The construction industry has a problem. If the US were to house everyone who needs shelter, we're short 7 million homes. Yes, the industry's had its ups and downs in recent years - particularly in the commercial real estate segment - but the labor issues are pressing. One in four construction workers are over the age of 55. As per Stateline.org:
An analysis released earlier this month by the Associated Builders and Contractors found that at the end of November [2023], there were about 459,000 job openings in the industry. The 5.4% job opening rate was the highest since 2000.
Generational shifts aren't helping. This is not an industry that draws young talent in, except as a seasonal stopgap. But is that changing? One notable shift I've seen: an increase in modern construction software - with the kind of mobile interface a generation raised on iPhones wouldn't find off-putting.
What do construction customers need to compete?
To make sense of these obstacles/opportunities, I had a virtual chat with Dustin Stephens, VP Construction and Real Estate at Sage. I had lingering questions for Stephens since my February stint at Sage Transform - including how Sage's 2024 acquisition of BidMatrix (via the Bridgetown Software purchase) fits into their construction software mix. Stephens has seen plenty of shifts over his decades in this business. But the changes construction and real estate companies now face is a post-pandemic whirlwind. As Stephens told me:
COVID threw a wrench in a lot of different industries. It just forced that - especially the accessibility needs: to be able to access your software, your technology, anyplace/anywhere. You see a lot of legacy solutions out there; they are tried and true. But you know, there's other things besides feature-rich functionality that are critical for customers to survive.
Such as?
Increased security is a big one. Do they have the right technology to attract the right talent? If you have a sense of accessibility, you can attract the younger talent in your generation who want that hybrid environment.
Seasoned construction workers might be used to navigating what I call "green screen" industry software, but the younger generation of talent is used to slick mobile interfaces. Doesn't something have to give? Stephens:
It just gets harder and harder to keep up with that. Speaking of the generational gap, even in the back office before us to solutions, they've been those Greenstein green screen solutions, as you call them. They're used to them - people don't like change. But that younger generation is going to want something different, a different user interface exchange, ease of use, accessibility. It's harder and harder to compete with those older solutions.
And yet, those older solutions have virtues. I might poke fun of them as "green screens," but many of those programs have rich industry functionality. They might even win a feature-by-feature comparison with newer cloud software. So isn't another change the software evaluation itself? With modern construction software, isn't it less about functionality grids, and more about the customer's confidence in the vendor, their roadmap, and their ability to deliver new functionality as the industry shifts? Stephens:
Oh, absolutely. We had to change the way we would communicate it. Back then, it was like, 'Hey, let's talk features, features, features.' And now, you say, 'We do everything we can to give you the most critical essential features you need to run your business, and have a really great user interface to do that.' But a lot of customers are saying,' Okay, I'll give up certain things because I want to make sure my integrations with my third party don't break down,' or 'I like the idea of modern technology - and I don't ever have to worry about [staying current].'
And as you just pointed out, with the extensibility and flexibility of the software, you can be much more agile. We're coming up with changes every quarter... Then whatever new needs in the market might come up, we can meet those needs faster. And so they start to see the value of that, by being on a modern cloud platform, versus 'I'm only looking to check the box on features.'
On construction platforms - and the power of customer choice
But with industry cloud software, there is another shift: if vendors do this right, it's about the platform. That means you don't have to get everything from the same vendor - or you switch it up when the time is right. I told Stephens about my interview with Sage customer ACT Construction at Sage Transform, and how they are still running Procore for some construction management tasks, but they may choose to move to Sage for that functionality over time. Too many cloud applications vendors are still overlooking that type of choice. But you better believe this matters to customers. Stephens responded:
We talk to customers every single day, and that's just something we feel is fundamental. It's what we call power of choice. We're going to try and give our customers the best possible solutions to help them run their businesses, but it's a complicated world we live in. There is no one vendor that can do it all. That's why we preach our open platform. We've got a very robust marketplace that we've had for years, and now we're expanding that more and more with third party construction tools. Just like ACT Construction, I can choose Procore when I need it; I can choose maybe a Sage solution here, or something niche. We're going to make sure that they have seamless integration, so their businesses is as efficient as possible.
