Report from the Front – Observations from a Veteran Construction Software Consultant

By Sheldon Needle

Based on a conversation I recently had with a very experienced ERP consultant who works with a variety of contractors, here are some timely observations about some of the most common challenges faced by prospective buyers of integrated job accounting and construction project management solutions.

Challenge #1: Getting straight answers on price
One of the first things many prospective buyers of construction software want to know is what will it cost them.
But vendors don’t like to talk about price until late in the evaluation process. A frequent technique is to lowball the software price up front on basic applications and then have price creep once you start adding applications. In fact one well known construction software vendor represented that he could sell his software to a single user prospect for $3,500. When the prospective buyer said he needed their estimating and document management applications he was charged for $1,300 for the estimating, $500 for document management, $1,000 for first year maintenance and $1,080 for 8 hours of job accounting training. But who knows whether that would be enough? When he said he needed 2 users instead of one, they added on another $1,595.

Bottom line, what started out as $3,500 product, quickly escalated to almost $10,000.

Challenge #2: Industry FUD
When vendors start slamming one other using the class FUD (fear, uncertainty and doubt) approach they may bring up that the vendor does not support the product, that the product is unstable or that the product will shortly be replaced by something new. But how do you separate fact from trash talk? The fact is that sometimes these accusations may be largely true. But it’s practically impossible for the buying prospect to determine the truth.

Challenge #3: How do you determine cost savings from a software purchase?
Everyone would like to justify their construction software purchase with the ability to save staff time or headcount. But, frequently new software benefits are not about eliminating staff. Rather, much of cost savings with new software has to do with improvement of procedures and providing more current and more detailed information. There is no easy way to calculate that amount. Savings should be based on getting greater utilization from assets such as labor, inventory, equipment and having more realtime data on job status.

If company personnel are resistant to change and won’t follow “best practices” when the new software is installed, anticipated savings may not occur.

Challenge #4: GIGO, Garbage in Garbage out.
The first step in software success is cleaning up the cobwebs and chaos that currently exist in company records. A common myth among managers is that buying new software will force the company to follow proper procedures and keep good records. However, without good records to start with and properly trained people, the chaos will only continue with new software.

Does the company have any kind of construction accounting system now? is the general ledger reconciled to the subsidiary ledgers for accounts payable and accounts receivable? Are job cost subledgers reconciled to the general ledger. Is there a coding system for jobs, phases and cost codes in place? Does the company do cost to complete analysis and manage change order documents. Without these basics, trying to acquire and put in a new, complex piece of software may not meet expectations.

Challenge #5: Person, or persons, in charge of the selection project lack the necessary experience or time to do the job right.
Some companies operate like inverted pyramids – there are more people at the top doing nothing, concerned more about turf protection than actually getting anything done. The key challenge is getting to the CEO and making him/her understand the importance of delegating the evaluation process to a competent committee which has the authority and accountability to perform the due diligence on software selection and make a good, well documented recommendation. Too often in small to mid-sized companies only one person, without the requisite experience, is assigned the responsibility for identifying and evaluating the job accounting vendors to consider.

Challenge #6: Good software but incompetent or unethical resellers
Construction software vendors who use VARs (Value added resellers) are always struggling to find qualified resellers. Buyers must understand that while the software may look great, the person who is selling it to them may not be capable of setting it up and training staff properly. This can happen when the reseller is new to their product or simply does not understand the profile of their company. For example it takes a lot more experience to configure the setup for a multicompany Design-Build Construction Management Company than it does for a small specialty contractor.

Users are advised to check out the reseller as much as the software.

Summary
Construction Software selection can be a complex process which will torment prospective buyers who are unaware of the pitfalls and confusion that will await them. Without extensive experience novice buyers can find themselves in a state of confusion at any state of software evaluation and selection. It’s best to know about the potential pitfalls and account for them in advance.

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