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Making In-roads

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DQI Bureau
New Update

Managing this frantic activity and expansion, the construction companies are

increasingly finding answers in integrated IT solutions like ERP and project

management applications, and wireless technologies to manage and connect the

numerous and dispersed project sites.

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The construction industry showed sign of IT adoption since few years back.

This resulted in evolution of niche small packages concentrating on few of the

critical business functions and addressing few areas. But, the recent

exponential business growth is calling for integrated approach and better

operation control to have better operational insights and the quest for

inculcating best business practices. In support of this, there is a need

emerging for scalable integrated solutions with a stable IT partner.

To address this in its nascent stage, vendors are configuring industry

specific solutions which not only addresses specific requirements but also align

it seamlessly with other functions like finance, procurement, inventory,

projects, HR, etc. According to Krishna Kumar R, head, Software Products

Division, Wipro Infotech, "Definitely, years to come are showing signs of huge

potential in terms of IT adoption and this will evolve tier-1 solution players

orienting their offering to this industry." However, as Srinivas Sagi, CIO of

Maytas Infra and Maytas Properties, the two subsidiaries of Maytas Holdings,

says that ERP solutions offered in the construction industry are still a little

oriented towards the manufacturing industry mindframe and will need to be fine

tuned to address some specific nuances of the construction vertical.

Growth Drivers



The construction industry is broadly categorized into builders (residential,
commercial, etc), heavy construction or infrastructure (bridges, dams, roads,

highways, etc), contractors for the above two and niche service providers

specializing in specific areas like waterproofing, industrial flooring, tunnel

repair, re-habilitation of old buildings, expansion joints, etc.

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The growth in infrastructure projects is one of the leading drivers in the

construction industry, providing necessary spurt to the IT adoption curve in the

vertical. According to Satish Pendse, CIO, Hindustan Construction, traditionally

till about six to eight years back, the government spending on infrastructure

was around 2% of the GDP, which has now grown up to 4% of the GDP. While the GDP

spend on infrastructure is growing, the GDP size itself has grown over the

years, thereby meaning an exponential increase in investments going into the

infrastructure construction. Going forward, the investments are likely to grow

rapidly as India harbors the dream of catching up with China, which spends

around 9% of its GDP on infrastructure. Thereby, driving rapid growth in the

construction vertical.

The last few years has also seen a dramatic change in construction trends in

the country with the private sector increasingly carrying out projects on a much

larger scale, ranging from residential complexes and new townships to malls and

big retail outlets. "The sector has become hot, as the business value of this

sector has increased manifold and companies in this segment have become large

enterprises," says Vinod Subramanian, regional manager, Application Sales,

OracleDirect.

As the sector is growing rapidly, the competition has become far more

aggressive with older companies expanding and becoming bigger and newer as well

as foreign companies entering the fray. This, in turn, is putting the pressure

on the companies to improve operational efficiencies. With the growth, companies

today are handling as much as around sixty to seventy projects simultaneously as

compared to around ten to twelve simultaneous projects till about a few years

back. This apart, as Pendse says, the value of the projects has also increased

substantially with the ever-increasing pressure to reduce the cycle time and the

projects' costs as well as greater strictness to deliver the projects on time.

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The only way to work efficiently at such a large scale is to have strong

operational systems in place that take care of everything from procurement to

financials to timely project execution. According to Subramanian, although most

companies were using basic IT to create such an environment, the last few years

have witnessed an increase in the uptake of world class IT solutions by this

segment. They increasingly begin to realize the benefits of computing, project

management, and collaboration technologies. "This trend will only continue to

gain momentum in the coming years as construction companies continue on their

phenomenal growth path," he adds.

IT Adoption Trends



Global majors like Jacobs, Skanska, Bechtel, Parsons, Black & Veatch, CDM,

etc have been using various IT solutions for improving operational efficiencies

for a while. Compared to their global counterparts, IT adoption in this vertical

in India is still in its nascent stages although some companies have taken up

these as a growth enabler. The newer companies and foreign multinationals

joining the fray by entering the market with their own set of advanced

technologies already in place, while the older set are now looking at IT with a

renewed interest. According to Sanjay Agarwala, director, ESS, among the most

visible growth at the builders (residential, commercial, etc) end, the erstwhile

small time contractors have become 'corporatized' and now run formally managed

companies with defined management practices. With growth, they have had to adopt

technology in their various areas of business.

Traditionally, from home-grown solutions to islands of computerization, IT in

the fast moving construction industry is now transitioning to standard ERP

systems. Pendse says that the movement towards integrated standard ERP systems

has started in the last three years and is still in the early stages though

gaining momentum. According to Kumar R, the factors driving the trend towards

standard integrated offerings include the need for tighter control over

operations, quality compliance in execution, global business practices due to

global expansions, MNCs entering in joint ventures with Indian corporate, and

streamlining operations as prerequisite norm before going for public funding

like IPOs.

