Despite the onset of the pandemic, construction software has enjoyed a period of robust market growth, prompting significant deal and IPO activity. Recent transactions include Hg’s acquisition of Trackunit, the merger of Sogelink and Geodesial Group backed by Keensight, Procore’s recent IPO, Schneider Electric’s takeover of RIB Software as well as the acquisition of a minority stake in Aareon by Advent International and TA Associate’s sale of thinkproject to EQT. But why is this sector enjoying a boom when others continue to navigate the uncertainties of the post-Covid recovery? What are the key attributes that set this otherwise cyclical and capital-intensive industry apart through this turbulent period?
Part of the answer lies in the fact that both construction and technology have benefited from comparatively less disruption during the pandemic compared to other industries, such as travel, hospitality, and retail, which were entirely suspended or significantly curtailed. However, the more long-term and deep-seated drivers include a combination of rapid digitalization, the proliferation of mobile-first applications on standardized hardware, and the adoption of increasingly sophisticated workflow automation software across different phases of the built environment lifecycle. Collectively, they have led to significant efficiencies, a reduction of time and cost for construction companies, enabled by the technology providers serving this systematically under-digitised industry.
Let’s first take a deeper look at digitization in the construction space. Contractors have long used design-centric software, like Autodesk and Nemetschek, in the initial phase to design buildings and create physical infrastructure. However, it is the project management and execution stages of construction projects that have seen significant digital innovation over the past few years. Collaboration platforms have enabled teams to work with Building Information Management (“BIM”) models instead of old-fashioned blueprints in real-time, enriching architectural models with as much data as possible and minimising potential errors, delays and cost overruns. Crucially, this has allowed builders to track the data throughout the build lifecycle and ensure continuity by leveraging a centralized platform. Further to this, leading vendors like ThinkProject, Aconex (acquired by Oracle) and others are adding further capabilities to their offerings to facilitate additional workstream coordination and provide valuable analytics and data-driven insights that underpin increasing automation in this industry.
Secondly, the availability of mobile applications for front-line workers on standardized and cost-effective hardware has been key enabler of growth in this sector. Previously, workers did not have access to Internet-enabled mobile devices which would enable them to document progress on the construction site and receive alerts in real-time. But the availability of inexpensive smart phones, ubiquitous connectivity and the surge of new mobile-first applications has transformed construction project management. Take Trimble for example. The platform, built out with the strategic acquisition of Viewpoint, enables teams to upload images of building sites, cross check them with project timelines and ensure that targets are being met.
Finally, sophisticated workflow automation tools have been critical in unlocking productivity gains. Innovative platforms have come to market to keep up with complex projects and ongoing maintenance of existing assets and infrastructure. Software companies, like Thinkproject, have created a suite of products spanning all phases of the project, from design and construction to operations by managing assets and the vast amounts of associated data.
The strong performance of the construction technology ecosystem has led to consolidation and, certainly in the short to medium-term, we expect to see further acceleration of M&A, especially as digital penetration of the construction sector remains relatively low compared to other industries like Financial Services and Telecom.
As the global economy recovers and markets navigate uncertainty, construction software has remained remarkably resilient. Enjoying significant growth over the past year, the sector’s accelerating digitization, the availability of mobile-first applications and the concurrent rise of specialist workflow automation tools have all been instrumental in shielding it from the worst effects of Covid-19. Going forward, digital solutions will be pervasive across all phases of the built environment lifecycle.