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How much is Technology DEBT costing YOU?

The construction industry is the last to keep up with technology advances. I just read an article from Bill Kracunas called, A Scorecard for Technology Debt. In it, Bill has develop a way to calculate the cost that companies are experiencing from the following elements;

  1. Ineffective technology leadership 30%
  2. Deficiencies in discipline, reporting, and strategic focus of the current IT systems 25%
  3. Outdated IT Systems 20%
  4. Misspending caused by under-spending, over-spending, misallocating strategic spending, or resource spending (business analysts instead of technical specialists) 15%
  5. Process chaos. Many organizations possess incoherent, cross-functional processes, resulting in multiple, separate systems and incomplete or conflicting data. 10%
  • The cost of these elements are astounding. In an ENR.com article dated Dec. 2012 by Isaac Sacolick, Isaac wrote that the Construction Industry is DEAD last in IT Spending! In a follow-up article in March of 2014 he reports the same! So with the costs beiComputer-Hardwareng so high, why are we so slow? As an industry, we are spending only 1% of our revenue on IT while the average for all other industries is around 5.8 percent.

Bond companies and Banks are starting to use technology scorecards to evaluate a construction company besides their financials. They are looking for the deficiencies mentioned above and understanding the magnitude of the costs associated with them. The following are key components of the scorecards;

  • Investments: How much is the company investing in technologies that improve its infrastructure, create new products, enhance the customer/employee experience, expand the customer base, lower labor costs, or increase production? To what extent does the company rely on its in-house technology organization versus outsourcing or the cloud?
  • Competition: How do the company’s technology strategies compare with its peer group? What is the “collective intelligence” of the company’s team when it comes to technology and understanding the systems?
  • Information: Is the company employing data mining and other analytics to tailor its marketing strategies? Does it have the systems and skill sets to compile and communicate valuable management information throughout the company?Does it possess sophisticated processes for managing its historical data for future costs analysis?
  • Track Record: Does the company have a history of successfully implementing new technologies, such as adding software systems, introducing enhanced products? Is its corporate culture conducive to adaptation and continuous change? Has the company experienced material write-offs of technology assets?
  • Security: Does the company have adequate safeguards to protect its sensitive and proprietary information, especially against cyber threats? Does it encrypt all personally identifiable information? Has the company been victim to a material data breach? Does it have robust contingency plans for potential incidents?

    As we continue to move to a cyber-world, the components above will have a great impact on companies not embracing the future. Getting a bond or financial funding may be restricted from a poor scorecard. The construction industry is DEAD last in spending and needs to step up and start allocating funds.

“CFO’s make up 80% of the decision makers of construction IT spending, What are the barriers in allocating funds? How can we improve and catch up?”

I believe the largest single way to do this is through standardization of data and terminology for our industry. Until a “cost code” is the same for everyone, the above deficiency elements will continue to plague our industry. All we have to do is look at manufacturing industry as a model of standardization. Until we measure production the profits required to catch up from the technology debt will not vaporize. We need CSI, CFMA, NCCER, ABC, AGC, and ASC to name a few, to create a combined committee to address this issue. They need to work with software companies to start making the necessary modifications to be able to process the new standards. Then teach, teach, teach.

Thank you for reading, I encourage you to comment….

Lee Clark
Lee Clark

As the CEO and co-founder of PayCrew, Lee Clark is passionate about the people in the field, because he understands the importance of trust between a company and its people. As a construction business owner, he saw first-hand how attracting and retaining skilled people form the foundation of a company’s success.

Lee has a passion for measuring daily performance in the construction industry and is also a regular contributor at Concrete Construction.