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Contractors continue to move to the cloud

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I recently had the pleasure of joining Stephen Sandherr, CEO of the AGC of America, and Ken Simonson, AGC chief economist, to present results of the “2016 Construction hiring and business outlook.” This informative report takes a close look at market trends, hiring patterns, and information technology usage in today’s construction industry.  In today’s post, I’d like to focus on four technology trends revealed by the study.

IT investment is up

The Outlook reported that contractors faced with qualified labor shortages are not planning to expand their headcount as ambitiously as last year. Their alternative is to find ways to do more with their current staff. So it’s not surprising that contractors are increasing their investment in IT as a way to achieve higher productivity. Of the firms surveyed, 42% say they are currently spending 1% or more of revenue on IT, up from 32% of firms in studies conducted the past two years. In addition, 41% of firms plan to further increase their IT spend in 2016. But even with a 10% increase in firms spending 1% or more, the construction industry spends the smallest percent of revenue on IT compared to other major industries, according to Gartner’s 2014 IT key metrics data.

That’s a bit about how construction firms spend, now let’s take a look at how they consume that IT spend.

Outsourcing is a popular choice

A significant number (69%) of contractors outsource some or all of their IT. Outsourcing is most common among smaller firms, which are more likely not to have any in-house IT staff. More than 3 out of 4 firms under $50 million in revenue report that they outsource their information technology. This confirms our experience at Sage where we are seeing more contractors moving their back-office systems to remote data centers that are managed by third-party IT service providers.

The cloud is no longer a novelty

Along with the move to outsourcing is the adoption of cloud-based software. It is becoming more relevant for contractors because of the speed at which issues on the job site need to be communicated, escalated and resolved. The faster the resolution, the faster everyone makes money on the project. More than half (59%) of firms currently use or plan to use cloud-based software, which is most often accessed through mobile devices. The ability to access information anytime and anywhere is the main reason 63% of firms say they are adopting cloud-based software.

Collaboration technology is gaining a foothold

One of the fastest growing categories of cloud-based software adoption is collaboration systems. Collaboration is an essential element in today’s fast paced construction environment. Whether that collaboration is about project management, estimating or any number of issues it has a huge impact on a project’s outcome—whether financial, quality or performance. While contractors still rely heavily on email (92%) and file sharing sites (71%), 40% have adopted some kind of online collaboration software. We expect both the adoption and sophistication of cloud-based collaborative tools to continue as project owners and general contractors have a greater expectation for collaboration among all the project team members.

So, all in all, we see continued growth in the adoption of mobile technology and collaboration software and a continued move to the cloud. While the construction industry is not known for being an early adopter of IT technology, the overall adoption is increasing. I believe that we will see continued adoption of technology as a strategic competitive advantage and as a way to deliver a superior experience with higher levels of both clarity and communication to project stakeholders.

For more information, check out our new 2016 construction IT outlook infographic.

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