Construction Industry Trends: A Deep Dive Into Technology Trends Among Small Construction Firms

by:
on March 27, 2018

Planning technology investments is an arduous process for construction companies of every size, but especially for small firms. You’re juggling “business as usual” operations, vastly limited resources and trying to stay on top of industry trends and advances in your field.

With a tall order like that, it might seem easier to hunker down and try to make it work with what you’ve got. But that would be a costly error in judgement.

If you don’t keep up with your peers’ technology investments, you won’t be able to compete in the same space. They’ll become quicker and more efficient, and you’ll become irrelevant.

To help you keep your finger on the pulse of construction industry trends, we analyzed a sample of our conversations with firms who contacted Software Advice in 2017 for help with the software selection process.

This report highlights technology trends across five major segments of construction software buyers.

If you’re not a buyer in one of the featured segments, head down to our “market summary” for an overview of technology trends across the market as a whole.

Electrical

The vast majority of electrical buyers in our sample (91 percent) are looking to automate two operations in particular: takeoff and estimating. Of those, 63 percent are looking to perform both in the same solution (rather than purchasing them as stand-alone applications).

The capabilities they’re looking for in takeoff and estimating software include:

  • Measure digital plans/electronic blueprints, PDF and AutoCAD files
  • Calculate takeoff
  • Calculate costs (access item/cost database, use degree of difficulty selectors and view itemized labor and material costs)
  • Create bid proposal/quote (using pre-built or custom templates)
  • Submit bid


Top-Requested Applications: Electrical Segment

Nearly 60 percent are currently performing takeoff and estimating using manual methods alone, i.e. by hand using pen and paper. Fourteen percent are using spreadsheets.

They’re investing in software because it’s taking too long to put together bid proposals and they’re losing jobs to their faster competition. Many who want to increase the accuracy of their bids note that they’ve underbid or overbid on jobs in the past and lost revenue as a result.

Current Methods of Managing Operations: Electrical Segment
Top Goals For Technology Investment: Electrical Segment

Out of all the segments in our sample, the electrical segment has the highest percentage of buyers looking to purchase software for a single user (47 percent). And the cost of these tools is likely the reason. Nearly 50 percent plan to spend* $6,000 per user license.

Number of Users: Electrical Segment
Budget For Technology Investment: Electrical Segment

*Budget estimates do not include costs associated with setup, maintenance, support etc.

 BUYER RECOMMENDATIONS: 

  • Ditch manual methods and begin automating takeoff and estimating so you can get bids out more quickly. Sixty percent of your peers are already doing this, so if you hesitate, you’ll struggle to compete against your faster and more accurate competition.
  • Look for trade-specific estimating solutions that are tailored to electrical jobs. Determine if you need takeoff and estimating together in one system (like the majority of buyers in our sample), or if you need one or the other.
  • Budget up to $6 thousand per user license (not including additional costs for setup, maintenance etc.). Takeoff and estimating software is commonly sold via perpetual license as an on-premise solution (and not as a cloud-based tool). For help calculating the ROI of takeoff and estimating tools, go here.

Residential Remodeling

The technology needs of residential remodeling buyers in our sample are split, with around 50 percent looking to automate estimating and 50 percent looking to automate project management.

These functions support different phases of the project life cycle. Estimating is performed during pre-sale or pre-construction, whereas project management is needed post-sale to manage the actual build process and coordinate with teams on the jobsite.

Around 30 percent of buyers note they need both estimating and project management. Some project management suites do offer “light” estimating, but as estimating is not the main purpose of the tool, the capabilities will not be as extensive or complete as those in specialized estimating tools.

Users that want full-featured estimating or trade-specific capabilities (such as connection to an item/cost database and pre-built assemblies) will need to purchase both an estimating tool and a separate project management solution.

Some common capabilities requested by residential remodelers include:

  • Calculate costs (access item/cost database, use degree of difficulty selectors and view itemized labor and material costs)
  • Create bid proposal/quote (using pre-built or custom templates)
  • Project management (task management, reporting, daily logs etc.)
  • Project scheduling (Gantt charts)
  • Document control (RFIs, change orders)
  • Job costing (compare actuals to estimates)

Top-Requested Applications: Residential Remodelers

Estimating and project management are the top-requested applications by residential remodelers

Around 40 percent are currently performing these actions using manual methods alone, i.e., by hand using pen and paper. Sixteen percent are using spreadsheets.

