“It's tough to make predictions, especially about the future.”
― Yogi Berra
Yogi was right, but that does not typically stop technology vendors, journalists and analysts from sticking their neck out with end-of-year predictions. The thing is, if you look back on these predictions a year later, I am not sure how well they hold up.
Sometimes, predictions are made because they are compelling, eye catching or just based on wishcasting. Since we debrief multiple construction technology vendors every day, conduct primary research and regularly take deep dives into how individual contractors are managing their tech stacks, IRONPROS is in a good position to take that step back and lay out three predictions for construction technology in 2023 that we are comfortable revisiting this time next year. Our sister publication, OEM Off Highway, tracks the technologies being specified and included in heavy equipment, so we have some insight into what will be released to market a year or so in advance. We are also preparing an in-depth primary research report on field and equipment technology adoption, and this gives us even more specific data points.
For some, these predictions may appear to be fairly obvious ones, but there is a genius in the obvious as Robert R. Updegraff so brilliantly illustrated. But our goal here is not to publish a clickbait listicle of “Four Surprising Construction Technology Shockers (three will make you cry),” but rather to offer something with some rigor behind it, designed to benefit the financial buyer of construction technology.
1. Market consolidation
Enterprise and business technology companies tend to consolidate in ownership over time. Economies of scale, the desire of technology buyers to reduce their number of vendors and manage risk by selecting established, stable vendors is one factor that will contribute to this. The ERP Graveyard Scorecard shows how time and time again in horizontal business technologies, software giants like Oracle, Infor Global Solutions and Microsoft absorbed competitors or expanded into new categories through acquisition.
Microeconomics-driven consolidation: In the construction technology space, Trimble has been aggressively growing by acquisition, including major moves into the enterprise software space through Viewpoint, B2W, eBuilder and others. Procore started with a core project management solution and then extended that through acquisition, although sources at the company say they will likely rely increasingly on partnerships and integrations to bring new capabilities into the fold. Middle market vendors too have been extending their construction software solutions by acquisition, including STACK Construction Technologies and RedTeam.
In 2023, we will probably see two patterns in merger and acquisition activity affecting construction technology. This will be most noticeable in the software space due to broad factors above, compounded by challenges faced by many legacy software vendors whose products have not made the jump to a modern cloud architecture. Modern cloud methods for designing and provisioning business software are just easier and more profitable for the vendor. On some measures, this software designed to be delivered by subscription on a shared instance of the software is also less costly to manage for contractor end users. A small legacy construction software company, for instance, will have a limited research and development capability. This creates hurdles as customer requirements advance, and net new and even established customers look for modernity, open application programming interfaces (APIs), and reduced administration dedicated to testing upgrades versus their unique, single tenant or hosted environment. Taking old software and completely re-inventing it as a modern multi-tenant software-as-a-service (SaaS) architecture will be too heavy and expensive a lift for some software vendors.
These companies will face born-in-the-cloud multi-tenant software-as-a-service SaaS competitors who can come to market at a lower total cost, iterate new features faster and offer and offer subscription pricing that moves software purchases off CAPEX and onto OPEX. This in turn enables an entrepreneurial SaaS software company to sell their business at a higher multiple on revenue than those that sell the software on a perpetual license.
In pre-cloud days, a contractor would have bought a perpetual license entitling them to use the software as long as they wanted, but would generally also pay a monthly service or maintenance fee for support and new versions. Multi-tenant SaaS software vendors that provision a single instance of software that is used by multiple subscribers will be a lot more efficient and profitable than vendors hosting a legacy solution in the cloud and slightly more efficient than single tenant SaaS vendors that provision a separate instance of software for each customer. But a modern, well-designed single-tenant SaaS product like Asset Panda or HCSS may increase customer cost and complexity only incrementally over multi-tenant with the real jump step coming in the move from a legacy solution designed for on-premise or a managed services hosted environment.
Software vendors that acquire these legacy software products hailing from the days of on-premise operation and perpetual license may expend the resources to largely re-imagine them as multi-tenant products as Autodesk did for elements of Autodesk Construction Cloud or unite them with a common data structure and integration platform like Trimble Construction One.
Technological convergence-driven consolidation: While microeconomics will favor the consolidation of software, other technologies will see consolidation as their use cases merge. Technologies are emerging to address specific segments of a construction process, and as multiple technologies that address the same use case migrate into single rather than multiple disconnected applications.
This is already evident in photogrammetry where image data from camera phones, drones, 360 cameras and LIDAR are merging into a single pane of glass. FARO Technologies has been on a tear, acquiring hardware and software technologies to create a broad and complete solution for capturing, managing and driving value from them in a centralized application as opposed to multiple point solutions associated with each capture technology. Most recently, FARO acquired SiteScape, an innovator in LiDAR 3D scanning software solutions for the AEC and operations and maintenance markets. SiteScape enables LiDAR-equipped mobile devices to easily capture indoor spaces digitally, providing a readily available entry point to scanning physical spaces for a broad range of applications.
