In IFS’s previous article, we highlightded how the construction industry is facing huge disruptive changes. In short, we need to modernize and change the way we work because:
- Margins are under pressure
- Productivity is poor
- We have a serious skills shortage
- Project delivery performance is not good enough
- Competition is intensifying
You need to be prepared to meet these unprecedented challenges. You need to make decisions to adapt your business to become one of the winners in the future.
Today most engineering and construction companies will struggle because they have far too many business systems and are heavily dependent on Excel as their primary management reporting tool. This undisciplined approach will hold them back as they try to extend digital design tools such as BIM and adopt data-driven, integrated processes and systems. In fact, I would say that the bigger the company, the worse the situations seem to be. We are seeing tier one construction companies go out of business because they are too slow to adapt and lack governance and control. This trend is accelerating.
Investing in construction and asset-centric enterprise resource planning (ERP) software is the first step to getting your business under control so you can provide a solid foundation to govern your business. The right construction ERP provides the critical platform to adopt new ways of working, such as offsite manufacturing, digital asset lifecycle management and BIM.
Contracting for outcomes (servitization) and supporting the asset through its whole life require a complete solution that lets you accurately bid and then execute on contracts that extend over the life of an asset rather than through the commissioning process only.
“But We Already Have ERP …”
You may have already invested in an ERP solution but, in my experience, it is probably not deployed as a true enterprise solution touching all functions of the business.
It often ends up being a finance and possibly a human resources system only. This is not ERP. There are many reasons why this is usually the case, but perhaps the biggest reason is that the software solution you have chosen was simply not designed for your industry, so it was never going to be anything more than a poor back-office solution.
The industry is under huge pressure to change, and the companies that successfully challenge the slower, more hide-bound global giant contractors will be the ones who select the right partner with the right software designed for the industry. These companies are the challengers.
Once they have the right software system of record in place, they can transform their business, making themselves more competitive on price, adding capabilities to sell projects the way project owners want to buy and putting themselves in an entirely new category from their competitors. Some global giant construction companies may also make this transition—once they accept that they need to challenge and reinvent themselves so they can avoid being marginalized by faster-moving insurgent contractors or new entrants from other industries.
But first, it is essential that you select enterprise software based on the right criteria. All too often, third-party selection consultants are brought in to help select a new business system, but the true requirements of the construction industry are often misunderstood—even by ERP experts.
For more information on what criteria you need to consider when selecting a construction and asset centric ERP solution, download our straightforward guide, Your Construction ERP RFP Checklist.