Today I am posting the first of what I hope will be a number of roundtable discussions with technology leaders in the construction software marketplace. I've edited this discussion down to a "blog-size" post, but the full transcript is available on Construction Software Advice.

The topic today is Software as a Service (SaaS). If you are not up on your tech acronyms, SaaS refers to a new software model where the software application is used through a browser over the Internet. The actual software code and database are maintained in a central location by the software vendor. Customers typically pay a monthly or yearly subscription for use of the software. Our roundtable includes executives from four firms that are pioneering the use of SaaS in the construction industry and enjoying good success.

• John Bodrozic, President, Meridian Systems
• Jonathan Antevy, CEO, e-Builder
• Norm Wendl, President, Corecon Technologies
• Tooey Courtemanche, CEO, Procore Technologies

What are the primary benefits of the SaaS model, especially for construction?

Jonathan Antevy of e-Builder: Some of the benefits include reduced risk, faster implementation times, lower total cost of ownership, and a higher probability that the software will work as intended. This is especially true in construction where multiple people from multiple companies come together for a relatively short period of time. Imagine how difficult it could be to install software within each company so that the team could manage the project together.

Tooey Courtemanche of Procore: We find that the primary benefit is simplicity. Most of our customers don't want to be in the technology business — they want to be working on construction projects. With SaaS, you know exactly what your technology costs are going to be, without any hidden extras. If your computer can access Yahoo! or Google, you've got what it takes in terms of hardware and connectivity to use Procore.

Norm Wendl of Corecon: As internet access becomes more ubiquitous, the SaaS model is particularly suitable for a very mobile work force. Having access to one's data whether in the field, home, or office improves efficiency and provides management up-to-date information to make better business decisions.

John Bodrozic of Meridian: One really important but often overlooked aspect of a comparison between SaaS and traditional "on-premise" software is how the investment is treated from an accounting perspective: does the organization want to capitalize this software investment on their balance sheet, or expense it as a cost on their income statement and charge it back to clients?

What do detractors say about SaaS and how are you addressing those concerns?

Norm: Data integration with existing applications is one of the biggest concerns, "How will this application communicate with my Exchange Server, my accounting system, etc.?" With the evolution of Service Oriented Architectures we are able to service enable our offering and provide applications which tie in to Microsoft Office applications such as Outlook for data exchange. We also have a tie-in to multiple accounting systems for transferring data to and from our systems.

Customization is one other concern, "How do I customize my reports?" Corecon at this stage offers Word and Excel export on most reports which allow for further customization, we are also in the process of opening up our architecture by enabling services for customers to further customize the software to their needs.

Tooey: The most common objection we hear is, "What about when my guys don't have Internet access?" That's a valid concern, so we've taken steps to make our system work both online and offline. For example, our users can use Microsoft Project to update their project schedules whether or not they're connected to the Internet.

Many people may fear having their data stored offsite in someone else's hands. How do you respond to those concerns?

Jonathan: That's a common fear and we've heard it many times. We address it with state-of-the-art security monitoring and protection equipment and a system that is specially architected for use over the Internet. We invite our prospective customers to visit our data centers and to review our security processes and procedures. It usually becomes apparent very quickly that we are doing much more to protect their data than they typically do in-house. In fact, we follow processes and procedures that are similar to those used by on-line banks and credit card institutions.

John, Meridian offers both traditional "on-premise" software and SaaS. How do you help prospects decide what is right for them?

John: It really comes down to each customer's unique profile that determines how they want to deploy Meridian solutions. It's a key differentiator for Meridian in that we provide multiple options for our customers, and as a result, we derive significant revenue streams from both on-premise and on-demand solutions. IT capabilities and financial implications are two key factors that ultimately influence our customers' decisions - whether they want to own the software and capitalize it on their balance as an asset, or treat it as an expense on their income statement. Then there are customers who don't have the IT resources in-house to procure servers and set up the environment, but would rather stay focused on their core business.

How does SaaS improve upon existing project management processes?

Jonathan: The SaaS model enables more people in more companies to participate in the project management process. The more involvement in the process, the more collaborative it becomes. Ultimately this results in more effective project execution. Server or point solutions that sit behind a firewall and exclude members of the project do not facilitate communication and collaboration. Lack of communication and collaboration has been shown to cause delays, cost overruns, and project execution difficulties in general.

Tooey: The key improvements that Procore brings to project management are accountability and transparency. We like to say, "Truth equals speed". What we mean by that is that the sooner everyone knows what really is going on, the sooner an obstacle can be overcome. A corollary to this is that the more people that know the facts, the more effort can be focused on solutions.

Norm, Corecon offers estimating and business development functions in addition to project management, but does not offer accounting functionality. Based on your experiences, which functions do you think are best and least suited for the SaaS model?

Norm: I think people are changing their perceptions of which applications can be used as a service. Initially, people focused on applications like CRM which was inherently suited for on demand because sales people wanted access to customer information anyplace, anywhere and anytime. If Salesforce.com - as SaaS leader and poster child - can demonstrate that people can get used to this idea of putting this information off-site, accounting and human resources information will be adopted in due time.