DroneDeploy also recently acquired StructionSite, unifying aerial and land-based data capture. We'll see more of this as the barriers between reality capture methods is erased to create a single version of the truth.
2. Real progress will be made on construction technology interoperability
Because construction projects are typically executed not by a single corporate entity but by several—owners, generals, subcontractors and other vendors—processes critical to success must be handed off seamlessly between different organizations. This means requests for information, change orders, applications for payment, certificates of insurance, work-in-progress (WIP) reporting, lien waivers, amendments to contract terms and more are all making the transition in many projects into multi-company digital workflows.
Technology to collaborate on construction processes across organizational boundaries will see market development in 2023. Some of this progress will come from major vendors including Autodesk with its Forma initiative, announced in October of 2022 and from Trimble though its integration layer, Trimble Construction Cloud, launched in November, came to market with initial use cases including a field-to-office workflow and building information model (BIM) file sharing. Other more middle market vendors to watch include integration platform-as-a-service (iPaaS) vendor Ryvit, file sharing and collaboration vendor Newforma, no code data management vendor Toric and others are growing their proprietary solutions for interoperability.
Also encouraging is that technology vendors including Ryvit, Trimble, Sage, Autodesk, Procore, Bluebeam, Newforma and others are banding together with contractors including Zachry, Yates Construction, Walsh and others through the Construction Progress Coalition. The organization is not laying the groundwork not for common data standards as would be the case with electronic data interchange (EDI) used in other industries including manufacturing. Rather, the coalition is focusing on creating a common data exchange (CDX)—a visual framework that helps stakeholders understand the relationships between people, processes, technology and data by aligning common processes and interactions with documents of record in a system of record like enterprise resource planning (ERP). Personas in a group of project stakeholders will be assigned activities within this CDX so they can complete specific processes within different documents of record.
We predict one or more major announcement and many smaller ones as vendors create, if not bridges, reliable maps to a shared future of construction interoperability.
3. Technology coming to the field
Technology for the back office of construction has had to grow in power and meet contractors’ project management and project accounting needs. But where we will see growth in 2023 is in the extension of more technology into more project sites by more contractors.
While automation and digitization came long ago in sectors like manufacturing, the omnipresence of mobile devices and connected equipment mean that Field Productivity Software can blend location intelligence with enterprise workflows. The sector of field productivity software will grow in 2023, which means more contractors will be issuing work tickets to and capturing productivity data from crews in the field. While much of this technology is aimed at managing work of people, some of the products including Assignar, HCSS Heavy Job, and EquipmentShare’s T3 product take an equipment-centric approach and also manage assigning work to and collecting data from equipment. Less equipment-centric vendors to watch include Sage Field Operations and ServiceTitan, both of which enable a contractor to manage both project-focused work packages and field service management and maintenance duties.
Another field technology that will see growth in 2023 is GPS Fleet/Asset Management Software. This technology combines internet of things (IoT) sensors in equipment with cloud-based software to facilitate equipment fleet management and optimization of individual pieces of equipment. Features include geolocation, usage tracking, maintenance, and various levels of asset accounting. With equipment availability constrained and fuel prices likely hovering above average, more contractors will see the value in making a small regular investment in software to reduce unplanned stoppages and surprise expenses while improving return on investments in equipment across the business.
Vendors to watch here extend well beyond commoditized offerings from Verizon or other mobility vendors. Construction-specific solutions drive data from connected equipment deeper into the business, addressing the needs of the CFO as well or better than the equipment manager or maintenance shop. They begin to track not just location, but operations and maintenance history, assignment to billable jobs and integrate with back-office systems to manage maintenance staffing, asset accounting and spares/repairs and consumables accounting. Leaders here include Tenna, Fleetio, and HCSS Equipment360. EquipmentShare comes at the product category differently, primarily through rental and management of internal fleets balanced against rental fleets. The company is also in pilot on a solution that would enable contractors to easily derive revenue from their owned fleet through outrental.
One interesting wildcard in the market for location-enabled asset management technology is that Trimble may not be aggressively selling its Pulse GPS fleet tracking software. This, a move by Tenna further up market and some pioneering insurgencies like Asset Panda will make for an interesting year.
Watch IronPros for hard data on these two product trends coming in Q1 of 2023.
2023 in Construction Technology
This next year will be a pivotal one for construction technology. We will see a winnowing process as some startups graduate to the role of middle market stalwarts and others are acquired. We will see large and small technology vendors and contractors coming together to make meaningful improvements in construction interoperability. And technology will come increasingly to the construction site, even in humbler projects completed by smaller contractors.
