Digital transformation, construction industry’s biggest trend

Wednesday, 11 April 2018 00:00 -     - {{hitsCtrl.values.hits}}

Digital transformation is the construction industry’s biggest trend and plays a key role in sustainable growth of the industry, stated IFS Global Industry Director Kenny Ingram, in an interview with Daily FT. Ingram has worked for IFS for over 20 years and is responsible for building the IFS solution and global strategy for the construction industry. His goal is to transform the construction industry by deploying modern technology and changing business practices. 

Ingram has been working with construction and other asset lifecycle industries for over 25 years and spends most of his time working to educate clients and IFS staff about how to facilitate best practice business models. Prior to joining IFS, Ingram worked as a consultant and project manager implementing business systems in many asset intensive industries. In this interview Ingram shares his industry observations and insights on what trends are likely to impact the industry in the coming years. Following are excerpts:

By Shannon Jayawardena

Q: Could you outline your work experience and how you began your career at IFS?

A: I’ve been with IFS for 21 years and when I first joined IFS we had a strong project solution which is still maintained up to date and since then we’ve had a lot of improvements. I have been involved in working with customers of the organisation to make massive improvements to the products. 

I began my focus on the construction industry maybe 15 years ago. Then there was really a need for improvements to give good solutions to the construction industry and I was the man for that. I was the person who initiated the construction initiative at IFS. We built a customer base in the UK initially and then we expanded construction focus to a global focus. 

For the last six years I’ve been doing a global industry directory role. I look after the global strategies for the construction space. My role is to educate and promote construction in every country to be operated around the world, try and help construction companies make their businesses be more profitable and deliver projects smarter, quicker and at a lower cost. Prior to IFS I worked in an ERP software company where I worked more on the manufacturing side.

Q: What are the big trends in the construction industry?

A: The biggest trend I think is digital transformation, which everyone is talking about. Then there’s also the trend towards manufacturing which has various terms. The key scenario is making transactions in the construction site. Part of the reason that trends are important I think is because there tends to be a labour shortage in the industry and Sri Lanka is probably no different from anywhere else with a huge labour skill shortage of the trades. The more the demand, the more the capacity. 

I don’t think the total demand for construction across the world and the available capacity in terms of labour cannot be delivered. Part of the reason why modelling has become a trend is because it’s one of the ways that we can solve the labour shortage problem. You don’t have to do it in a factory environment and it’s more efficient. The first thing is digitalisation and of course model manufacturing is the second big trend. 

The other one is more towards the idea of no longer building an asset and handing it over to someone else but being responsible for maintaining and servicing that asset. The reason we have a hospital is to make people healthier, the outcome is less people stay sick which builds the economy making things more efficient. So from a Government point of view they need to understand that to build assets is to build the infrastructure more efficiently. 

The idea is that you should actually link the contract to those objectives. You need to design the assets so that they are easy to maintain and at a low cost. 80% of the cost of an asset is spent after it’s completed. So maintaining is more costly than building it. You have to be thinking about what your outcomes are going to be and that these assets are more flexible. You have to look at the whole picture.

Q: What challenges are the industry facing at the moment?

A: Labour shortage seems to be the number one problem. Most people find it hard to find labour or it’s very hard to get good labour and you try to get it from sourcing labour from outside your country very often. It’s the same in the UK and I think around 80% of all the construction workers on site are from outside the UK. You also have things like trade buyers and further the political environment makes it harder. So I think that labour shortage and labour skills are huge problem.

I think the industry is becoming more global and competition is also a huge challenge. Gradually we see more global players getting into more action. So there is going to be a globalisation in the industry. Companies really need to think about how to expand their businesses outside their own regional environment, otherwise they are restricted to their market. The biggest challenge I think is changing attitudes when it comes to culture as it is a very old fashioned industry. In general nothing has changed very much as most of the business practices are still the same. They may be using word and excel documents but they are kind of doing what they use to on paper which is not making that much of a difference. 

The culture is very old fashioned and it is hard to attract young graduates into the construction sector as it seems to have a bad perception. We have to make the industry a more attractive one and attract more of the younger generation. We should really have training schools and teach them in universities and we need to educate people for the right skills. It’s a very innovative industry and it does have some very interesting things happening. We need to have a digital strategy as well.

