While SaaS adoption continues to transform every industry it touches, it has become apparent that every industry responds and benefits to this technological revolution in their own way. Below is a write up detailing the unique demands of construction management software (CMS) that radically effects the CAC/CLTV equation today but presents ample opportunity for a CMS to foster an ecosytem that implies future pricing power and reduced churn.
“Plan the work and then work the plan” is the maxim of construction management. Encapsulated in this simple heuristic is the complicated reality of coordinating and communicating vast project needs. A software product that can become a trusted tool would be invaluable to end users who work in an industry cluttered with frustrating points of friction.
Every project depends upon three primary parties; the owner, the contractor, and the architect. It’s important to note that each owner, contractor, and architect will likely have other concurrent projects at any given time.
Every new project is a catalyst for software review. Before a project begins all three parties must discuss and agree to the primary software(s) that will used for the life of the project. This wrinkle forces each organization involved to sign up for multiple software services at one time, assuming they are working on other concurrent projects utilizing a different combination of software(s). Medium to large scale projects typically will last a few years and the thought of switching softwares mid project would be comedically chaotic. This dynamic is the foundation of what makes the CAC/ CLTV equation of construction management software exciting. Essentially one sale equates to three or more new customers for the chosen CMS provider.
Companies that subscribe to CMS software enjoy a latent but powerful perk; the organization gets to sample a lot of different software at once. On the contrary this reduces pricing power for the SaaS providers as it hinders their ability to scale.This is a critical footnote when analyzing the adoption numbers of any CMS as new adoption is dependent on new projects beginning; resulting in lumpy adoption numbers meanwhile churn may not be entirely indicative of dissatisfaction of the product but rather signaling the end of a project utilizing the CMS. There is often significant lag time between an organization’s intent to adopt/ abandon a CMS and the subsequent implementation.
In order for any particular CMS to become an industry standard it must be multidimensional in both it’s capabilities and ability to satisfy parties with different objectives. The start of a new project, and in turn the adoption of a central CMS for all parties, brings about complaints of doing the same task twice. The very basic function of a CMS is to serve as a redundant network drive that houses documents and tracks workflow. When utilized at this capacity all parties are essentially doing the same task twice, as they will use their preferred CMS to generate documents and then upload a PDF to the project’s chosen central CMS. The challenge and opportunity at hand for all CMS providers is to A) become the chosen software before a project starts and B) offer such a superior experience that this prompts greater engagement and reliance on the software. An organization could use a given CMS on one project and become so impressed that it decides to shift their entire organizations default CMS. In order to accomplish this feat a given CMS would need to satisfy a lengthy wish list.
Below outlines the utopian vision of capabilities for a CMS. For illustrative purposes I have hyperlinked some companies currently involved in this massive ecosystem.
The Contractor List Wish
- Communication With Manufacturers: Equipment and specialty parts are often custom made for a project, and these items have long lead times. Currently if the owner wishes to know if a product is on production schedule they would need to probe the contractor who will then reach out to the manufacturer who will then give a status update to the contractor who will in turn finish the game of telephone with the verdict to the owner. An API from the CMS to the manufacturer would produce live timelines of production progress, becoming a key data input to effect the accuracy of project schedules. This could be further monetized as certain projects are willing to pay a premium to accelerate progress by bidding for a more favorable slot in the manufacturers production queue.
- Communication With Vendors: Materials come onto a project site in waves, with deliveries arriving at all hours. Sometimes an item wasn’t ordered ahead of time and is needed ASAP. Many would assume this is where Home Depot/ Lowes play a critical role, but not really. The ideal CMS would allow field staff to use a tablet/ mobile device to order specialty items from the vast network of industrial distributors that includes Fastenal, Grainger, SiteOne, and HD Supply, among many privately owned specialty outlets. The ideal CMS would act as an aggregator for industrial material distributors.
- Communication with Subcontractors: While a contractor may have other concurrent projects this rings even truer for subcontractors who operate on a smaller scale often with a niche focus. The ideal CMS would eliminate the need for extensive emailing and phone calls as subcontractors could be seamlessly updated on project schedules delays that may impact their own schedules and in turn their ability to provide timely service for the contractor. A live update of a contractors 4D BIM schedule would morph into a cornerstone data point of a subcontractors forecast of upcoming labor and equipment needs. It’s possible they would pay for access to this pivotal data.
- Equipment Management: Equipment is expensive, either it’s depreciating everyday or you’re rental bill is increasing. Coordinating schedules with equipment needs is critical. Live data of where equipment is located in relation to how much longer it’s needed on a particular project would allow organizations to maximize their fleet. The ideal CMS would allow organizations to tie equipment needs to projects schedules in relation to the organizations other projects, reducing idle capacity.
