Technology Investments for Increased Profitability
By Stuart Binstock, President & CEO
As Ken Chiccotella notes in his Chairman’s Message, information technology (IT) is an area for which many of you have some or all responsibility in your companies.
For those of you who recently attended CFMA’s 2016 Annual Conference & Exhibition in San Antonio, TX, this might explain why you may have noticed a heavy concentration of IT-related companies in the exhibition hall. Whether it’s at our Annual Conference, a regional conference, or a chapter meeting, CFMA is replete with members who work for IT companies that can help you understand how to effectively implement and utilize technology.
In a recent Construction Dive article, CFMA’s Immediate Past Chairman Brad Robinson and I talked about how contractors implement cost-cutting measures within their companies. While Brad covered industry-specific techniques, I focused on how investing in IT is a “cost-cutting measure.” Over the years, I have surmised that sometimes you have to first invest in something in order to ultimately save money. I can think of nothing more apropos of that concept than a construction company investing in IT.
One specific IT investment that comes to mind is a company’s ERP system. Whether it’s in discussion threads on CFMA’s Connection Café or during conversations as I visit with chapters across the country, I am always surprised at the number of construction companies that contemplate and ultimately decide to change their ERP systems. Further supporting this trend, multiple articles in this issue relate to different aspects of selecting and using ERP systems.
Given the sizeable investment in making the change from one system to another, it’s important to carefully consider your company’s needs and available options. (I know of a large GC that changed its ERP system a few years ago, and I was told that the total investment was in excess of $2 million.)
What would justify such a significant turnover in ERP systems and such a major investment in IT, particularly in an industry where investment in technology lags in comparison to most other industries? I hear the following reasons most often:
- Better technology enables a company to make more informed and faster decisions;
- Those decisions allow a company to bid more accurately and faster; and
- Better financial reporting ultimately makes a company more profitable.
Anecdotally, it seems apparent that those contractors that invest in technology are more profitable. While there are a few surveys underway that aim to measure construction IT investment and its ROI, I believe that their results will confirm what is already known. But, it would be nice to be able to present our members who have not yet invested adequately in technology with specific information and results that show what they might be missing out on – profitability. In the meantime, I hope you find this issue to be a guiding resource for your role as it relates to your company’s IT.
Copyright © 2016 by the Construction Financial Management Association (CFMA). All rights reserved. This article first appeared in CFMA Building Profits and is reprinted with permission. CFMA Building Profits is a member-only benefit; join CFMA to receive the magazine.
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