Autodesk+PlanGrid is a big bet on construction digitalization

What does almost one billion US dollars buy? In Autodesk’s case, PlanGrid.

Yesterday, as part of its quarterly earnings, Autodesk announced that it will acquire the privately-held PlanGrid for $875 million, net of acquired cash. That’s a heck of a lot of money, so let’s take a look at what Autodesk might want to do with PlanGrid and what its customers might want from a combined entity.

First, what’s PlanGrid? PlanGrid makes field execution and project management tools for the construction industry. Founded in 2011, PlanGrid was one of the first companies to see how digitalizing job sites could lead to greater efficiency, remove at least some of the information bottlenecks and create, in the parlance of the industry, better project outcomes. Designed from the start for mobile use, it’s intended for casual users, not CAD people.

Autodesk, on the other hand, makes BIM (building information modeling) software and products that help different constituencies collaborate around and make use of BIM data. That’s architects, building owners, construction planners — but not necessarily the people working on a construction site. These people have specific and critical skill sets that don’t need CAD expertise; they expedite work orders, accept materials, process bids and payments and generally keep the job site working as smoothly as possible.

That’s where PlanGrid comes into the picture. Its offering consists of a series of role-specific apps that let construction industry professionals carry out tasks like managing bid packages and requests for information, creating punch lists and field reports and coordinating between tasks. That’s all document-centric, usually derived from the data-centric BIM model, and is how much of the industry works. But more and more projects are moving towards a more data-centric approach, and it looks as thoughPlanGrid will help Autodesk bridge the two types of data flows.

I am often asked how long it will take for the construction industry to become data-centric, moving away from drawing- and document-based workflows. That’s hard to predict because the industry covers everything from homes [likely never to be data-centric] to skyscrapers [already there] and from roads [no for repaving] to massive bridge complexes [already there]. PlanGrid and similar tools don’t force projects to be data-centric but can confer many of the benefits of being digital, without requiring massive retraining or IT investments to gain benefit. That’s an important step on the road to broader digitalization in the industry, even if it’s not 100% data-centric.

PlanGrid’s value is that it is construction-specific, so not a general-purpose document manager, and that it speaks the language of the industry. its aim is to capture everything about the construction process, ensuring that the handover to the asset owner, at the completion of construction, is as accurate and complete as possible. (There is still the question of what happens to that digital pile of paper after handover, but that’s another issue.)

I think one of PlanGrid’s taglines says it best: “Confusion is expensive. With our construction software, never worry about working off an outdated set of plans”.

Autodesk said that PlanGrid has around 12,000 customers, each with about 10 users. That’s an incredibly low average, given how many people on each jobsite could benefit from PlanGrid’s mobile solutions — but it’s likely that this is across everything from small to very large projects, so some will have in the hundreds of users. In any case, it would appear that there’s room for expansion. Autodesk CEO Andrew Anagnost told investors that there is some customer overlap between the two companies, there is no project overlap — since Autodesk focuses on design and PlanGrid on the construction, there is definitely potential for tighter integration.

So let’s talk dollars. This is the biggest acquisition in Autodesk’s history, at $875 million. That’s objectively a lot of money but investors seem to think it’s worth it. The company already has ties to Autodesk, in that former Autodesk CEO Carol Bartz sits on its board. It’s no fly-by-night, having secured at least $70 million in funding (that I was able to find) from investors including Y Combinator, Sequoia Capital and Tenaya Capital. Finally, it’s got real revenue: Autodesk said PlanGrid has a “$60 million to $70 million revenue run rate right now and [is] growing about 50% year-on-year.” Autodesk said that it expects PlanGrid to contribute $100m in Annualized Recurring Revenue (ARR) by Autodesk’s fiscal 2020 (so, more or less calendar 2019).

I think this is more about the opportunity Autodesk+PlanGrid presents than about the absolute dollars. Once the deal closes, sometime before the end of January 2019, Autodesk will be able to offer its AEC customers a mobile-ready, cloud-based platform plus apps that, over time, will be integrated with Revit and BIM 360. And, since PlanGrid has been/is being used on 1 million projects globally, those all become candidates for other Autodesk products.

At least in the developed world, the construction industry is absolutely aware of the potential technology has to transform the job site. From improving safety and time-on-tools to faster overall project completion, there’s a lot of room for improvement. I like what PlanGrid CEO Tracy Young wrote to her customers after the deal was announced: “We’ve always believed that if we could save construction professionals a few minutes each day, it means a few more minutes to spend with their families. If we could get PlanGrid into enough hands and projects around the world, it would help save weeks, years and decades of humanity’s time. With the power and resources of Autodesk behind us, now more than ever, I see this vision coming true.”

Given Ms. Young’s vision, $875 million doesn’t seem like so much, does it? Yeah, it still does.

We’ll cover the rest of the earnings announcement after the Thanksgiving holiday. In a nutshell, it was good. Very good.