Unlocking Construction Software Value: Assessing the Return on Investment (ROI)

In the construction industry, there has been a growing need for construction leaders to embrace technology and innovation. With challenges such as labor shortages, changing workforce demographics, safety and budget compliance, and the availability of new digital tools, construction companies are under pressure to adapt. However, implementing new management software and undergoing change can feel risky, and it's important to determine if the investment in software will provide the value needed for the business.

Calculating ROI for Construction Management Software

Calculating return on investment (ROI) for construction management software is essential to determine its effectiveness and value to the business. While the cost-benefit analysis for software may be more complex than hard costs, it is crucial to understand how construction software impacts the bottom line. In fact, suboptimal communication and data management in the construction industry are estimated to cost $177 billion per year. Therefore, tracking ROI for construction software is not only important for individual businesses but also for the industry as a whole.

To effectively track software ROI, a four-step process can be followed:

Step 1: Define Success

The first step in tracking software ROI is to define success. Consider the goals of the company and how construction software contributes to those goals. This could involve saving time, money, optimizing labor, improving efficiency, or winning more bids. It is important to have a clear picture of what success looks like and to choose quantitative metrics that can be easily measured.

Step 2: Calculate True Cost of Ownership

The cost of construction software goes beyond the initial sticker price. It's important to consider additional costs such as software licensing fees, additional hardware or software required, implementation and administration time, training time, troubleshooting time, and scaling costs. By considering the full cost of ownership, businesses can make more informed decisions about the value of the software.

Step 3: Set Clear Goals

Once the metric for success and the true cost of ownership are defined, it is important to set clear goals for how the construction software can positively impact the business. These goals should be realistic and aligned with the company's highest priorities. By having exact goals, progress can be measured effectively.

Step 4: Track, Track, Track

The final step is to track the metrics selected and assess the impact of the construction software against the total cost of ownership and the progress made towards the long-term goals. It is important to continuously reassess and track as objectives change and the company scales. By compiling results over time and identifying trends, businesses can gain a comprehensive view of the software's impact.

Direct and Indirect Savings of Construction Software

When calculating ROI for construction software, it is important to consider both direct and indirect savings. Direct savings are easily quantifiable and include time saved from using digital tools instead of manual processes. For example, a back-office employee may spend 5 hours per week entering time tracking data, but with the implementation of construction management software, this time may be reduced to just 1 hour, saving 4 hours per week. These direct savings can be multiplied by the number of employees and their hourly rates to calculate the total savings.

In addition to direct savings, there are also indirect savings to consider. These savings may be difficult to measure in hard dollars but are still significant. Indirect savings can include reduced employee turnover, reduced recruiting costs, fewer costly mistakes, reduced scheduling errors, and reduced time spent on legal and safety compliance. These benefits contribute to overall cost savings and should be factored into the ROI calculation.

New Revenue Opportunities with Construction Software

While direct and indirect savings are important, construction software can also open up new revenue opportunities for businesses. By automating processes and improving efficiency, businesses can scale to take on more projects or pursue new business lines. Construction software can also enhance the customer experience, improve the company's reputation, and empower employees to focus on more productive tasks.

When calculating ROI, it's important to consider not only the immediate returns but also the long-term value and potential for growth that construction software can bring to the business. By taking advantage of new opportunities and leveraging technology, businesses can stay ahead of the competition.

Conclusion

In conclusion, tracking ROI for construction software is crucial for businesses in the construction industry. By defining success, calculating the true cost of ownership, setting clear goals, and tracking progress, companies can determine the value of their software investments. Direct and indirect savings should be considered, as well as the potential for new revenue opportunities. By effectively tracking software ROI, businesses can make informed decisions, improve efficiency, and stay competitive in an ever-changing industry.