The ERP Opportunity: Driving Digital Adoption in Construction

Transformation
Written By Guest User

Defining “Enterprise Resource Planning” (ERP) can be a challenge, and the sheer variety of applications available can be daunting. This is a hint at the flexibility and wide-ranging implications of adopting ERP solutions. ERP software creates a shared, often cloud-based, database that can integrate multiple business functions such as human resources, accounting, planning, and inventory management under a unified system [1]. This centralisation aims to provide a business management solution that connects teams on-site to back-office functions with an information pipeline.

There are inherent challenges to the adoption of ERP systems in large construction firms due to the nature of project-based work with multiple contractors across geographies. Adoption is the process of having users integrate their workflow into the new ERP system. However, the opportunity is clear to bridge information silos within conventionally decentralised organisations, enabling a real-time view of key performance metrics to guide decision making. Construction ERPs can include integrations between project, resource, and asset management, to act as a single source of truth on the current financial position of a project [2]. This software comes in different tiers:

Tier 1. This caters to complex enterprises with multiple departments in potentially global locations – these include Oracle ERP & SAP Business One.

Tier 2. For medium-sized companies catering to a wider range of size and complexity - software such as Automatica Cloud ERP, SAGE X3, and COINS.

Source: ONS, 2021. Business enterprise research and development dataset Table 10 [3]

Market leaders have clearly identified the ERP opportunity, with the top 10 UK contractors having spent over £450m during 2009-2019 on supporting IT software development [4] and the two highest spenders, Kier and Balfour Beatty, investing £172m and £145m respectively [4]. Construction ERP software is often marketed as a bespoke and all-encompassing solution – the panacea for all organisational inefficiencies. The reality of course is not as enchanting, analytics firm Garter reports that 55% to 75% of all ERP projects fail to meet their objectives with some projects overrunning costs by over 100% [5]. The decision to pursue ERP software should be followed by a clear plan for users to adopt it. UK Construction lags in R&D expenditure only contributing to 2.28% of total investment while employing over 9% of the total labour force in 2019 [6]. While many companies understand that technology investments are foundational to a more resilient business, multiyear transformations must carefully consider human adoption to ensure benefits are fully realised.

Ensuring the successful adoption of ambitious ERP initiatives requires buy-in from key stakeholders. There must be a clear vision of how the ERP solution will have tangible benefits for the business and the day-to-day work of those stakeholders. It is important to set guidelines for how the ERP implementation will achieve potential benefits both internally and externally.

Executive Support

The decision to implement project-based construction ERP will impact the resources and time of senior leaders in the short term but the transformation effort can deliver significant long-term gains. Executive support is essential to allocate adequate resources to ensure successful integration of an ERP solution by allowing core users to learn new systems. There should be planning around managing internal capacity for ERP adoption initiatives to ensure dedicated time is allotted to cross-training between core change drivers and new users. Assuring the maintenance of day-to-day operations while adopting ERP may require executives to bring in external support.

Introducing new ERP software can be met with resistance from employees to perceived changes to their responsibilities and any monitoring of performance. Enabling users to realise the value of ERP software in their daily work is imperative to achieve buy-in. A key to achieving this is providing employees with the relevant performance metrics for their function. Automated dashboards of live project progress and costs are generated through the suite of integrated ERP software. These dashboards could have automated alerts or projections to prompt early user intervention. To support value realisation, there should be role focused communication sessions on how the ERP software utilises their data inputs to form reports.

Bilfinger, a €3.5 billion construction multinational, recognised the need to bring in external experts to perform due diligence on their SAP Business One implementation to understand the regional nuances of the Polish market. This study revealed that the software fit their project management needs but was insufficient in accommodating finance, accounting, and materials management integrations due to the differences in Polish laws and construction standards [7]. A due diligence exercise of this scope would have demanded a dedicated team forgoing their responsibilities to complete this project. Successful adoption of construction ERP requires executives to consider the best use of internal and external resources while maintaining the day-to-day operations.

End-User Adoption

One of the key benefits of construction ERP software is the removal of information silos and access to real-time performance metrics on current project progress. The quality and reliability of this information are dependent on the standards and compliance of contractors on site. Organisations must collaborate with software vendors to provide continuous training on optimal usage. These training efforts should be documented with user feedback and performance improvement testimonials which is the foundation for future user induction. Concurrent with training, organisations should communicate with ERP vendors on data validation features, software tooltips, and in-app support to limit the possibility of human errors.

Robertson Construction, the largest family-owned construction company in the UK, has acknowledged the importance of internal adoption with new software. When implementing COINS ERP, financial director Phil Tablot stated the need for a “constant education process for users to both accept and embrace the change” [8].

Construction ERP automates information flows within an organisation to provide live information on project performance. Many construction firms have attempted to drive the adoption of multi-million pound, project-based ERP software to varying degrees of success. There is a myriad of factors that lead to the successful adoption of IT solutions in the construction industry, especially one that impacts multiple key business functions. These considerations focused on a few organisational barriers to ERP adoption. Construction firms should gain executive support to manage internal and external stakeholders, continuously train end-users to comply with reporting standards, and communicate the value of their data inputs to drive the successful adoption of ERP software.

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