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Construction Industry Dead Last in IT Spend

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Construction companies with less than $250 million in revenue invest about 1.6% of it on information technology, according to Gartner Research. Meanwhile, construction firms with $10 billion in revenue on average spend only 1.1% on IT. The construction industry is dead last in IT spending compared to 14 other industries measured by Gartner. The federal government and banking spend the most on IT (see chart).

For firms struggling through the construction recession, underspending on IT may be a shortsighted strategy. According to the Bureau of Labor Statistics, 70% of U.S. productivity growth comes from IT. So, underinvesting in IT for extended periods could put firms at a competitive disadvantage. Operating IT systems past their end-of-life also could increase risk. Further, Gartner reports that 30% of net income is affected by IT economies of scale, so technologies optimized across the workforce may also improve profitability.

Gartner recently highlighted the nexus of four strategic technologies—mobile, information, social and cloud—that likely will be game-changers across all industries over the next few years. In fact, this state of affairs may already be the case in the construction industry.

Tablets will continue to be a big trend, thanks to specialized apps that give workers access to plans, punch-list tools, and safety checklists. New cloud-based collaboration tools facilitate increased productivity and faster construction cycles, especially in integrated project delivery. Many of these apps are longer-term investments whose returns will be difficult to measure until better industry benchmarks emerge.

Despite these stats, plenty of firms are pursuing new technology and realizing its benefits. For example, Bechtel CIO Geir Ramleth says Bechtel has developed application programming interfaces for construction project teams; APIs interface with the firm's core enterprise data, enabling use of tablets and web-based interfaces. At McGraw-Hill's FutureTech conference in October, Turner Construction SVP Richard Bach said a key investment is to consolidate enterprise-resource-planning systems in order to improve the accuracy and timeliness of a company's data and profits.

2012 IT SPEND AS PERCENTAGE OF REVENUE
INDUSTRY ANNUAL REVENUE APPROXIMATELY $250 MILLION ANNUAL REVENUE APPROXIMATELY $10 BILLION
BANKING7.3%6.2%
CONSTRUCTION & MATERIALS1.6%1.1%
EDUCATION5.6%3.3%
FEDERAL GOVERNMEnT10.8%7.9%
STATE AND LOCAL GOVERNMENT4.6%1.8%
SOFTWARE AND INTERNET8.4%5.4%
INSURANCE5.3%2.9%
HEALTH CARE3.5%3.3%
MEDIA5.4%3.2%
PHARMACEUTICALS3.0%2.6%
PROFESSIONAL SERVICES5.6%3.4%
RETAIL AND WHOLESALE1.9%0.9%
TELECOMMUNICATIONS4.9%3.8%
TRANSPORTATION3.5%2.3%
UTILITIES4.2%1.7%
ACROSS ALL 15 INDUSTRIES5.04%3.16%
SOURCE: GARTNER IT KEY METRICS DATABASE, 2012

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