They’re investing in software because they want to be more competitive in the bidding process, both in accuracy and in the time it takes to turnaround a bid.

Those looking to automate project management functions want to increase transparency into project progress, specifically in terms of detecting budget or schedule overruns, and improve collaboration among teams.

Current Methods of Managing Operations: Residential Remodeling Segment
Top Goals For Technology Investment(s): Residential Remodeling Segment

Over 50 percent of residential remodeling buyers are looking to purchase software for two to five users, and are budgeting* $100/month. Tools that are sold via flat, subscription pricing like this are usually priced per project and include unlimited users.

The 20 percent marked “other” includes budgets outside this flat, per month subscription model. For example, 11 percent of residential remodelers are budgeting $1,000/user for perpetual license systems.

Number of Users: Residential Remodeling Segment
Budget For Technology Investment(s): Residential Remodeling Segment

*Budget estimates do not include costs associated with setup, maintenance, support etc.

 BUYER RECOMMENDATIONS: 

  • At first, only look for solutions that support your primary need: either estimating or project management. If you try and implement both an estimating and a project management tool at the same time, you’ll divide your time and split your resources, potentially resulting in two failed implementations.
  • If you know that you’re going to invest in the other technology in the near future, discuss your integration requirements with vendors. In this case, “integration” would become one of your “need to have” capabilities (as opposed to “nice to have”), and you should vet products based on this criteria.

General Contractor

Sixty percent of general contractors in our sample are looking to automate project management, while 40 percent are looking to automate estimating. Just over 20 percent of buyers note they need accounting and job costing.

These functions support different phases of the project life cycle. Estimating is performed during pre-sale or pre-construction. Accounting and project management are needed post-sale to manage budgets and oversee the actual build process.

It’s not uncommon to find some budgeting or job costing capabilities in a project management solution, but most integrate with more well-rounded accounting software, such as QuickBooks or Xero, for core accounting, i.e., general ledger (GL), accounts receivable (AR) and accounts payable (AP).

About 10 percent of buyers note they need both estimating and project management. Some project management suites do offer “light” estimating, but as estimating is not the main purpose of the tool, the capabilities will not be as extensive or complete as those in specialized estimating tools.

Users that need full-featured estimating or trade-specific capabilities (such as connection to an item/cost database and pre-built assemblies) will need to purchase both an estimating tool and a separate project management solution.

Common capabilities requested by general contractors include:

  • Project management (task management, reporting, daily logs etc.)
  • Document control (RFIs, change orders)
  • Project scheduling (Gantt charts)
  • Job costing (compare actuals to estimates)
  • Calculate costs (access item/cost database, use degree of difficulty selectors and view itemized labor and material costs)
  • Create estimate/quote (using pre-built or custom templates)
  • Measure digital plans, electronic blueprints, PDF and AutoCAD files
  • Calculate takeoff

Top-Requested Applications: General Contractor Segment

Estimating, project management and accounting are the top-requested applications by general contractors

Over 50 percent are currently managing operations using construction software, either alone or in combination with other tools. Seventeen percent are using spreadsheets.

Whereas other segments are looking to purchase their first system, many of the general contractors in our sample have outgrown their current tool(s) and are looking for software with more advanced features.

Other goals for their technology investment(s) include wanting to standardize processes and improve collaboration on projects.

Current Methods of Managing Operations: General Contractor Segment
Top Goals For Technology Investment(s): General Contractor Segment

The majority of general contractors want tools for two and five users (56 percent). However, out of the five segments featured in this report, they also have the highest percentage of buyers looking for tools that support six to 10 users (16 percent).

We’ve broken their budgets* out into separate charts showing the planned spend for subscription and perpetual licenses.

Twenty-four percent of general contractors are budgeting $100 per user per month, meaning an annual spend ranging from $2,400 to $6,000, depending on the number of users.

Of the buyers planning to purchase perpetual licenses, 13 percent are budgeting $5,000 per user license, meaning an upfront cost ranging from $10,000 to $25,000.

