Construction Industry Continues to Underspend in Technology

Isaac Sacolick, CIO, McGraw Hill Construction

Two years ago, I reported that the construction industry was dead last in IT spend compared to 14 other industries, as reported by Gartner Research.

Now, Gartner has broadened the construction industry category to include materials and natural resources, but the results are the same.

In 2013, IT spend was 1 percent as a percent of revenue, 1.2 percent as a percent of operating expenses, and last on both measures compared to the 19 other industries surveyed. Gartner also put construction in one of 12 industries where revenue is growing faster than IT spend, implying that it is unlikely that construction as a sector will break out of its under-spending trend anytime soon.

These numbers may not feel real to construction industry C-levels that are spending more in IT and see rising costs in IT infrastructure, hiring and training IT for new skills or investing in field and BIM technologies. Many companies are spending more on newer technologies and are seeing real benefits.

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Construction industry is dead last in IT spend compared to 14 other industries

For example, McGraw Hill Construction reported in its Smart Market report on the Business Value of BIM for construction in Global Markets, a 10-25 percent ROI on BIM investments with the biggest benefits in reduced errors and omissions, owner/sub collaboration, and reduced rework and costs. In its Information Mobility study, 20-25 percent of survey respondents reported benefits against investments in mobile devices, project document collaboration, and connectivity.

So it appears that construction companies are investing and some are seeing financial returns. So why does the industry lag so far behind other sectors?

Opportunities for Technology Investment

The Gartner report suggests that construction is still under-investing in some key areas. Notably, the report says the industry spent $4,347 per user in 2013, the lowest across all industries surveyed and about one-third the average across all industries. That's astonishing—especially at a time when construction leaders recognize that recruiting a new generation of architects and engineers is critical to sustain and grow the industry. When college graduates expect to work with sophisticated collaboration tools, the latest BIM technologies or BYOD, it will be hard to compete for this talent if construction companies are significantly under-spending in technology for its employees.

The report also showed that the industry's top three IT cost areas representing 54 percent of spend was in data centers, application development and application support. While this isn't completely off from all-industry averages, it still suggests that shifting to cloud and SaaS platforms or outsourcing some application development and support could free up resources for more growth and transformational investments.

Construction executives should consider challenging their CIOs and IT leaders to develop multi-year technology road maps. CIOs should consult with industry analysts and perform research to identify areas of under-spending and the types of investments that might improve productivity, address safety risks, shorten project schedules, or provide market differentiating capabilities. Firms that accelerate investments in the best areas and execute well in their implementations are more likely to see benefits versus their peers.

“Reprinted courtesy of Engineering News-Record, copyright McGraw Hill Financial, March 5, 2014, All rights reserved.” We also ask that you cite us as “Engineering News-Record, the national news magazine for the construction industry.”