- Remote Offices: Organizations typically have a central headquarters and a central garage that help service their remote project site locations. Establishing a remote office is a time sensitive challenge as each office lease is for a somewhat undetermined length of time and needs to be located within walking proximity to the job site. The ideal CMS would help organizations monitor leases and request extensions when delays alter the project schedule. This communication would be particularly useful for rural locations where a mobile office needs to be established, requiring communication with a vendor.
- Internal Data: Having your CMS reduce the friction of reaching out to other businesses is great but now it’s time for it to materially impact your own organization. Tying together all the inputs of the organization’s projects would illuminate previously unforeseen opportunities for cost saving synergies. For example, the invoices from industrial material distributor for the urgently ordered materials could now be automatically linked to the project budget, noted with the exact point in the schedule, in relation to the exact cost code, allowing the organization to leverage this data for more accurate estimating when bidding on future projects.
The Architect Wish List
- #1 Wish is that their preferred CAD software never changes. As the organization grows all design work from previous projects service as a reference library to learn and copy from. The more CAD files in their possession the more efficiencies the organization should enjoy. The industry gold standard is AutoCAD.
- Synced Specs & Submittals: The ideal CMS will cross reference specs and submittals with products available on the market to accelerate the architect’s reviewal process of contractor submissions.
The Owner Wish List
- Communication: Owners typically have to contact municipalities, inspectors, local utilities, police departments for a road side details, and neighboring properties throughout the life of the project. The ideal CMS would contain a directory of notable contacts to facilitate the process of soliciting permits, requests, issuing notices,etc.
What All Parties Wish For
- Meetings: The ideal CMS would facilitate more efficient meetings. Remote project locations and organizations that have concurrent projects creates a recipe for schedule conflicts where key members either miss a meeting or are forced to call in. Microsoft Teams is now a coveted tool where all members can visually see what particular detail of a drawing is being analyzed.The ideal CMS would integrate a recording of a Microsoft Teams meeting with the architect’s official meeting notes so that a particular meeting item is now hyperlinked to the exact moment it was discussed in the meeting.
- Dashboards: If data is the new oil then data visualization tools are the new oil refineries. Dashboards that allow macro level metrics to stand out will facilitate better planning in relation to looming milestones.
- Enterprise search: Institutional knowledge can’t be leveraged if key data can only be found through metadata search results.
- Offline: The ideal CMS will allow for all data to be easily exported for redundant storage offline.
Addressing the wishes above is step one to for any SaaS provider wishing to become a dominant player in an industry that yearns for a default CMS and accounts for 13% of the world’s GDP. This is a space worth monitoring for two reasons; CMS solutions are currently highly fragmented (Example 1 + Example 2) & the vast ecosystem surrounding even one construction project illustrates the ample opportunity for greater adoption and monetization. Construction software may be the domain least transformed by network effects. This is where the current CAC/ CLTV equation is likely understating the potential for future monetizable integrations. Take the following example- What is this CMS integration worth to Waste Management?
Today: Contractor calls Waste Management to schedule a dumpster drop off (calling is often necessary as drivers will need specific instructions of exactly where and when they can drop off a dumpster). Dumpster stays on site for undetermined amount until it is filled, where Waste Management must then react to a contractors request to remove the dumpster.
Tomorrow: Waste Management receives an inbound request via a contractor’s CMS with written dropoff instructions and specific GPS location attached. These instructions reduce both Waste Management’s workload and the opportunity for error when dispatching a driver. The dumpster that gets dropped off is now coupled with an IOT weight sensor that allows Waste Management to anticipate when to pick up the dumpster. When full they can contact the contractor via the CMS to confirm pickup while also utilizing this channel to invoice the contractor for their services.
Moving forward it is clear that Construction Management Software has the ability to grow into a critical member of what is currently a vast, opaque, and friction filled ecosystem. A software solution that bridges gaps with seamless and meaningful API integrations has the potential to become a conduit for billions of dollars of annual transactions. The future of Construction Management Software will dramatically reduce a project’s time spent on trivial tasks, increase an organization’s visibility of individual project expenses and schedules, and will increase efficiencies across the entire industry. In sum, investors need to take note of the unique quirks and demands the industry imposes on software providers to accurately model the future success of any given CMS product. Creating tools to foster an ecosystem of communication and transactions should be the ultimate objective for any CMS provider and this vision should be in the forefront of every investors mind.
Future Post: Is the construction industry subsidizing the development of the programs that will become foundational tools for the advancement of augmented reality?