Out of those budgeting more than $5,000 per user license, 9 percent are willing to spend $12,000 per user, which would put their upfront costs between $24,000 and $60,000, depending on the number of users.

Number of Users: General Contractor Segment
Subscription License Budget For Technology Investment(s): General Contractor Segment
Perpetual License Budget For Technology Investment(s): General Contractor Segment

*Budget estimates do not include costs associated with setup, maintenance, support etc.

 BUYER RECOMMENDATIONS: 

  • Look for highly-rated construction management systems that offer the best capability and value for small businesses. If you’re like the majority of your peers, your main focus is on improving post-sale activities, e.g., project scheduling, coordinating teams on job sites and managing project costs and schedules.
  • Consider an industry-specific solution that is built for basic accounting. Contractors need to track costs and equipment by job site, manage subcontractor payrolls and oversee fixed assets, so it’s important to use a system build with these operations in mind.

Specialty Contractor

The specialty contractor buyers in our sample are split, with 50 percent looking to automate pre-sale takeoff and estimating, and 50 percent looking to automate post-sale project management and accounting.

Of the buyers seeking pre-construction functionality, 21 percent want takeoff and estimating integrated in the same solution (as opposed to purchasing them separately).

Pre-sale and post-sale construction tools support different phases of the project life cycle and typically require different solutions. You can often find takeoff and estimating together, and you can find project management and accounting together, but if you need both estimating and project management, you’ll need to purchase separate solutions.

The top capabilities specialty contractors are looking for include:

  • Measure digital plans/electronic blueprints, PDF and AutoCAD files
  • Calculate takeoff
  • Calculate costs (access item/cost database, use degree of difficulty selectors and view itemized labor and material costs)
  • Create bid proposal/quote (using pre-built or custom templates)
  • Project management (task management, reporting, daily logs etc.)
  • Document control (RFIs, change orders)
  • Core accounting
  • Job costing (compare actuals to estimates)

Specialty Contractor Buyers’ Top-Requested Applications

Takeoff, estimating, project management and accounting are the top-requested applications by specialty contractors

A significant number of specialty contractors are already using construction software (over 50 percent), either alone or in combination with other tools. These buyers note that they’ve outgrown the usefulness of their current tools, saying they lack features and are not scaling with their growing business.

Other goals for their technology investment(s) include wanting to improve collaboration on projects and centralize data. In fact, 14 percent note they need to access the system from mobile devices so they can coordinate with teams on the job.

Current Methods of Managing Operations: Specialty Contractor Segment
Top Goals For Technology Investment(s): Specialty Contractor Segment

The majority of specialty contractors are looking to purchase software for five or less users (24 percent for a single user and 53 percent for two to five users).

The greatest percentage of buyers budgeting for subscription license software (18 percent) are budgeting $150 per user per month. So for two to five users, that’s an annual spend ranging from $3,600 to $9,000.

For those buyers planning to purchase perpetual license software, 41 percent combined are budgeting $5,000 or more per user license. So their upfront costs would range from $10,000 to $25,000 for two to five users.

Out of the five segments featured in this report, they have the highest percentage of buyers comfortable spending $12,000 per user license, at 15 percent.

Number of Users: Specialty Contractor Segment
Subscription License Budget For Technology Investment: Specialty Contractor Segment
Perpetual License Budget For Technology Investment: Specialty Contractor Segment

*Budget estimates do not include costs associated with setup, maintenance, support etc.

 BUYER RECOMMENDATIONS: 

  • List out the issues you’re having and rank those challenges according to their impact on your business. Then, put the features you’re looking for into two categories: “need to have” and “nice to have.” If you’re like the majority of buyers in our sample, you’re looking to replace your current software with something more advanced or industry-specific.
  • You may need multiple tools to cover all your needs, but don’t try to implement them all at once. Choose the tool that helps you solve your primary business challenge and focus your resources on that investment. Once that solution has been successfully implemented into your business, re-evaluate your needs and go from there.

Home Builder

The majority of home builders in our sample (62 percent) are looking to automate project management, while 33 percent are looking for pre-sale takeoff and estimating. Of the later, 16 percent want both pre-sale functions integrated in the same solution.

