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It's customary for us to put our best foot forward as we dive into the new year. One topic that came up a lot in conversations over the past year has been around good business strategy while planning projects and responding to risks. That is, not losing sight of the forest for the trees.
AI: Will this shiny new object break out of the novelty zone?
Labor Shortage…the gift that keeps on giving
Interest rates and construction material cost fluctuations
Adding a service business and focus on recurring revenue
Construction data and analytics
Read on to see the top 5 construction software trends of 2024!
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Artificial Intelligence (AI) in construction stepped out in a big way in 2023. We see AI disrupting construction software in three big areas: Data strategy, document processing, and workflow efficiencies.
The New Civil Engineer says “[Construction AI] delivers actionable information, rather than just data, so that decisions can be taken more quickly.” In big and small ways construction AI has the ability to help project leaders focus on strategic growth, in addition to responding to environmental risks.
It seems like we’ve been talking about AI for a long time without being able to name the ways it’s actually being used in a practical manner, today. How are you using AI for construction right now? It might not be obvious, but you probably already are.
If you’re using construction data analytics - Tools like Trimble’s Construction Analytics (formerly Viewpoint Analytics) - you might already be working with AI in construction. It uses powerful Microsoft artificial intelligence tools to automate invoicing by integrating accounting verification data into the construction billing system, or ERP.
Other ways you may already be using AI in construction are in construction project management, optimizing equipment usage, improving construction site safety, and sustainability.
Skilled labor/workforce was a persistent, high-level risk in 2023 with no end in sight for 2024.
“It’s not about the pay,” says Brent Kirkpatrick of Crowe, a construction financial services provider. “It’s the constant grind. If there’s not enough people, you get no break. It’s hard work for everyone. It’s hard for laborers, for accounting, for C-suite."
“Just paying people more isn’t the answer. You have to get more workers in the door.” There are lots of ways to attract more younger workers, and keep folks around longer.
A few of our ideas from 2023 that top the list: 1.) Embrace remote work, for those roles where it makes sense—like estimators, project managers, accounting teams. 2.) Look for opportunities to boost diversity and inclusion. Not only do diverse teams deliver better results, but you might open the door to a whole new pool of workforce talent.
Money ain’t free anymore.
Following historically low interest rates (3.25% in the fall of 2023), the Federal Reserve raised its benchmark interest rate 11 times to slow inflation. The interest rate stands at over 7% at the time of this writing.
The rate hikes did have the desired outcome of cooling inflation, which slowed in the second half of 2023; however prices remain high. ($1.00 today has the buying power of $0.56 four years ago, in 2000.) Purchasing construction materials is still a volatile market, due in part to disrupted supply chains, fuel prices, and geopolitical instability around the world.
Project owners and GCs who don’t want their profit eroded by interest and risk will be taking a much more serious look at cash flow management and procurement in 2024.
Three words: Annual recurring revenue (ARR).
As construction GCs become larger and more strategic, they are increasingly taking a page from the software business, by turning to annual recurring revenue. ARR is the money that comes in from a subscription or contract—that sweet, sweet, repeatable profit that is beloved by investors as a prediction for future growth. Especially “in these turbulent times.”
Adding a service business is one of the simplest ways a construction company can add a recurring revenue stream—as opposed to one-time profit. To smooth out the peaks and valleys of project-based work, a service business provides reliable, ongoing revenue that can be counted on in the future.
Related
Besides, who better to service your project than the company who built it in the first place?
Self-performing GCs and specialty subcontractors in particular will be looking at creating or building out a service business in 2024.
Construction projects generate (and require) huge amounts of data—that’s nothing new. What’s new in 2024 is that more of that construction data will be able to sync and flow between different workflows and software.
Rather than downloading, reformatting, and manually entering data, more and more construction software technologies are using APIs and integrations, so that data is more easily shared and used.
For example, new integrations between Carrier and Vista HR Management syncs employees’ elected benefits and open enrollment directly between systems—no more emails with benefits carriers to confirm these plan changes and elections are confirmed.
Project data will also be leveraged more in 2024, as data analytics are increasingly used to do a post-mortem lessons learned, identify risks—for example, a vendor who has been consistently late on past projects; and find opportunities, such as volume-based discounts or new places for business development.
Forward-looking companies will be able to find opportunity for growth, even during the economic changes that are sure to come in the new year.
