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IRONPROS Contech Predictions Get a Reality Check

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How did our IRONPROS 2023 Construction Technology Predictions hold up as the year unfolded? That’s what Senior Construction Technology Editor Charles Rathmann and Asphalt Contractor Editor Brandon Noel hash out in this quick but somewhat entertaining conversation.

 

RATHMANN: Hey, thanks for joining us again here on IRONPROS as we revisit the predictions that we made for construction technology at the end of last year. So this time at 2022, I was sitting in this chair, trying to come up with some predictions that we could probably live with about now, which is the first of December of 2023. These predictions had to do with market consolidation, progress on construction technology interoperability and more technology coming to the field. As I was talking about this, with my esteemed colleague, Brandon Noel of Asphalt Contractor, and Pavement Maintenance and Construction and a partridge in a pear tree, I can never get that other title 100% mastered.

NOEL: Yeah, that is correct. Pavement Maintenance and Reconstruction.

RATHMANN: Yeah, so Well, it's December, man. So yeah, you and I had, frankly, a frank exchange of ideas about these predictions. So I'll just let you yell at me and tell me all the stuff I got wrong.

NOEL: Well, you know, it's tough for me to yell at you about anything. You're you have such a wealth of knowledge when it comes to the platform software …

RATHMANN: I got you fooled, man.

NOEL: I often look to you for feedback and advice in my own right. But there was a besides the big one that we will get to in a moment. The number one prediction, you made market consolidation, after reading the article in full, while there have been a lot of like acquisitions, people moving into new fields by acquiring smaller companies, that that sort of thing happens on the reg, right? That's happening all the time.

But this year earlier, we did the big tech roundtable discussion where with Asphalt Contractor magazine, we brought in a couple pavement specific software developers and kind of talked to them about what's happening. And I asked, specifically, whether or not they felt the industry sector was heading towards homogenization, or diversification, like whether they thought things were kind of going to move in one of those two ways. And surprisingly, I thought they would be like, Well, yeah, it's all going to be kind of move towards one big gloopy mass. But they see the other way around. And that what will happen is the niche will kind of branch out that people who needs like the specificity of certain things are going to always be kind of looking and innovating in ways, iterating new sorts of ways to make the technology different, setting themselves apart. Now, I know, that's doesn't include not being acquired. But I think the functional things are still staying, you know, pretty diverse. What do you think?

RATHMANN: This was brought up to me by one other person who's surprisingly, or not surprisingly, the CEO of a startup construction SAS company. He’s like, ‘well, gee, we there, there's acquisitions, but we keep on making new startups.’ You know, within any market, I think we're gonna see a lot of consolidation, but an enterprise software in particular, where the economics really favor a larger entity, with the ability to go further up market to get those more lucrative nameplates and contracts. With consolidation to I think that you and I have looked together at some software specific to asphalt contractors. And what we'll be interested to see is where consolidation doesn't really reach. There are going to be businesses where it's like, well, if you're dealing with software specifically for asphalt contractors, and I wonder is that like a big enough market for very large companies to say well we're gonna get into that or not. But it'll be interesting to see where dividing lines fall. Now, with acquisitions, we often see acquisitions that don't make sense where they might gobble up that smaller company in that more niche market where the total margin and market opportunities are not very large but they may be not thinking about that. There are a lot of just regular private equity roll ups that just wind up leaving you with, you know, kind of a sloppy mess. So, you know, I think that that will never be a complete trend

NOEL: I'll throw a curveball at you …. a situation that I've come across … and I want to see what you think about it. I recently interviewed a company … they're an asphalt pavement maintenance company, and they've gotten quite large. They've grown quite quickly over the last decade. And through that process of trying to refine their own quote, to job, sending out their invoice and greasing those wheels, they decided to just build their own app, the app is called spot on site. And they built it proprietary themselves. They, they, they didn't have coders. So they worked with a coding company, they told them what they wanted, and they slowly have been refining and building this app. However, then they started selling leases to other, you know, technically their own competing field, to other asphalt pavement companies. They started being able to license out the use of this estimating software for other companies. And in speaking with them about that process, I kind of got this interesting sense, which is that I wonder if more and more not just in the payment may maintenance sphere, but in the contracting technology sphere in general, that these are internal assets to be built and developed, possibly with the hope of being bought and sold, at some point. It’s a long term investment strategy, only to help them on the business side of building this thing and increasing those wheels and making the job more efficient. But the development process and the customer base that they are establishing is itself an asset. That's pretty valuable. What do you think about that?