The top capabilities home builders are looking for in these solutions include:

  • Project management (task management, reporting, daily logs etc.)
  • Project scheduling (Gantt charts)
  • Document control (RFIs, change orders)
  • Job costing (compare actuals to estimates)
  • Calculate costs (access item/cost database, use degree of difficulty selectors and view itemized labor and material costs)
  • Create estimate/quote (using pre-built or custom templates)
  • Calculate takeoff

Top-Requested Applications: Home Builder Segment

Takeoff, estimating and project management are the top-requested applications by home builders

Nearly 50 percent are currently performing these tasks using manual methods alone, i.e. by hand using pen and paper. Eighteen percent are using spreadsheets.

They’re investing in home builder software because they need more oversight on job sites and transparency into project progress. About a quarter of buyers note they need to improve collaboration among teams.

Those looking to automate pre-sale operations are looking to reduce the time it takes to put together a bid proposal so they can win more jobs.

Current Methods of Managing Operations: Home Builder Segment
Top Goals For Technology Investment: Home Builder Segment

Nearly 90 percent of home builders are purchasing software for five or less users: 33 percent for a single user and 56 percent for two to five users.

Of those planning to invest in subscription license software, 35 percent are budgeting* $100 per month. Tools sold via a flat monthly fee are typically priced per project and include unlimited users, which can be a smart investment for firms needing to collaborate with multiple sub-contractor teams on the jobsite.

Out of the home builders looking to purchase perpetual license software, 27 percent combined are budgeting at least $5,000 per user license. Eleven percent are comfortable with upfront costs of $12,000 per user license.

Number of Users: Home Builder Segment
Subscription License Budget For Technology Investment: Home Builder Segment
Perpetual License Budget For Technology Investment: Home Builder Segment

*Budget estimates do not include costs associated with setup, maintenance, support etc.

 BUYER RECOMMENDATIONS: 

  • Ditch manual methods for automated tools. Over 50 percent of your peers have outgrown manual methods and spreadsheets and recognized that automation is the only way they can compete in an increasingly digital field. Our advice is that you do the same, or risk being left behind.
  • Identify the area that can most benefit from automation and organization and invest in technology to support those processes. Are your main struggles with pre-sale or post-sale operations? Identify end-user requirements and use those to create a list of must-have capabilities. These will drive your search for solutions and help you identify the right tools for your team.
  • Don’t get caught up in a system’s bells and whistles. Remember that as first-time software users, ease of use should be top of mind when you’re evaluating systems. Ask about data migration services and vendor support offerings to ensure your team gets the support and training they need for a successful implementation.

Market Summary

If you’re not a buyer in one of the featured segments, don’t worry. Below is a quick summary of the construction industry trends for the market as a whole.

Key Findings:

  • The largest percentage of small construction firms (43 percent) are currently managing operations using manual methods alone, i.e., pen and paper. Fourteen percent use spreadsheets. A combined 41 percent use construction software in some capacity, alone or in addition to spreadsheets or manual methods.
  • Over 60 percent of small construction firms are looking to automate takeoff and estimating. Around 40 percent are looking to automate project scheduling and management. Around 20 percent are looking for accounting solutions.
  • Most firms are purchasing software for five users or less. Fifteen percent are budgeting $100/month for a flat fee, subscription license. Eleven percent are budgeting $100 per user per month. Thirty-four percent are comfortable spending $5,000 or more per user license.

Demographics:

Construction Buyers, By Industry
Construction Buyers, By Annual Revenue
Construction Buyers, By Number of Employees
Construction Buyers, By Number of users

The designation marked as “other” in the breakdown of buyer segments above is made of up segments that appeared in 5 percent or less of our sample of advisor consultations. These include earthwork/excavating, mechanical/HVAC, roofing and siding, concrete and plumbing among others.

Budget estimates do not include costs associated with setup, maintenance, support etc.

Find The Best Construction Software For Your Firm

Knowing what technology your peers are investing in can help you evaluate and prioritize your own needs. You don’t want to fall behind your competition and implementing the right tools can help you remain relevant in your market segment.

If you want help diving into the specific needs of your peer group, email me at eileen@softwareadvice.com.

Or, if you’re ready to start your software search, call our advisors at (855) 998-8505 for a free consultation.

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