Why do most large software providers use non-integration as their business strategy?

It’s a question that, at first glance, seems contradictory. In a world of integration, embedded applications, and new technology, why would a big-name software vendor choose the outdated route of non-integration?

It’s also a question that came to mind while reading The 5th Annual Construction Technology Report 2016 by JBKnowledge, in partnership with the Mechanical Contractors Association of America (MCAA), the Construction Financial Management Association (CFMA), and Texas A&M University’s Department of Construction Science. This report, which focuses on the software and new technology currently being used by the construction industry, relates findings from a survey taken amongst more than 2,600 industry professionals across North America.

In many cases, the main reason medium and large software vendors don’t offer full integration with their solutions is that a large chunk of revenue is driven by professional services; i.e. customization, configuration, and implementation. Creating an integrated solution can be extremely costly; therefore, companies with legacy-based software choose to give their solutions superficial face lifts rather than rewriting the software to fit the needs of today’s technology demands. And, with non-integrated software, vendors can continue to make money off unsuspecting clients with excessive amounts of customization—often with unsuccessful results.

There are only a handful of software vendors that actually provide a fully integrated, modern software system that addresses industry requirements without heavy customization, add-ons, spreadsheets, or offline processes. Most companies that offer software and services to the mid-tier marketplace (small and medium-sized enterprises, or SMEs), are resellers of various vendor solutions—many of them offer several software products from a variety of vendors. In most instances, the actual sale of the software products accounts for only a small percentage of their revenue. The majority of the revenue stream comes from charging for configuration, customization, and other add-on products not available with the main enterprise solution.

“Interoperability and system integration is a huge challenge in our industry,” attests a survey participant in the The 5th Annual Construction Technology Report 2016. “As a Consultant PM/CM organization, 99% of the time we have to interface with an owner’s legacy system […] Integrating an in-house solution with an off-the-shelf system is always a painful process” (p. 35). Another participant states, “This is one of the most frustrating parts of construction IT. Most large software providers use non-integration as their business strategy” (p.35).

For the most part, large software companies aren’t making the move towards integration, choosing instead to continue selling old software with superficial updates, such as modernized user interfaces. Part of the problem is that construction companies aren’t making a point to request more from software providers. As the report states, “Two-way integration offerings will continue to remain stagnant until builders demand more of their technology providers” (p. 36).

“This is one of the most frustrating parts of construction IT. Most large software providers use non-integration as their business strategy.”

Most of the base accounting and construction software products currently on the market have roots in older legacy-based solutions. Many of them were designed and developed more than 25 years ago. These vendors are hanging on to outdated data models and technical architecture while trying to avoid investing in software updates to meet the needs of today’s digital era. Buyers must be wary when purchasing a new software system, since many products receive a facelift that belies the dated underlying technology. With these legacy systems, it can be difficult to manage or assimilate with the integrated requirements needed by many customers in the marketplace.

Traditionally, the construction industry has struggled to find IT solutions that provide real value and that help solve operations issues. The idea of a base accounting, financial, and human resources system that would allow for seamless mobile and add-on integration is a great idea in theory, but the delivery begs to differ. Many systems that claim “seamless integration with add-ons” offer only interfacing, which means that the base product and the add-on are simply bridged, rather than acting as one solution. Data is maintained in multiple locations, as opposed to the one data location offered with true integration.

As modern business becomes more complex, it makes no sense to choose business technology that makes things more difficult. Using multiple software systems to complete office tasks is counterproductive and increases the chance of human error. Why would a company select a software package that still requires them to make use of Excel spreadsheets, especially when integrated enterprise solutions are out there? Likewise, why should companies grossly exceed their budgets to develop custom solutions to meet their needs, often resulting in non-integrated systems that void the chance of future upgrades and releases simply because they’re custom-built?

“Why spreadsheets?” asks the report. “It’s hard to predict in what year of this survey there will be a significant decrease in the amount of spreadsheets and manual process utilization rates, if ever” (p.77). The issue, as always, is the lack of integration found in most products sold by large software vendors.

“Builders believe the easiest solution for transferring data is a spreadsheet and manual process, especially for workflows during construction (i.e. on the job site) – so technology providers have a lot of work to do to challenge that standard” (p.77).

“The increase of subcontractor respondents this year helped highlight the challenge of integration across internal systems and interoperability across job sites with multiple GCs, contractors and suppliers,” states the report. “Investments and efficiencies in a particular technology are lost when internal systems cannot integrate, or owners/general contractors mandate the use of their system” (p.77).

Why should systems and IT complexity get in the way of business innovation? As I’ve seen from more than 35 years of experience in the IT industry, many organizations spend absurd amounts of money to simply maintain the status quo, rather than making their business more competitive. In their defense, many big-name IT software vendors have not made a significant effort to provide the construction industry with modern enterprise solutions that have integration and foundations in new technology, hence many businesses’ turn towards the independent software companies that can offer more flexible, comprehensive solutions. It is no longer sufficient for companies to simply keep their current IT systems up and running. To remain relevant in this new digital world, organizations need software systems with the latest technologies and, in the case of enterprise systems, have the assurance that the solution is fully integrated and works seamlessly within the business. The software framework should allow for both technology and business innovation to ensure the product remains relevant in the future, regardless of when it was first installed.

The challenge is for the IT community to fill this gap.

When a problem is identified and is consistent across all organizations in this sector, it presents an incredible opportunity for the right IT company to fill this need. This will not happen by continual patching of old systems, disconnected offline point solutions, spreadsheets, and manual processes. Very few companies in the IT sector have viewed the problems faced by the construction industry as a tremendous business opportunity to deliver a solution that not only addresses these deficiencies, but provides a blueprint to full digital transformation both today and into the future.

Business leaders want IT to be focused on business results, innovation, and continuous improvement. Taking an old legacy system with a few new features and letting the client wrestle with integration is not the answer these companies are looking for. IT solutions that offer true integration, next generation features, and modern technology are the key to solving this issue. Members of the construction industry should be made aware of the extent of their options with regards to business software, rather than simply choosing a large-name vendor that will run up costs on customization and implementation time while limiting support for future versions.

Al Muirhead is Co-founder and Partner at Reflex Enterprise Solutions Group Inc.

*Originally posted on LinkedIn Pulse on January 24, 2017.