How does pricing for SaaS applications typically work and what are the benefits and drawbacks relative to traditional "perpetual licenses" where the customer owns the software outright.

John: The basic fundamental pricing concept around SaaS is that you "pay as you go," with users subscribing to your on-demand application on a monthly basis, or some other predetermined period of time. While an on-premise license is something you buy at a point in time for perpetual use.

Jonathan: The subscription is all-inclusive and provides the software, hardware, maintenance, support, and periodic upgrades. While the perpetual license model seems attractive on its surface, the cost of the license is a fraction of the total cost, usually less than 15%.

Tooey: Procore is priced by the project, by the month. That means that customers pay a low flat monthly charge at the beginning of each month, for as many users as they want to have access to that project. This aligns software cost with project cost — if you have fewer projects, your software costs will be lower. That makes sense.

Given these new deployment and pricing models, how is SaaS changing the way businesses adopt software, as well as their management of IT projects?

Tooey: Software adoption doesn't need to be a complex process. How do you adopt Amazon.com? You try it out. Google adoption? Go use it. With Procore, we work the same way. If a prospective Procore user wants to try us out, we'll set him up on a project for a month at no charge. That user can test us out, and see if Procore actually adds value.

Norm: While SaaS still accounts for a small percentage of the application software market, it is by far the most rapidly growing segment. As a result, this deployment model will rapidly overtake and emerge as the mainstream delivery alternative to packaged software sales.

What types of SaaS applications outside of construction do you feel are leading the way for this model? That is, what companies of categories are really pushing the envelope in SaaS?

Tooey: Some SaaS players we pay attention to include Zoho.com for desktop applications, as well as the Web giants like Google and Yahoo!. Check out the newest Yahoo! mail — it feels and acts just like a desktop application, but it's available from any web connection.

John: In our case, analytics or business intelligence applications (such as Cognos) deployed via SaaS have been a positive factor. Having the ability to access real-time business intelligence with key performance indicators and executive dashboards at your disposal are resonating well with our customers.

Jonathan: Outside of construction, we've seen major SaaS successes in CRM software (customer relationship management), benefits and payroll software, and accounting software. Some of the largest SaaS providers are in the accounting and CRM areas with hundreds of thousands of companies and users.

Look forward to 2015. Tell us how SaaS has evolved in construction and what users are able to do that could not be done today.

John: Because of the rapid implementation timeframes and lower IT costs that SaaS can provide, we will see better adoption of technology within construction, engineering and building owner organizations.

Norm: Economy and Ecology will be the main driving points come 2015. How do we build something efficiently and something that is ecologically sustainable (green building)? 2015 will also bring us into a more global economy, so more AEC firms will be involved and bidding on jobs at expanding economies such as China, India, Russia and Brazil. SaaS will have a major role in enabling the above vision.

Jonathan: A project member will be able to access their SaaS provider and not only manage their projects but perform other related services. For example, they might locate suitable bidders, send drawings to a reprographer, or transfer funds to their vendor accounts. The key is that all of the various systems will be integrated so that the user can work in one system.

Tooey: That far in the future, I think we're going to have Internet access everywhere. Between EVDO and emerging technologies like WiMax (which is like a supercharged WiFi that can be everywhere), getting onto the Internet is going to be thought of in the same way as we think of getting an AM or FM radio station today.

April 17, 2007

Yes, nice article indeed. Definitely SaaS has arrived to take way user worries. BUT, we need to be careful in showing the right level. As SaaS has been divided into 4 level now. Check Wikipedia for the same.

Because, only a handful of providers are able to reach Level 3.

Rgds,
Sushant Madhab

December 19 , 2006

Excellent post.

O.J. Semmes

November 22, 2006

We at Enviance are pleased to see that SaaS is becoming recognized as a important software alternative in the construction marketplace. Enviance is partnered with E&C firms like ARCADIS, Earth Tech, Stanley Consultants, Malcolm Pirnie, and The Shaw Group, who use the Enviance SaaS offering to provide value added services for Environmental, Health & Safety compliance and management. We encourage an on-going dialogue on the role of SaaS and technology in the E&C world. In fact, we would be pleased to participate in a 2nd round of SaaS discussions that focus on other uses of SaaS such as EH&S compliance and management.

Larry Goldenhersh
President/Founder
Enviance, Inc.

November 17, 2006

I view software as more of a material than I do a service. I do think IT systems is a service.

However, software software alone is not very useful without infrastructure(networks and hardware) and more importantly processes in place with people to make it all work.

Chris Galick
Civilized Solutions Inc.

November 16, 2006

We are in the process of looking for software; and after this blog, I'm leaning towards a SaaS software package. Is there a way to search for SaaS products on riverguideinc.com?

Thanks… this is a great post!

Lauren Mullins
Spanish Peaks