Focus On: AEC*
| Top business challenge: Managing growth and acquisitions, integrating disparate offices and processes, and enabling collaboration
Solution: Link offices using interoperability standards and Web-based document management
How IT can help: By developing an infrastructure that supports collaboration with partners and government agencies
*Architecture, engineering and construction
After a midmarket engineering firm acquired a Brazilian subsidiary, management was more than a little confused when the South American unit filed its quarterly report. "The first set of financials was in Portuguese," says the company's CIO, who doesn't want to be identified. "My CFO turned the text upside down. He just couldn't understand it."
That sort of miscommunication is emblematic of the architecture, engineering and construction (AEC) industry. Technology is vital to the business of designing buildings and infrastructure, but disparate systems and sector fragmentation often create the IT equivalent of the Tower of Babel.
And while business is booming, fueled by demand for commercial construction and post-Katrina infrastructure rebuilding, business challenges are also proliferating -- notably managing growth and integrating acquisitions.
"At Earth Tech, we bought 25 firms, and none of them had the same infrastructure," says King Nelson, a partner in the Denver office of consulting firm Tatum LLC and former CIO at the Earth Tech division of engineering firm Tyco International. "We meshed them together by saying, 'You're going to use our stuff.' It wasn't hard to change technology; it was hard to get people to change."
The AEC industry is a major driver of the U.S. economy. Engineering, design and architectural firms -- segments of the industry that are responsible for designing buildings and infrastructure as well as the electrical and mechanical systems that make them work -- represent slightly less than half of the total construction sector. According to a U.S. Census Bureau forecast, that sector will reach $1.16 trillion this year. Construction ranks just behind health care in terms of growth, according to McGraw-Hill Construction, which publishes the trade magazine Engineering News-Record. But given the fragmentation of the industry -- the majority of firms have fewer than 50 employees -- sector growth frequently comes through acquisition.
While residential construction has slowed recently, research firm Reed Construction Data forecasts that spending on nonresidential building projects will increase 10.6% this year, together with an 8.1% increase in spending on nonbuilding projects such as bridges and roads.
But while the industry is growing, it's also bedeviled by communication problems -- a lack of standards, interoperability and collaboration -- both inside and outside organizations. How big a problem is interoperability? A 2004 National Institute of Standards and Technology study estimated that building maintenance organizations wasted almost $16 billion a year because computer-aided design (CAD), engineering and business process software systems couldn't exchange data freely.
A Knowledge-Sharing Gap
A lack of interoperability is symptomatic of a larger issue: the inability to effectively share and disseminate knowledge. "Knowledge management is one of the really critical topics," says Nelson. "Everything is a project at an engineering firm. You have various offices in your own firm, plus clients, subcontractors, government offices. There's so much passing information back and forth -- and doing that in a secure environment. Everyone is still looking for the one tool for collaboration, but no one has found it."
Construction and engineering firms have invested in IT in recent years, and the trend looks likely to continue. A survey last year by Engineering News-Record of 400-plus executives found that 29% expected to increase their IT budgets in 2006, while 45% expected spending to stay the same. "Our highest priority is getting project information to our project people more effectively," says Greg Gould, the CTO at Burns & McDonnell Inc., in Kansas City, Mo., with revenue of roughly $600 million.
Burns & McDonnell is deploying a new employee portal to automatically generate business reports that interface with its Oracle enterprise resource planning (ERP) system. It's also rolling out Document Locator, a new document management system from ColumbiaSoft Corp. "More and more of our clients want us to be able to collaborate electronically," Gould says. While his company has tried several tools, none has worked to his satisfaction, he says.
One measure of inefficiency is how much paper the industry uses. A recent Harris Interactive survey indicates that large CAD files are reviewed 50% of the time both on paper and onscreen because they can't be exchanged electronically. "Documents are splattered all over the company," Nelson says. And he knows what he's talking about. He organizes the IT portion of the Design Finance Officers Group, a roundtable for industry CIOs to discuss concerns. "When the project ends, you have to archive the stuff," Nelson says. "Companies have different rules. I don't know anyone who has solved this problem. Everyone builds their own thing."
Another problem is the rapidly changing nature of workflow. Larger firms might have thousands of active projects spread among an ever-shifting array of locations. "The workload changes all the time," Nelson says. "Two offices talk to each other all the time, then they never talk again. Every company seems to have a different way of doing things. And lay the government on top of that. You need a communications network you can really manipulate." Companies frequently have to open satellite offices at construction sites with heavy bandwidth requirements quickly, only to move these resources to other projects before long.
"You get a notice they're going to open a project office in two weeks," says Kevin P. Pierce, director of technology at $80-million Woolpert, an engineering and design firm in Dayton, Ohio. "You need 30 days to get an Internet connection at least. Acquisitions are another challenge. We don't want any of their computers, but generally they come our way anyway. In two years, we've had four acquisitions."
The issues are similar at firms like Burns & McDonnell, where growth has been organic. The company employs more than 2,000 people in nine business units scattered among more than a dozen offices. "The units traditionally have lots of autonomy and different ways of doing things," says Gould. "My primary focus is on project execution. We're tying apps together to improve productivity and efficiency."
Many offices house different practices under the same roof, each with different IT systems. But as the business expands, Gould says he has to add more systems to capture customer information. Early this year, the company rolled out Interaction, a customer relationship management system from LexisNexis, replacing a homegrown program that Gould calls "user belligerent." Interaction, he says, gives the firm a handle on all parties with whom it does business.
Unfortunately, Gould has to turn to solutions designed for other industries because vendors have difficulty meeting this industry's demands. "Every project we do is different; every design is different in this industry, but business applications are made for people who make widgets," Gould says. Since AEC firms are project based, he adds, systems leave much to be desired. "The way we want to track and report -- those systems don't fit our needs."
Michael Ybarra is a contributing writer for SearchCIO-Midmarket.com. To comment on this story, email [email protected].