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Five Best Practices

n

Identify the right projects and streamline opportunity management:

Understanding which client relationships have been the most profitable and

which projects best-fit resource capacities and skill sets. By analyzing

past experiences with clients, suppliers and subcontractors, service

providers and other entities, companies can recognize and address risk

factors early on.







n
  Reduce

risk and drive bid and proposal efficiency: Companies should evaluate which

portions of the work pose the most risk, identify suppliers and

subcontractors that have the needed capabilities and define the contract

terms and conditions to balance risk with potential profitability.







n


Optimize delivery of

pre-construction tasks: Companies need to improve contract administration by

managing contract provisions, establishing key deliverables and tracking

requirements. They also need to manage equipment requirements by forecasting

usage through a rolling stock equipment strategy and handling preventive and

ongoing maintenance.







n


Control project

information and changes: From initial project planning through contract

closeout, companies need daily awareness of all relevant progress, cost and

schedule changes, productivity, subcontractor and supplier status, equipment

utilization, billings and closeout requirements. Lack of detailed visibility

into project status can lead to negative surprises that erode job profits

and can damage relationships.







n


Manage closeout and

ongoing operations: Companies need to integrate and improve key operations

through all phases of the project lifecycle, from concept through

completion. They need to connect all the project stakeholders, capture and

integrate communications, and streamline this otherwise tedious

administrative process to help fulfill all requirements and speed final

payment.






-Vinod Subramanian,




regional manager, Application Sales, OracleDirect

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In Focus



According to Agarwala, considering the industry's dynamics that are

presently being focused upon include sales, inventory, finance, procurement,

costing, integration with other PM tools, etc. Now, as well as in the future,

the focus will increase on consolidation across locations, projects, MIS, and a

complete WAN being implemented in the construction segment.

One of the biggest focus areas for construction companies is the area of

project management considering the sheer size of projects being undertaken by

companies. The growing size and volumes of the projects is also increasingly

making it difficult for companies to manage their data. As a result, they are

also looking for IT solutions that enable them to manage their vast data in

order to increase efficiency, reduce procurement costs and wastage, hence

boosting productivity and cut project execution time.

Among the most visible growth at the builders end, the

erstwhile small time contractors have become 'corporatized'





-Sanjay Agarwala,


director, ESS
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On the Agenda



Some companies in this vertical are now also starting to look beyond a basic

IT infrastructure, looking at solutions that address their needs for different

parts of the business. According to Subramanian, as the magnitude of

construction increases and construction laws become stringent, the vertical is

looking at technologies which make processes easier and help increase

profitability. Companies are also looking at software to address their needs

across locations and provide a 360-degree view of their business. They are

demanding software solutions that give them a real time view of operations

across locations, thereby enabling them to reduce costs, wastage and therefore

increase RoI.

According to Kumar R, the industry is undergoing changes and IT is aligning

to the growth. Currently, the key pain area is to integrate operation for better

insights, which IT is already engaged in and in future, as the industry IT

maturity level grows, areas to look for will be CRM, BI, and collaboration with

external partners. Also, recent developments indicate that total outsourcing of

IT infrastructure is going to be the mantra in the coming years. This will gain

acceptance, as core business management becomes a challenge while coping with

the speedy growth.

According to Subramanian, rapid growth in this segment has led to a fight for

human capital, both at the executive and operation management levels. Stable,

consistent and predictable systems, and HR practices have become critical to

attract and retain talent. The need to deliver projects in time in spite of

staff movements is making it necessary to establish processes and support it by

IT deployments. For example, organizations like Ansal Properties are linking

their regular payroll and operational systems effectively to improve employee

relationships. Pendse recognizes HR as a key focus area for construction

companies and feels that IT can play a critical role in retaining talent through

areas like employee portals that help strengthen the relationship with

employees.

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The legal framework in the country is also going through dramatic changes

with automation of land and immovable asset records, and this is driving

standardization of contracts and documentation. The ability to link data

including transactional records like agreements, invoices, project management

reports, purchase orders, clearance certificates, khata or title of property,

etc are becoming center stage. Organizations will be looking at leveraging IT

for overall alignment.

Going Wireless



Today, one of the biggest challenge faced by the construction industry is to

streamline operations across locations whereby enabling them a real-time view of

operations. As a result, the most common challenge faced by construction

companies in today's scenario is enabling round-the-clock access to information

across various construction sites. In line with this is the challenge of

connectivity, considering that most construction sites are located in remote

areas and also spread across huge distances, especially in case of

infrastructure projects. Companies are now increasingly looking at wireless

technologies and PDA based applications for connectivity and data access at the

construction site. HCC and Maytas Infra are currently in the process of

considering Wi-Fi connectivity at their project sites. According to Sagi,

wireless and handheld applications are going to find their way into the

construction industry considering the very nature of the projects. Pendse adds

that overall connectivity is going to be an issue that construction companies

will need to focus on considering the widespread nature of their operations.

Eventually, organizations will leverage IT to do bid analysis effectively,

manage projects more efficiently, close out projects on or before time and

manage global operations with amazing flexibility. While IT addresses all this

and more, one critical success factor for vendors will be to further fine tune

and customize their offerings in line with the processes specific to the

construction verticals. Construction, not being the traditional mainstay of the

IT industry, is one area that vendors seem to have let down the industry a

little, as they don't have much legacy to learn from. Therefore, customization

will hold the key to the success factors for how far vendors are able to make

in-roads into the super highway.

Shipra Malhotra



shipram@cybermedia.co.in

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