How technology can lessen the impact of soaring construction costs
The Australian construction industry has been hit with challenge after challenge over the last few years, including the COVID-19 pandemic, natural disasters, and labour shortages.
The combination of these challenges has forced costs to soar, rising by 11 per cent in the past 12 months, and it’s showing no signs of slowing. The significant cost inflation in an industry with slim profit margins has seen construction businesses account for almost 25 per cent of all business insolvencies in Australia.
However, there is hope on the horizon. Homegrown technology may be the answer to helping construction businesses see big savings. Migrating core business from disparate on-premise solutions to one integrated solution hosted in the cloud known as ‘Software as a Service Enterprise Resource Planning’ (SaaS ERP) has multiple benefits. The Total Cost of Operations (TCO) savings within three years of migrating to SaaS is approximately 14 per cent for large construction firms, three per cent for construction SMEs, and 16 per cent for organisations that own, operate and maintain major infrastructure assets.
A slowdown in the Australian economy over the last few years has led to reduced demand for new construction projects, but that is starting to change, giving suppliers more bargaining power, and driving up the price of materials. These rising costs have had a significant impact on the bottom line for construction companies and it is vital to closely monitor these costs and implement cost-saving measures where possible.
Moving to SaaS has huge cost saving benefits for the asset and project intensive industry as a whole sitting at approximately $62 billion over ten years. Implementing enterprise software enables construction businesses to develop more efficient processes with online self-service capabilities and integrated reporting and analytics.
What is SaaS ERP?
SaaS ERP is a cloud-based solution that transforms the way organisations interact with their staff, customers, and communities with access from any device, anywhere, at any time. For construction, an industry focused SaaS ERP solution provides a comprehensive platform for project management, financials, supply chain, human resources and payroll, and more. It also helps improve an organisation’s bottom line by reducing costs, improving efficiency and operational productivity, and creates full project visibility enabling better decision making.
At TechnologyOne, SaaS ERP software solution has supported construction companies, such as BMD, BGC and JWH Group and more, with managing their projects and developments on time and on budget.
Industry General Manager at TechnologyOne, Luke Fleming, weighs in on how SaaS could benefit Australian construction companies.
“Construction businesses and their employees need the right technology and the right tools to deliver for their clients and their communities. I have seen first-hand how the right SaaS ERP solution can help construction companies, developers, suppliers and subcontractors make cost-effective decisions in real time by providing a single source of truth and transparency on the information they need.”
Managing data across projects to make smart management decisions
Traditionally, the construction industry has relied heavily on manual paper-based processes and multiple disparate systems to manage different aspects of business, from contracts and invoicing to equipment maintenance and work orders. These outdated processes can lead to increased costs, lost or damaged assets, and the need for additional staff.
With SaaS ERP, all information is stored in one centralised database providing visibility into the status of projects, resources, and finances and allowing seamless data sharing, enabling a far more accurate level of reporting, leading to direct savings. It also enables non-technical workers to quickly digitise manual processes, which is critical to delivering greater productivity gains.
Regular equipment breakdowns can make it challenging to hit critical milestones on construction projects. With a centralised database of resources, construction companies can track the availability of materials, labour, and equipment, ensuring that projects are completed on time and within budget. It enables companies to easily manage the entire source-to-pay process, inventory management and replenishment as efficiently as possible, improving spending patterns and making strategic sourcing, contract management and stock optimisation decisions to drive savings throughout the supply chain. With full visibility into the status of projects, construction companies can reduce the risk of project delays and help to optimise the use of resources, reducing costs and improving the bottom line.
Cutting ICT maintenance and ownership costs
On-premise software requires construction companies to purchase and manage on premise IT Infrastructure. This involves significant capital investment, as well as recurrent costs such as Information and Communications Technology (ICT) consultants and training to be able to customise, manage and continually update the software.
New evidence suggests SaaS has the potential to deliver substantial cost savings to organisations. The savings come from reductions in the cost of ICT ownership and maintenance, and productivity improvements associated with the automation and simplification of business processes.
SaaS ERP is hosted by a software provider who takes on the onus of ensuring the software remains updated and functional, meaning no need to invest in hardware or ICT consultants to support it. It also removes pressure from in-house IT staff to keep pace with technological advances and modern cyber security obligations, enabling them to concentrate on other higher priority matters. This benefit is translating into sizeable gains in the TCO of the software, as well as the hardware and staff resources required to keep it operating. It also means that should a work site get rained out, business can continue as normal with all important systems, automation, and processes safe.
Mitigate the risk of disputes, project delays, and unplanned costs
The major benefit of SaaS ERP for construction is the ability to access information from anywhere, anytime, on any device, enabling companies to stay connected and informed, even when working on remote sites or on the move. Enabling real-time collaboration between team members, contractors and clients increases productivity and reduces the risk of project delays by improving communication, decision-making, and ultimately improving the bottom line.
“We know the majority of our customers’ employees will be on a construction site during the day with little or no time to sit in front of a computer. That’s why TechnologyOne offers a software solution specifically designed for construction, decreasing the time spent managing paperwork and increasing time spent on the project.” said Mr Fleming.
TechnologyOne’s software provides a secure, configurable portal framework that enables companies to interact with external parties within project environments, as well as a Subcontractor Portal to securely engage with external parties and provide a single source of truth to view invoices, payments, claims and certifications, insurances, defects RFI’s and more.
SaaS ERP provides a comprehensive solution for managing all aspects of a construction business, from project management and resource management through to financial management. By improving efficiency, reducing costs, and enabling better decision making, it helps construction companies to improve their bottom line and achieve business goals. With its flexible, scalable, and cloud-based architecture, SaaS ERP provides a solution that can grow with a construction company and support its long-term success.
TechnologyOne offers a software solution built for Australian construction that offers more project visibility than a hi-vis vest. For a full solution overview, register for the webinar here.