I don’t write about the smaller companies in our PLMish universe often enough — yet they create valuable solutions that are used successfully and profitably by customers around the world. One reason they fascinate me: they compete against suppliers who use fear, uncertainty and doubt (aka FUD) and claim bigness as a key reason to buy from them, and not from the smaller supplier. Bigger does not necessarily mean better or more stable but it’s a question they have to address in nearly every sales situation. It also leads many smaller suppliers to grow by acquisition where they can. To grow sales channels or capacity or to take them into adjacent areas, where they can leverage existing reach.
Aconex, an Australian company that makes cloud collaboration solutions for the construction industry, just announced such a deal. They’re acquiring Worksite, which makes a Software-as-a-Service project cost control solution that’s often called ARES, after the selling company, ARES Project Management LLC. Aconex is paying roughly AUS$6.5 million (US$4.8 million) for Worksite in a deal that should close by the end of July 2015.
This is a smart timing. AEC companies are moving away from Excel-based processes because they’re hard to control across projects and too specific to the people maintaining even company standard workbooks. Worksite’s cost control solutions enable visibility across projects, so that companies can find and promote best practices and start to look for efficiencies that are buried inside people’s Excel files. Aconex plans to take this further, and will integrate Worksite with its project collaboration platform; customers will be able to forecast, budget, and manage earned value billing and cost performance.
One criticism I’ve heard about Worksite is that hasn’t been evolving quickly enough to keep up with modern technologies, like mobile devices and web interface design. Aconex plans to increase its R&D expenditures to “build-out [Worksite’s] integrated cost management solution” and integrate it with existing offerings. As a result, Aconex says, the acquisition is expected to be moderately dilutive to earnings and net profit for the next 24 months — but the company, of course, does expect the acquisition to become accretive after that.
Aconex CEO Leigh Jasper said in prepared remarks that “connecting cost management to the Aconex platform will bridge internal cost systems and external collaboration, providing a single source of truth for better financial visibility and control. Participants project-wide will be able to track budgets, contracts, claims and payments, and cost and schedule changes — both actual and potential. All of this information will be connected to collaborative processes managed on Aconex, offering new insights into the current and forecasted status of the project. Project cost information can now flow seamlessly from the collaboration platform into internal enterprise resource planning (ERP) systems. The acquisition of Worksite will further increase the value that we deliver to our customers, broadening the Aconex product portfolio and accelerating the growth of our global user network.”
There are many data points* on inefficiencies in the construction industry. Sometimes projects stall or become less profitable because of design changes, but even fully specified projects suffer because of complex supply chains that make planning and execution so difficult. Tying planning, cost and other project data together provides visibility and accountability. Project teams can start to quantify the consequences in time or cost of a design change, of delayed delivery of a piece of steel or a labor issue, work on earned value payment schemes and start to trim litigation expenses. Over time, AEC companies on a learning path to will discover and address the root causes of the industry’s nagging inefficiencies. Will the problems magically disappear? Probably not, but moving the needle even a little will will save billions.
- Just a few, in case you’re interested:
- A 2007 presentation showing how inefficiency is calculated into project budgets. It’s a case of addressing the symptom and not the disease — but makes perfect sense given that the industry has always had this problem.
- An industry review that showcases “25 to 50 percent waste in coordinating labor and in managing, moving, and installing materials … [and] transactional costs of $4 billion to $12 billion per year to resolve disputes and claims associated with construction projects”, along other data supporting the benefits of modular construction.
- An awesome presentation by Barry LePatner on the causes of inefficiencies in the US construction industry that “cost taxpayers, corporations and developers over $120 billion a year”. Ouch.