What is the state of digitalisation in the construction sector? It’s a question on many people’s minds. We put it to Frederik Brugmans, Associate Director at KPMG Strategy. In his daily work, he assists companies and investors in the sector with growth and strategy issues, responding to current trends. ‘If you don’t start investing now and achieve a certain level of digital adoption, it will ultimately cost you dearly.’
What was once a trend has now become essential: the adoption of digital technologies in the construction industry. Companies must take steps to survive, Frederik Brugmans of KPMG observes. ‘Digitalisation plays an important role in construction, perhaps even more so than in other sectors. However, construction is a very traditional sector and is currently lagging behind other sectors in terms of digitalisation. However, it is catching up; companies are actively thinking about their digitalisation.’
Brugmans outlines two major developments in construction:
‘With these kinds of KPIs, you can further improve your organisational structure and make it more efficient. Various construction companies are working on this,’ says Brugmans. ’When it comes to digitalisation, I mainly see the digital tools that a company has to run its operations more efficiently and tightly. That starts with BIM and then moves on to project calculation. I have noticed a surge in this area in recent years, due to the tight market and price pressure, particularly in new construction. It is therefore very important to be able to calculate costs in order to ultimately keep your business healthy and realise projects with a healthy margin.’
There are several trends that are accelerating digital adoption. Brugmans explains: ‘You see external factors accelerating digital adoption, such as the enormous price increase of materials due to scarcity. Insight into price developments at suppliers and the timing and volume of required materials has therefore become more important. This requires good calculation and ERP software. I have seen such ERP systems being adopted in recent years and expect this trend to continue.’
Nevertheless, the Associate Director sees that the way software is used is still very traditional in the sector. ‘Many construction companies still run ERP systems on their own servers on site, rather than in the cloud. This makes maintenance and scalability a lot more complicated for software companies in the market. Because if something goes wrong, they have to go to that company every time to see what the problem is.’
When asked why a company would switch to using more and more digital technologies, Brugmans is clear: ‘The biggest advantage of digitisation is efficiency. Construction is a project-based business, which sometimes makes it difficult to keep your finger on the pulse and identify pain points. Not every project can be a huge financial success, of course. But it is true that digital tools and monitoring can help you avoid a lot of inefficiency and problems. As a result, the project margin will increase. That is why digitalisation has enormous added value for the entire sector.’
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Although most construction companies do not yet prioritise it, CO₂ reduction is an issue that they will inevitably have to address. ‘This is very relevant for the construction industry,’ says Brugmans. ‘There are more and more tools that respond to this, such as project calculation software that already takes into account the CO₂ footprint of certain materials used. This allows you to weigh up the options: do I draw up a quotation using material X or material Y? The costs for a particular material may be slightly higher, but if this results in a lower footprint, you can distinguish yourself in that area. End customers are also becoming increasingly aware of this. This is certainly a criterion that is coming to the fore more and more, particularly for public authorities. I expect this to play an increasingly important role. The CSRD directive also helps in this regard.’
Anyone who decides not to go along with digital developments is taking risks. Brugmans expects this to have major consequences. ‘The risk of not investing in digitalisation, or not doing so in time, is that you could miss the boat. There are also companies that are digitising and coming up with smarter solutions. This enables them to reduce costs and makes them more interesting to work with.’
‘So if you don’t start investing now and achieve a certain level of digital adoption, it will ultimately cost you dearly. You can already see a trend where digital requirements and, for example, being able to calculate the CO2 emissions of a project are becoming increasingly important to clients. That’s when you’ll start to reap the benefits of investing in digitalisation.’
Many companies still run their ERP systems locally. This means a lot of manual work when updates are needed, limited scalability and a high degree of dependence on on-site IT support. With a cloud-based ERP solution such as 4PS Construct, you can take a different approach. Discover how cloud technology can save you time and money and give you instant insight into your system. We’d be happy to show you!
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