAs its name suggests, this is a procurement and equipment financing Web site aimed at small construction and manufacturing companies. The basic idea is to negotiate deals with vendors and deliver to them a numerically sizable audience with collective purchasing power. The company started in January with the three co-founders and one other employee. By April it had grown to a staff of 125.
As with most procurement Web sites, EqualFooting services are free to the buyers. Income comes from a commission fee paid by the suppliers.
Constructware.com/Rentmaker.comThis was the first of what is now a proliferation of Internet-based project management systems, although it prefers to call itself an "application service provider."
"We took the time and effort to design and successfully deploy a ground-up project management system that has a central enterprise database as the organizing principle," said president and CEO Scott Unger. "For the first time, you could manage both projects and your corporate enterprise from the same database."
As of early June, Constructware claimed some 10,000 users, 270 companies and $8 billion in projects taking place on its site. At the show, Constructware announced entering into an independent partnership with Rentmaker.com, the Internet's first marketplace for equipment rentals, now accessible from the Constructware site.
This reporter thinks Constructware deserves special mention in another category. Its promotional literature stands out amid all the dot-coms for clarity and a breezy style. Most Internet-related publicity seems written by geeks who think the world is dying to know which way the electrons spin, but who are incapable of describing in layman's terms how their Web sites benefit the user. Constructware fulfills the promise stated in a letter to AEC Systems 2000 attendees to "tell our story in simple, unhyped terms." That's what it does, and it deserves applause.
BuilderSupplyNet.comThis company's unique approach is to provide online working communities at the local level for construction and building markets nationwide. As of this writing it had marketplaces set up in 32 metropolitan areas where subscribers can search for vendors by CSI division number, specialty and minority designation; send documents and files in original format; transmit blueprints without special software; electronically transmit sealed bids; submit online BSN purchase orders; and perform other construction communications functions.
BuilderSupplyNet is owned by Internos Corp. of Dulles, Va. The company operates similar working communities in the railway and toy industries, which, like construction, are highly fragmented, paper-intensive fields. Chairman and CEO Donald Hyde is a former developer and general contractor. He is a sharp businessman who has recruited many other talented people to the organization. I think this dot-com is going to be one of the survivors.