Speaking of which, how should we make sense of the expanded lineup of Sage (and Sage Intacct) Construction and Real Estate Solutions, bolstered by acquisitions? Stephens says a big emphasis is getting the go-to-market message right, because "construction" spans a range of smaller verticals and roles, each with their own software needs.
Construction is just a broad term... A general contractor is very different from the needs of a specialty contractor or a civil highway contractor, or a residential home builder. And so we really break it up into sub-verticals. We put packages together, and we try to, in general, give a suite solution, if you will, that will fit the needs of each of those different sub-verticals. We want to be that technology of choice across pre-construction, to construction operations, either pre or post during construction, or post-construction service work, and your back office financials, but really elevating those areas into the cloud for our construction companies.
You mentioned BidMatrix. That was a very strategic acquisition for us; we now have an industry-leading estimating solution out there in the marketplace... This gives us an opportunity to leverage that platform, to start moving estimating into the cloud for our customers.
The wrap - can modernizing your operations lead to "light bulb moments"?
Modernizing your operations is an essential step - but it's not what really gets my attention. I don't know about you, but I look for those "light bulb moments," when customers extract benefits from a real-time view of their business. I told Stephens about how ACT Construction changed their take on project profitability:
ACT Construction's management team has made important discoveries by drilling into Intacct dashboards. ACT's Joe Murray explained:
'Big jobs don't [necessarily] make big profits. We have a sweet spot where our jobs that run probably 14 to 20 weeks are the best performing jobs when it comes to money. Bottom line: a big 8 million dollar job doesn't always perform in the bottom line. It's a nice job to have on your resume; you did this really nice, big restaurant. But it's doesn't always equate to the dollars that way.'
Stephens responded:
I think that light bulb moment - every company is different when they evaluate: 'When is it critical for me to make this decision?' I think we're over the hump when it comes to cloud construction operations now.
There is also what I call the "AI readiness" factor. AI readiness, as I see it, is putting your company in a better position to absorb AI functionality in the future - even if you're not entirely sure what the best AI use cases will be. In my research, moving to cloud-based applications (and standardized data models) definitely helps with AI readiness - Though Sage CTO Aaron Harris is one of the few executives I've talked to who says customers don't necessarily need to be on one standard data model or cloud release, in order to access AI services from the Sage Network.
That's refreshing - but it's a topic for another time (see my Sage Transform piece, "AI software development is completely different" - how Sage plans to deliver enterprise AI with thousands of customer-specific finance models. AI or not, I believe those "light bulb moments" are part of a cloud maturity push. In his recent diginomica article, Harris gave a provocative take on that: Finance leaders - are we finally ready to eliminate the close?
But getting to those moments isn't necessarily easy. So what is Stephens' advice to customers who want to achieve that type of value, via a cloud construction move? Stephens believes it's about community:
Over the twelve years or so that I've been here, I think one of our biggest strengths is our strength of community... You have access to a variety of different channels that can help educate you. You're not alone; you've got your value added reseller who's been doing this for 30-plus years... You've got a community we put together. We talked about Sage Transform, where you can come and you can learn about all the different innovations, the roadmap, everything that we're building.
When we spoke, Stephens was getting ready to head to the TUG user group meeting in Miami (Sage acquired Timberline in 2003; the user group is now officially The Users Group for Sage 300 Construction and Real Estate, Sage 100 Contractor, Sage Estimating, & Sage Intacct Construction). When communities are open and knowledge is shared freely, good things happen:
Our customers have been so passionate about our solutions that they meet together, regionally and nationally, to just go in rooms - and they have different tracks around estimating and financials and project management, and its peers or Sage competitors and construction companies teaching other competitors how to get the most out of technology... We believe in that community, and people learning and teaching each other. Talk to a variety of different other peers in your industry, and discuss ways of getting better and better.
Peer-to-peer discussions for the win? You'll get no arguments here.
