Is it time for you to upgrade your construction software applications into one system?
The best way for a construction business owner to determine if it is time to upgrade the company's software system is to ask the end users-the accounting staff, the project managers (PMs) and the IT staff-the people who use the software every day. Executives who don't interact with the system daily often have a vague sense that the system isn't performing as well as it could be.
However, it is the financial manager who spends too much of her time closing out a project each month or the PM who has given up using the system entirely because it takes up too much of his time, or the harried IT systems manager who locks himself in his office, trying to make all the different systems work together who really understands how things are working. A general rule of thumb is if you are spending more time managing the system than building projects, then it's time to upgrade your construction software.
The evolution of a construction company's relationship with a software system is often linear. Starting out, a company will use pen and paper and spreadsheets to track project costs and other financial information. As the company grows, it starts to add point solutions-software that addresses one particular department or function, usually a financial software package to track costs and a separate estimating solution. Typically, after that, a company will turn to a project management (PM) solution, then a customer relationship management (CRM) system to stay on top of opportunities and, finally, a document management application to keep track of the growing stacks of paper.
Few companies have the foresight to integrate all these applications on a single database. Inefficiencies are created as data is entered from the field into the project management system, then again into the financial system. Business development information stays in the CRM application, locked away in a sales director's mobile device.
Eventually, the company realizes that integration is needed and builds data bridges between systems, so information can travel from one department to another. At first, this seems like a solution to the problem since the PMs don't have to re-enter data, and accounting is processing faster. In reality, though, these are ghost efficiencies, as the work is off-loaded to the IT department, who now has to keep all the systems in sync, and shudder when it is time to upgrade one of the systems because this means all the data bridges must be modified.
Let's take a generic company, built from real-world case studies, to illustrate how to determine if your business should upgrade its software system. ABC Construction Group is a 75-year-old, family-owned business in its fourth generation of leadership. Based in Dallas, ABC Construction Group offers general contracting, construction management and design-build services across the country, with eight regional offices and two divisions-Alpha Concrete and Omega Contractors. The company used a generic financial software solution for the last 12 years and its own proprietary project management system for the last five. On top of that it has been using a non-construction CRM solution and a rudimentary document management system.
The former CIO was a big proponent of the financial system and developed a sophisticated set of data bridges and workarounds to get project information from one system to another, but this was primarily for generating reports for executives. Most of the information flow was performed by staff members dedicated to this task, who took reams of paper and invoices and re-entered the information into the system. Certain functions, such as financial forecasting, took a lot of time to complete and involved multiple systems. If a mistake were made in one of the stages, even a small mistake, it would cast the reliability of the entire forecast into doubt. Company executives and users of the system reached a point when they knew, for the most part, that the data could not be trusted, but they used what they had to complete projects on time.
As the economy took a hard right turn, executives at ABC Construction Group knew they had to reduce overhead and streamline the entire organization to survive the recession. The software system was a prime candidate for optimizing, so the company formed an IT action group to perform a thorough evaluation of its IT system and its impact on business processes, something that the company had never done. By involving members from every department within the company and going through processes step-by-step, ABC Construction Group determined the business processes most impacted by software were as follows:
- Job Initiation - covered business development, contact management, opportunity tracking, proposal cost management and conversion of the proposal to an executable project
- Estimate to Job Cost Budget - covered the creation of jobs from opportunities
- Estimate to Subcontract - covered the assignment of the estimates to the job and through to buy-out
- Payment Management - covered compliance management for subcontracts and purchase orders through to processing subcontract requests for payment
- Contract to Billing - covered contract creation, mapping the job structure to contract structure, bill presentation, billing methods, billing rates and accounts receivable integration
- Potential Change Item to Posted Owner Change Order - covered the lifecycle of a project, including sources of change items, effects on cost/billing budgets and impact on forecasting
- Job Forecast to Work In Place (WIP) - covered job forecasting by operations through to general ledger work in process adjustments by accounting
The IT action group discovered that the company was using four separate systems for job initiation, including a spreadsheet application. The same was true for estimate to job cost budget and estimate to subcontract. The payment management process involved three systems and a series of complex workflows that had multiple project stakeholders e-mailing back and forth to each other. Contract to billing involved a complex series of spreadsheets and multiple payment applications. The potential change item to posted owner change order involved four systems, while job forecast to WIP was the most time-consuming and convoluted process. It took four systems, five departments and a stack of reports to perform this process.
The IT action group knew that the current IT system did not work well and took too much time to perform, but they did not have any hard numbers to test this theory. So, the group decided to generate some. Using representatives from each department, the group assessed each process and determined what steps were involved. For example, in the estimate to subcontract/purchase order process, the IT action group determined that 18 separate steps made up the process, starting with the creation of the estimate and finishing with copies of the subcontract being e-mailed to the accounting and operations department. The group saw that most of these steps were unnecessary, such as manually entering subcontractor information into the project management system and taking the invitation to bid (ITB) out of the PM system and sending it to the accounting department. Charting out each process this way was an eye-opener for
ABC Construction Group as it illustrated some areas in which efficiency could be improved.
Since every construction business is unique, each will have its own point when it is time to upgrade the software system. Before determining what system to upgrade to, construction business owners need to determine in what direction the company is moving and what areas of the current system can be improved. If it seems that your business is more about managing IT systems than managing projects, then an upgrade should be considered.
Upgrade Systems, Lower Risks
Upgrading a software system isn't only about saving money and improving efficiency, it can also reduce risk. Using multiple systems with separate silos of information is a major area of risk for a company. Without real-time communication between operations and accounting, a PM can sign off on a subcontractor contract without accounting properly vetting it. If the subcontractor doesn't have the proper insurance and an accident happens, the company is now exposed to large losses and the stability, not to mention the profitability, of the project is thrown into question. A software system should deliver real-time project information to the right people so these kinds of situations can be avoided. In addition, eliminating separate systems reduces the data entry points, which, in turn, reduces the chances of errors, and provides a single source of truth for billings and other financial transactions.
Construction Business Owner, October 2010
