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Construction : The Good, Bad and Ugly

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DQI Bureau
New Update

I recently met the CEO of a construction company and he told me that he was

never able to pay attention to the implementation of an ERP system in his

company because when times were good he was too busy pouring cement, and when

times are bad, like now, he has no money.

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He can barely keep the banks off his back and so he does not have the luxury

of thinking about the future. I am sure many of you will smile wryly and say, I

can feel this mans pain. Unfortunately, what separates the long-term winners

and losers is the difference in preparedness for the future in good times and

bad times.

As the CEO of a rapidly growing ERP solutions company, focused on the

construction and real estate verticals, you dont expect me to tell you: Stop!

This is a bad time to invest in IT.

Let me review the promises of a well-designed and executed ERP system for the

construction industry:

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The Good

  • It gives you visibility into the totality of your business, including

    accounting, estimation, construction management, progress on project

    completion and schedules, property sales and management, human resources,

    profitability by product lines, cost structure, etc.
  • It helps you manage your cash flow, liquidity and banking relationships.

    Remember that banks, private equity and other stakeholders want to invest in

    companies that have robust systems to control their financial risks.
  • Standard ERP platforms only automate the four Ms of any business, namely

    men, machines, material and money. However, industry-ready ERP systems which

    are the latest trend, will bring you the industry best practices so that you

    are not reinventing the wheel at every turn.
  • Specific to construction, industry-ready ERP solutions help with accurate

    estimation, digital archive of the schedule of rates, access to historic

    prices, automated bid tabulation, contract management, change orders and

    digital inspections including capture of site photographs.
  • Industry-ready ERP solutions for the construction and real estate

    industries also help seamlessly integrate core construction management

    processes with accounting and scheduling systems. This streamlines the

    computation of running account bills in an error-free mode and also produces

    earned value reports.



    It helps comply with government regulations; AS 7 Project accounting standards
    and owners documentation requirements.
  • With built-in business intelligence, it helps you mine the data for

    information critical to your business. It gives you the valuable information

    in real time when it will be of most use to you.
  • Properly implemented and managed, an effective ERP system can improve your

    competitive position tremendously by driving business efficiency.
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The Bad, and the Ugly



Unfortunately, many installations of ERP do not meet their promise or are

outright failures. Most of the reasons are now well understood and many are

specific to the nature of the Indian construction and real estate industries.

The most common ones are as follows:

  • ERPs are seen as something for the IT department, not as a critical

    management tool. If the senior management is not involved in specifying what

    results they are looking for, the potential will never be realized.
  • Hiring an incompetent IT manager to run your ERP system is another

    concern. The biggest expense in a construction company is not its people,

    unlike the IT Industry. Therefore, while the construction firm may believe the

    IT manager is fairly well paid compared to other employees, it may be far

    below what a good IT manager deserves. This attitude of after all, he has

    been looking after my PCs, he has been stringing wires, he can run anything

    is a disaster. ERP systems are critical to a businesss success and a

    qualified IT manager is equally important.
  • ERP is a check mark purchase. My accountant told me we need an ERP system

    so I will go out and buy the cheapest from a fly by night local vendor as the

    offerings from Microsoft, Oracle, and SAP are expensive. Let me deal with a

    smaller vendor who lives around the corner. All ERP systems are the same. When

    the system fails to meet the sales promises, it is because all IT systems are

    useless and just a pain in the neck.

Gearing Up



How then can you achieve a successful ERP deployment in the construction

industry?

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  • The CEO and CFO must be involved in what they want the ERP system to do

    for their business and not leave it up to the IT manager. As management, your

    involvement is just not to allocate the capital for purchase. Rather, you have

    to make sure that the system gives you what you want in order to make your

    business efficient. You are not buying it for your IT manager.
  • Buy a reputable system from one of the top international vendors.

    Remember, from their worldwide experience and thousands of deployments, they

    have developed the best practices. Microsoft, SAP, and Oracle are the leading

    business software providers and they spend hundreds of millions of dollars

    each year enhancing their ERP systems, and bringing very substantial

    innovation to this domain.



    If your IT manager recommends a homegrown system or from one of those little
    local vendors, change your IT manager. This is not a small guys game. In

    India, you have a lot of small players peddling their toy systems. Keep away,

    they have no future and their total cost of ownership (TCO) will kill you.
  • Staff up properly or outsource the operations part to a knowledgeable

    service vendor. IT may not be your strong suite, so why not focus on your

    primary business, which is construction, and leave the operations to

    professionals who are expert in their field? This will not only be

    cost-effective, but will avoid a lot of headaches.
  • The ERP platforms mentioned above are generic. As the CEO or CFO of a

    construction firm looking to leverage technology for competitive advantage,

    you need to buy a complete industry-ready ERP system, which has built on it a

    comprehensive construction and real estate industry specific solution. You do

    not want to do custom development on a generic platform. It is too expensive

    to build and a nightmare to support.

Whats New

  • You may have heard that ERP systems, especially from the world-class

    global players, are expensive, take very long to deploy and need very

    time-consuming and expensive customization to make them specific for your

    industry and your company. All this was true a few years back, but like every

    other domain in IT, the progress made in ERP solutions has been mind-blowing.

    Costs have come down by a factor of five times, industry-specific solutions

    are now available on all three of the major platforms, and customization

    required is minimal.
  • Very strong mobile solutions are now available where your ERP is now

    extended to the field for data entry, retrieval and you can monitor the

    progress of the project while you are on the beach in Goa or even traveling

    out of the country.
  • The best ERP solutions now come with industry-specific add-ons, bringing

    in best practices to the table, along with significantly reducing

    customization efforts and the time to deploy.

So, are you ready to make the right decision now?

Balaji Sreenivasan



The author is the founder and CEO of Aurigo Software Technologies. (The

opinions expressed here are those of the author and do not necessarily reflect

the views of Dataquest)



maildqindia@cybermedia.co.in

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