To an architect, engineer, contractor, or developer, no other story holds a universal appeal than the unfinished "Tower of Babel" in biblical time. Whatever led to this hubris, the Tower of Babel metaphorically tells a story of a breakdown of workflow, lack of orchestration from the material supply chain to the job site--a project disaster waiting to implode.
Whatever the Tower of Babel may represent, one thing is clear: Construction Tech has been an IT laggard since the first Apple computer went to market. It is noteworthy because construction is unlike any other industry where 80% operate as small-to-medium size businesses and only eight companies comprise the remaining 20%. In comparison, three-quarters of the aerospace industry is dominated by eight of the largest companies in that sector.
Ironically, the architecture-engineering-construction (AEC) industry while an epitome of math and geometry has some shocking numbers to show when it comes to profit margins: Other than the owners, most of the project stakeholders only achieve an abysmal 2-3% gross margins and a looming loss if one wrong bid, poor installation, design rework, or breakdown in supply chain deliverable happens.
By contrast, in the offshore oil industry every dollar of oil above the $45-a-barrel mark is profit for BP, Shell, ExxonMobil, and other conglomerates. It's not an anomaly that the oil giants are some of the wealthiest corporations in the world.
In a 2004 analysis, Paul M. Teicholz, research professor emeritus in civil and environmental engineering at Stanford University, showed the gap in 'Labor Productivity Index' in construction versus a dozen other verticals. He found that in the forty-year period between 1964 and 2003, the AEC industry lost productivity while the other sectors gained an average of 1.77 times.
How did construction fell so far behind even with the advances in technology?
Due to its multidisciplinary nature, different personalities, and competing agendas, the AEC industry has yet to practice true, project-centric collaboration. This problem is exacerbated by a meager 1.4% investment in technology being ranked "dead last" compared to fifteen other verticals (Source: Engineering News Records article on 'Big Data' 11-28-12).
Certainly revealing, however, project stakeholders are beginning to see real, tangible benefits brought about by new tech trends.
Aconex Upright Software from Down Under
Aconex (est. 2000) was launched in the dot.com era behind already well-established project management software companies in the United States such as Meridian Systems, Inc. (acquired by Trimble in 2006), Primavera (acquired by Oracle in 2009), Autodesk, Accubuild, and other lesser known players.
Perhaps the offshore founding of Aconex was a blessing, allowing it to incubate, experiment, and grow to become one of the global market leaders more than a decade later, eventually moved its headquarters from Melbourne, Australia, to San Francisco, California. To learn more about their rapid ascension in cloud computing for Construction IT, I interviewed Aconex CEO and co-founder, Leigh Jasper.
"Ten years ago we saw an opportunity to use the Internet to streamline huge volumes of information on construction projects. Back then, they were overrun with paper, faxes, emails, workflow processes, transmittals," Mr. Jasper explained. "Before there was Software-as-a-Service (SaaS) the Cloud was called ASP (Application Service Provider). It was the best way to deliver outcomes to the multiple parties online to streamline workflow, which too often worked off the wrong information. That meant they built off the wrong information, too. What we set out to do was decrease the use of wrong data."
Last year, Aconex made its first acquisition in Grazer Pty., Ltd., another Australian company, which digitizes the post-construction phase of building management with what is called Operations & Maintenance (O&M) manuals, or what Leigh Jasper said Aconex rebranded as "smart manuals."
In a press release, the CEO stated, "This is an important milestone in the growth of Aconex and builds on our strategy to transform the way the industry manages project information. Grazer's commitment to better project completion and improved asset information management makes our businesses excellent fit."
Aconex not only manages the workflow on construction projects globally, but in "99% of the cases we hold onto the data, in an archive," Mr. Jasper stated. "The reconstruction of New York City Hall required an ongoing compliance, for multiple parties to have full access of a bulletproof record."
He said for the Panama Canal project, Aconex managed "over ten million documents in a tech stack using open source, Java, and databases in the cloud that hold massive file stores to keep new and old projects ongoing."
It was refreshing to hear the CEO share his domain knowledge--how big and complex projects are, the design and specifying products and materials, the building process up to the "handoff" to the owner with the "smart" O&M manuals.
"We moved our headquarters to the Bay Area to balance it with Melbourne, where we are still actively involved, to gain entry into the North American market with a better focus. We have gotten great traction here. And moved into other paper-based sectors in energy and mining," he said.
Turning Construction Workers into Knowledge Workers
Leigh Jasper and Robert Phillpot, General Manager - Product, co-founded Aconex in 2000. Mr. Jasper, who worked at McKinsey & Co., met Rob Phillpot, who at the time was working as a project coordinator for an Australian construction company called Multiplex. Mr. Phillpot complained about the paperwork issues, building off wrong information, and the lack of collaboration between project stakeholders. Banding their backgrounds together, Jasper and Phillpot set out to solve the fragmented workflows in the construction industry.
Thirteen years later, Aconex grew from a small Melbourne-based firm into a global software company with 350 employees, 43 offices, and presence in all the major markets. To date, Aconex has managed $700 billion in construction projects worldwide, storing hundreds of terabytes of data for their clients.
Although Construction IT is dead last among fifteen verticals investing in technology today, Mr. Jasper observed, "There's massive opportunity for the industry to increase that 1.5% spending and invest twice as much in technology."
That investment will be driven by mobile, cloud computing, and big data analytics. Those technology drivers may pose significant challenges to new entrants with limited focus only on mobile applications and communication-based social platforms. Aconex and all its main U.S. competitors have launched mobile platforms to be used in the field in tablets and smartphones.
When mobile phones were used in the 1990s, "Contractors were the first adopters to use cell phones in the field to help coordinate project logistics," Leigh Jasper noted. "I see mobile devices today as a natural progression to help field workers manage projects better. Combined with Aconex SaaS focus, we are enabling all participants to be part of one project workflow."
Beyond being a co-founder of Aconex, what does Leigh Jasper consider his proudest moments: The three weeks it took Aconex managers to setup the project management suite for the engineers and contractors on the Panama Canal project, or the Aconex's culture with a single-minded focus on SaaS and collaborative solutions where "We learned so much over the years in the processes from our clients and the tens of thousands of best practices?"
I consider it a toss-up: Any company that is motivated to eliminate the siloes and interoperability issues that persist in today's 'Tower of Babel' is a big win for industry stakeholders in dire need of improving their margins.
[Disclosure: After 25 years in the AEC industry, I launched a mobile-cloud startup in Cloudnician, which is developing workflow software. I made it clear to Mr. Jasper prior to the interview that our companies might compete one day. He replied in an email via his PR representative that he "doesn't see it as a conflict, but a plus."]
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