Why Construction Firms Don't Digitize - Myth #1

Stephanie Patterson, Rhumbix InsiderMay 12, 2017 • 4 min read

In our conversations with numerous construction professionals, we’ve uncovered several beliefs—we call them myths—that we think are preventing firms from taking meaningful steps toward digitization. So we’re kicking off a series that explores some of these common reasons why construction companies are not adopting digital solutions. Some are real. Others are only perceived. Find out which ones. 

Myth #1: “Creating an in-house solution is better than buying one off-the-shelf ”

That’s right. The classic build or buy dilemma. This myth is embraced by both large general contractors and smaller, regional firms. What’s interesting about this myth is the intention behind the statement is genuinely legitimate: A company realizes they need a software solution to address an inefficiency and believes their own team understands their needs better than any software company possibly could.

On this point, we can agree. Your team does understand your needs better than anyone else. But where we disagree is that just because you understand what you need better than anyone else doesn’t make you the best equipped to achieve that solution through custom-built software.

In fact, there is a lot of evidence that internal initiatives to build custom software fail often, and those that succeed require many trade offs along the way. Below are just a few of the challenges companies can expect when building custom software in-house.

Higher Cost

There are really only two options for building a software solution in-house and both will run you a higher price tag than working with a SaaS solution. The first option is to hire your own talent to build it. Obviously this involves adding the necessary headcount of developers, designers, managers, and engineers needed to build and maintain the system. Depending on the size of the team and average salaries, you could be looking at up to $500,000 for the year, and beyond.

The second option is to outsource the software development. This option tends to be more common than hiring your own talent, because on the surface it seems like it will be more cost effective. Companies that take this route typically form a team internally to define the requirements for the software tool and then engage a consultant to build it.

The risk with this approach is putting the fate of your new software into the hands of a single outside individual or agency and the limitations of their skill set, availability, and turnover. What’s more, you’re now hamstrung to your choice for all future updates and maintenance of the tool. This could be very risky and leave your firm vulnerable to delays, scope creep, cost overruns, fee gouging, and poor functionality of the tool itself.

So again, you’re looking at a large investment up front to create the tool, and ongoing costs to make the changes you’ll inevitably need to keep the tool up to date and relevant.

Bottlenecks When Making Changes

When it comes to those inevitable software changes, be prepared to wait longer for them to be implemented if you’re going with your own custom-built solution. Software maintenance requirements cannot be overlooked when considering whether to make or buy, and if you’re considering more fundamental changes to feature sets, expect an even longer lead-time. It’s not uncommon for those with in-house solutions to feel like their software is completely outdated by the time it’s launched.

In contrast, when you purchase software from a vendor, updates are typically pushed out weekly, or even more often. Finding a SaaS solution whose road map aligns with your priorities will almost certainly get you the results you want faster than an in-house solution.

A False Sense of Loyalty

And finally, as with anything you spend a lot of money on, expect to feel a responsibility to “get your money’s worth” out of your investment. Companies that build their own solutions are notorious for continuing to use them even when they may, in fact, be a barrier to efficiency. It’s so much easier to cancel a subscription than it is to walk away from something you’ve invested in with your time, money and resources.

Depending on the source, the failure rate for outsourcing your software development can be as high as 50%. Even if a construction firm can cut this rate in half by investing in the right resources to bring software development in-house; is it worth the risk and long-term expense?

Something to think about.

Other posts in this series:
Myth #2: “Digitization is important, but not urgent.” 
Myth #3: “The field won’t like it.”
Myth #4: “It won’t integrate.”

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