RATHMANN: A lot of software really kind of starts that way. I mean, you take a look at Tenna, I mean, that's owned by Conte Construction. InEight is owned by a contractor. We see a lot of these different things, you know, once you make the crossover into having a generate revenue, there are people who say you do have a little bit of a headwind, because you're essentially dealing with your competitors, who might not be comfortable with that. But who is going to support that solution on an ongoing basis? Who's going to develop it and evolve into the future? What if the smart people to create it leave the company or if they're on vacation. Having commercial off the shelf software is something that, you can have that argument over, over coffees or beers or something like that, and it'll never get old. I mean, I personally could argue either side, but I’m more prone to argue the side of COTS software, But there's one bigger area where you're really wanting to work me over the coals, man. So let’s get to that.

NOEL: I've teased enough people about it, which is that the biggest thing if people look through your three big predictions, obviously, the biggest missing gap is AI. It has been a topic of conversation between you and i personally through our work, chat and over social media. Anytime any big news happens in the AI sphere, you know, it's falling into our normal conversation. So I was surprised when I reviewed your three predictions of 2023 that AI is the big gap here. So I guess my first question to you is like, Well, how did it fly over your head 12 months ago, December of 2022.

HERE, OUR AUDIO DROPS OUT, INCONVENIENTLY OBSCURING WHAT IS EITHER A BRILLIANT RETORT OR A CLEVER RATIONALIZATION FOR A MAJOR OVERSIGHT. SUMMED UP, IT AMOUNTED TO THE OBSERVATION THAT AI HAS BEEN IN CONSTRUCTIONFOR DECADES AND WE HAVE ONLY SEEN A STEP CHANGE IN ACTUAL FUNCTIONALITY RELEASED TO MARKET.

RATHMANN: At Autodesk University, they’ve made the point that they’ve we've had AI tools out there for years, involved in thousands of projects. I've seen it rear its head in scheduling software many years ago. It's something that, you know, what people used to call just automated invoice reconciliation, well, some people are now referring to that as AI. My focus here is taking a look at what's coming to market as opposed to a hype cycle. And, you know, Chat GPT is really what's behind all of the public chatter about AI. And what is it? It's a chatbot. And you know, I've talked to a number of construction software companies that had fairly advanced AI that did like parametric work to figure out are all the different ways that you can structure and schedule a project, here are ways you can pull, you know, take off information out of graphical files for estimating.

But, you know, then online also, you saw that that image, that meme of the class turning around and yelling at Bart Simpson, “Say the line!” And he says “We're integrating Chat GPT.” And the people yelling are the investors.

 

And it's a good way, perhaps to make it a little bit easier to find stuff in an enterprise application. But enterprise search has been around for a long time. So you know, where I think the potential is, is not AI that, you know, behaves like a human. It's AI that does the stuff that humans can't. And we're starting to see it. For instance, in interoperability, you have companies like QuickBase, that have a no code, low code development tool so you can write your own software. You can now use generative AI to identify all the different data sources that we have access in all the different API's. And here are the ones that we might want to look to to integrate to create a new application or to solve a given problem. So yeah, it's out there. But really, what that is, is it's one more tool that in some cases might be used to achieve things.

But when I work on my predictions for 2024, I'm going to predict that the AI hype cycle is going to come down the other end of the hill.

NOEL: I hope for one that you are that you are correct in that prediction. I haven't seen your other predictions yet, but I hope that if no other prediction you make for 2024 is correct, I do hope that that hype cycle kind of reaches its natural foregone conclusion.

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