ROI for Construction Technology

ROI on Construction Technology Costs – an MEP Force Highlight

All 0 Comments

Don’t you just want to buy all the new construction technology to make your company more efficient and profitable? The hitch: it all costs money, and sometimes you may feel you’re at the mercy of the person running the mouse. These stumbling blocks hinder some firms from moving forward with the technology that is the best fit for them. But there’s no need to back off technology adoption. Even though it may be a wild issue, it is still just a tool. It needs to be treated, tracked and charged out like a tool – it’s just not tangible like a hammer. The key is to figure out the return on investment in technology tools – cost versus benefit. The benefit/cost ratio (BCR) is simple:

                Program benefits ÷ Program costs = BCR

                If BCR is greater than 1, positive ROI

                If BCR is less than 1, negative ROI

During MEP Force 2019, David Francis and John Mack shared helpful insights into how firms can manage technology costs and make the most out of those investments. Their recommendations included: calculating burden rate; rental and leasing; payback; documentation; budgets; training; and strategy.

Burden rate – First and foremost, what does an employee cost at your company? This covers time, benefits, perks, cell phones, vehicles, gas cards, and other overhead. Know what your labor costs are –  Francis referred to it as “package rate.” If you’re looking for technology to save someone time, you need to know how much that time is worth compared to the cost of the technology you’re considering. Then multiply that by the number of people who are affected by a workflow bottleneck you’re trying to solve. Calculate the software cost to overcome that obstacle and its eventual payback. Sometimes software is the least expensive part of the equation.

Rental as a business expense – Technology is a cost to the job(s) it’s used on. Project rental includes all the tools for a particular job, so charge computers, which are tools, against the job. Rent printers and plotters just like other equipment for the job. Consider leasing your technology, because technology changes about every two years. For tax purposes, you may want to lease to own. And when something is at the end of its “life,” hand it down to the job trailer to fill out its useful days.

When calculating technology rental expenses, be sure to include everything that’s applicable:

hardware cost + software cost + tech support + customization + training + labor

Payback – You know what they say about payback. No, the other thing. Tools have a ten-month payback; if you’re going to rent it longer than ten months, you might as well buy it. Mack said computers have a two-year payback because of software and associated expenses. Keep hardware up to date so users don’t waste time on workarounds to get old hardware to work with newer software.

Documentation – Prepare documentation on the hardware and software your firm uses, and make sure every user knows where to find it. Set company standards, so everyone is on the same page. Mack suggested that documentation should be simple, visual and brief, otherwise no one will want to take the time to read or even use it. Include three- to five-minute videos for quick summaries. This is even more important if you’ve had customization done to suit your company’s standards.

Budgets – Francis suggested asking for double what you think you need in your technology budget. After all, budgets are a guess. Remember to budget for growth. According to Mack, the average general contractor investment in technology is one to two percent of gross revenue; MEP trades will double or triple that number because of the size and type of files and fabrication automation tools they need. Give management informed options for technology investment, and empower them to choose. Best case scenario, budget increases will be their idea, not yours. Before budget negotiations, you may want to read the book Francis recommended, “Never Split the Difference” by Chris Voss, former FBI hostage negotiator.

Training – Always budget for training. Don’t expect your staff to “just know” how to use the technology your firm invests in. Training is key to implementation. Give users time to get trained, recognize that it takes time to get productive, and count on a learning curve. Your firm can even incentivize training by putting it in a paycheck bonus structure. The bottom line is the money that will be saved in efficiency gains by solving your labor bottleneck.  

Technology strategy.  You may need a technologist/strategist. Although the concept of having a guy sitting around the office cleaning his ear with a pencil eraser while testing and investigating hardware and software might make your hair stand on end, a strategist really may be necessary to help your firm stay ahead of the competition. Although you may be capable of investigating the myriad technology options for staying competitive and profitable, do you have the time? A technologist is not just an IT person and not simply a computer geek; likewise, the position is not completely an “overhead” cost. Mack described charging his company technologist’s time against all the active jobs. The technologist looks for opportunities, tests software, thinks strategies, solves problems, and determines how software integrates into the company as a whole.

When your firm treats technology like the tool it is, your return on investment will become obvious. If you need a partner in that process, contact Applied Software today to investigate the best technology fit for your firm. Applied will help you empower your firm to be more efficient and profitable.

“ROI on Construction Technology Costs” was just one of dozens of valuable break-out sessions during MEP Force. MEP Force 2020 promises to offer attendees even more useful opportunities to learn and network. Registration is live, and discounted registration is available through January 31, 2020.

Leave a Comment