Classic ERP and construction doesn’t mix – but modern construction software is emerging

Profile picture for user ray.rebello By Ray Rebello June 18, 2019
Summary:
The construction industry has modernized - but until recently, ERP hasn't been keeping up. Why? Acumatica's Ray Rebello drills into the functional needs of construction firms, and how modern cloud software fits into the mix.

high tech construction

The construction industry is booming again, and one contributing factor is technology. Today’s buildings are designed to be “smart,” energy efficient, and user-friendly. The materials used in these smart buildings are stronger, lighter, and more reliable.

However, while the construction industry has been quick to utilize new advances in the building process, these same professionals are slower to adopt new technology in their business applications. 

Why is that? Have they grown used to cobbling together information they need in spreadsheets from disparate systems? Have they just accepted the tedium of pulling reports from multiple systems and collating them into one report - not only wasting time, but also leaving the business vulnerable to errors? Or is it because the new breed of business management systems still isn’t up to par?

Just as a second story can’t be added on a house unless the foundation was configured to support that weight and access, a secondary set of construction applications cannot be tacked onto an existing ERP platform.  It just won’t hold up.  But there’s another reason too: the construction industry requires unique functionality, such as retention for accounts payable.

Separating your construction and ERP software isn’t working anymore

Suppose you receive a bill from a subcontractor for $200,000, but 10 percent of that is withheld until the project has been satisfactorily completed. Meanwhile, you have to think about compliance to certifications and licensing. You may have 40 or 50 subcontractors, each of whom must be licensed, bonded, and insured—probably all at different times. Keeping track of who is, or should be, working on your site is a time-consuming and error-prone process, but it’s also essential if you want to stay out of trouble with the government.

Similarly, you need a solution that can support constant changes during the construction process. Keeping track of change orders require you to document who asked for what, how much was quoted, and what you should charge. This requires a system that tracks approvals and exact costs.  Not every solution can handle construction payroll, either, which often includes union payroll, nonunion payroll, and certified payroll—all by state and county. And let’s not forget garnishment. These are just a few reasons why it’s essential to have a construction ERP solution rather than a generic accounting one. 

Construction industry solutions built in the 1990s were generally very good and widely adopted. But then the 2000s came. A series of building recessions wiped out many construction companies, resulting in a sharp revenue dip for legacy solution vendors. Meanwhile, internet applications began to dominate the software industry and legacy solution vendors were no longer able to profitably invest in new development of their applications.

Cloud hosting doesn’t solve the construction integration problem

The only way forward for many vendors was to host their legacy client/server applications on offsite servers while marketing them as “cloud” applications. This was a short-term solution at best. Today, many of the most popular vendors of the 1990s are being bought by consolidators. The future of their industry-specific applications is an open and lingering question.

At the same time, however, a new generation of cloud enterprise resource planning (ERP) vendors is emerging. Their solutions are based on robust, adaptable, cross-industry platforms consisting of horizontal applications that have industry-specific vertical applications built on top of them. These newer ERP vendors use modern technology and tools to deliver true cloud applications that are fully mobile. This is the true cloud payoff:  vertically-rich ERP systems, exposed by APIs. However, it’s still buyer beware time: not every ERP vendor can offer a modern construction cloud software solution. 

Today’s true cloud ERP vendors appeal to a new breed of construction companies. This includes companies that expand from just building to fabricating or manufacturing materials, and construction companies that want to provide ongoing services such as property management or field services to building owners or homeowners.

What does modern construction software look like?

True cloud construction applications allow job site workers to enter data from wherever they are—reducing data entry delays and errors. With mobile data access, field workers have all necessary information right at their fingertips. Mobile also allows field staff to take pictures and attach them to any report. Using the speech recognition capabilities on most mobile devices, workers can dictate information into the description field, eliminating the need to type.

Of course, no matter how good a cloud ERP system is, it will still need to talk to other cloud applications. Considering the sheer diversity of processes and procedures involved in construction, no single system will ever have all the functionality a business might require. But today’s application programming interfaces (APIs) make it easy for cloud ERP systems to interoperate with other cloud applications.

Modern cloud ERP lets you track real costs and committed costs in purchasing and job costing to forecast the projected total costs at any point in the building process. Most older systems only report historical data—and it often takes a month just to get those numbers -- while a modern system will not only report historical results, but also help forecast expected future costs and provide other valuable information to mobile personnel.

Modern systems also offer:

  • Built-in document management, so that any incoming document or invoice will be attached to the job record
  • Integrated CRM, so that you see the process from bid to delivery to completion
  • Built-in workflow for purchase orders, accounts payable, time entry, and so on

The new reality is that:

  • Traditional back-office construction-specific software has changed for the better
  • Cloud and mobile solutions have radically expanded the ways to access company information
  • Now a construction business may pay for software according to the computing resources required rather than on the number of users granted access to the system
  • New reporting and dashboard tools offer greater ease of use and self-service reporting
  • As the current generation of owners and operators retire, a new generation is taking over—and they expect more from their business management systems

Construction is a tough, fast-paced industry. Companies stuck in manually-intensive reporting, equipment spreadsheets and data silos are going to fall behind. Competitors will seek out software that provides integrated, up-to-the-minute information.  Today, at last, construction companies have the chance to run their business on software as modern as their building designs. But they have to seize it. It starts with research on what’s possible today. Build a new requirements list with the type of criteria outlined above. Learn from successful projects, and throw out the old assumptions of what construction software is capable of.

Image credit - Feature image - Builder On Site Looking At Digital Tablet With Apprentices, by Monkey Business Images - from Shutterstock.com.

Disclosure - Acumatica is a diginomica premier partner.