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.
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.
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.
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.
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 |
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 -Sanjay Agarwala, director, ESS |
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.
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