Q: How can IFS help with regard to these challenges?

A: Well, we do have an integrated business system but the first in this journey is digitalisation and modelling and we have to have the foundations in place. We should start with a good set of financial numbers. Today if I speak to most construction companies and ask them if they know how much they’ve spent on their projects, they’re answer most of the time is maybe or no. This is because they don’t have the information so they rely on others.

For me, step one is to get governance and basic systems to give you an accurate set of information. If you rely on excel spreadsheets then the mentality is not very stable. Transparency is also very important. Information needs to be transparent and accurate. It is only then can you have a stable integrated system.

Q: How has digital transformation been adapted in the construction industry globally?

A: Slowly. It is a journey and I think some countries have adapted faster than others but is has been a very slow process. The real transformation in UK has been through the Government creating better strategies which was about five to 10 years ago. 

We need the industry to waken up and be more modern. If we don’t change and be more modern then we aren’t going to last. So the Government in UK wanted the industry to waken up and realise that they had to change which was the real driver. We need to maintain assets which is very important as well. We need to build them faster and to do this you have to change. 

Sri Lanka is probably UK five years ago but it’s going to be mundane. It’s a very complex industry which is why it’s a very challenging industry. It’s not going to be an easy process and I think it’s going to take some time before we get to this wonderful digitalised world. We are now at the beginning of this journey. 

Q: Could you share with us a case study of a customer you have been engaged with and as to what you’ve learned from it?

A: Multiplex is the best example, it’s a global construction company and they basically build high rise commercial buildings. They build hospitals and they build residencies. They operate in a number of different countries with their headquarters in Australia. They basically wanted to get a common business system across the whole group. They wanted to have a proper construction centric, commercial and financial system with a common database. So they connected with IFS and they wanted to stay connected global wise with an integrated business system. 

The key message was the success of that project because they recognised at a very senior level the need for transaction and it was a great example of the senior level commitment. You need your business to be agile and to be able to change and adapt, which is what they did. Change of management is the hardest thing in this as people culture is the biggest thing. Having top level commitment is very important and Multiplex did a very good job at that. 

Q: What is the main concern with system usage on project sites and what would your advice be?

A: The main challenge is culture and changing people. This is a business system but actually is about people. The hardest thing in the world is to change people and you have to recognise this as a change management project, changing processes and so forth. Some people will like it some people will not. Some people will try to resist, some people will not embrace it, so the whole other thing is the people psychology which is the biggest single challenge that we need to understand. 

We need to make resources available in our businesses to drive that change. At IFS we provide consultancy to implement. We don’t really want to do it for you but we look at it from an outside perspective. Generally we transfer knowledge as to how we think things could work from a best practice model. Culture change is the biggest challenge.

Q: What are the challenges faced in multi-project, multi-country and multi-currency environments and what are your thoughts from a system perspective?

A: We are normally implementing accounting as part of our scope. Clearly if any organisation wants to implement a solution that does accounting or finance then the country has to be compliant as to what that country’s accounting taxes are. For us if you buy a solution that does not support multiple countries in terms of tax and language, we in turn support multiple languages and jurisdictions in terms of legislation and tax. 

Don’t select a supplier that doesn’t have the ability to support the countries that you are in, both from a software perspective and from having people on the ground because you need consultancy to understand the culture. You also have to think where your business will be in five years’ time for sustainable growth. It’s not just about what you are doing today but about what your aspirations are.

Q: Could you give us a brief solution overview of IFS and share some insights on what functionalities and processes IFS solutions cover on a typical construction project-based organisation?

A: IFS is an ERP solution but we also have spaces in asset management and service management. We are based on ERP but are also based on project base solutions. If you talk about the ERP space, we provide accounting, we provide human resources, project execution capability and we provide a very strong asset management and service management solution. 

It’s an integrated system made up of six stacks which are finance, human resources, manufacturing, supply chain, asset management and project development. We also have common things such as document controlling, quality and safety measures. So when a company buys IFS they can pick and choose according to their needs. They can start very simple and expand over time. What we are offering is a big system that can do a lot of things.

 Pix by Ruwan Walpola