Hidden Costs of Your Construction Software
Here are some tips for doing due diligence before selecting software that will underpin your construction operations.
The construction industry is moving onto centralized, structured software products to manage operations. This is a good thing—for too long, contracting businesses were littered with unconnected spreadsheets that did not provide visibility between projects. Each project manager or superintendent may have their own way of doing things, which made it even harder and prevented management from making decisions based on what resources were already committed where and fleet condition.
Many legacy software solutions have made it to the market over the years and have created process improvements for some contractors, albeit at a price. Here, we will look at the costs these different approaches to construction operations software impose on contractors and guidance on more efficient choices.
Revenue-Based Pricing
A software company can price their products a few different ways, and one very profitable way is to peg subscription cost on a contractor’s annual construction revenue.
If they are clever, that vendor can still create an analysis to show that a contractor comes out money ahead based on operational savings, but they miss the point. That contractor will come out even more money ahead if they buy software based on other metrics, including the number of modules, field workers or the equipment fleet. One popular construction software product that charges based on construction revenue might cost about 10 times more than other software that ought to yield similar or greater measurable business benefits.
Revenue-based pricing may look better to general contractors who can open the solution up to subcontractors and other collaborators at no additional cost, but for self-performing contractors, the price delta is even harder to support.
Equipment IoT Devices
Why would a software company want to sell IoT devices to go onto equipment? Many equipment pieces will already have onboard telematics, and there is no shortage of choices on the market for sensors and other devices to connect to other equipment.
Whitelabeling and selling hardware drives some revenue for the vendor, but more importantly, it encourages vendor lock-in. Each IoT device has firmware that will work only with that company’s software.
Progressive construction software companies are now backing away from this practice, and going to market as open systems that can pull in data from a broad spectrum of hardware vendors through cloud-to-cloud integrations. This means contractors can select software based on how it helps them access and make use of equipment data and not because they can only get their equipment data from the company that provided the hardware.
Contractors with mixed equipment fleets have faced this challenge for years as they found the telematics portal provided by their equipment OEM did not cut very well across their other lines of equipment. Standalone offerings emerged to address this, using the AEMP telematics standard. But each standalone software vendor tended to come to market with proprietary hardware.
The market is now maturing past this, and contractors are coming to know better.
System Administration of Old Technologies
Construction software has evolved over the last 10 years, moving from on-premises applications that were bought for perpetual use to cloud solutions sold by subscription.
More changed than just where the software lives and how it is paid for . On-premises software, even once it is moved in the cloud, creates some real work and cost for users that a modern multitenant software-as-a-service (SaaS) construction application won’t.
- Updates and upgrades come periodically, and functional updates must be regression tested to make sure they don’t cause problems in that contractor’s instance of the software. This can take hours, days or weeks. Skipping it can cause the system to grind to a halt.
- Managing the compute environment, whether it is on-premises or online, also requires attention. Database administration and managing system resources consume bandwidth of internal IT people or staff of a managed services provider, which again drives cost.
- Integrations are slower to create and exponentially more expensive with older software. A modern solution has an advantage here not just because it is in the cloud, but because modern software is designed from the start around the idea of integrations, often with an application programming interface (API)-first design that uses the same APIs to rout processes internally as are used to integrate with outside systems.
Poor Usability
How many times do you need to tell an employee how to use the software? How many internal hours are consumed by training? What happens when staff that had been part of the initial implementation have left, and nobody remembers how the application works?
Software that is not kiosk-based, walk-up-and-use simple will cost more overtime.
Inefficient Construction Software Implementation
Time to value is one way to think about implementation, and during selection it always makes sense to ask a vendor how long customers take to get live on the software. Another important metric is the amount of internal staff time consumed during implementation. Who must be involved, and how much time must each spend? Adding billable rates to these numbers and adding it to software cost will help you understand the true spend involved in an application.
Broader software offerings that come from the finance side typically involve more work in implementation than software involved in operations, as will software that is highly configurable to meet a diverse set of needs. Software that is purpose-built for heavy civil construction operations meanwhile might involve a simple data migration and a reliance on intuitive usability.