Changing Landscape in Contractor Financial Systems (ERP)

Future of ERP

There are two aspects of ERP that make that solution among the stickiest in the industry (meaning least likely to be changed out); cost and disruption. Said another way, both relate to the difficulty in implementing the types of systems. In my 30 years within the industry, I have yet to hear a controller or CFO express delight in the prospect of another ERP deployment. Even so, a significant number of people evaluate the ERP marketplace each year with a view to better automating their accounting and operational functions. This seemingly benign process can bring its own cost, frustration, and risks. Certainly, making the wrong decision can be costly in terms of investment and personnel time to not meet the organization’s expectations. This topic could easily fill two or three newsletters. However, for those considering their options, the focus here is only on the most significant developments that are in the ERP space for contractors.

In no particular order, these developments include a lack of support for manufacturing/fabrication functions, sufficient project management functionality, an open architecture for integrating with other applications and publishing tools that provide a higher level of capability than typical report writing.

Significant Factors

  1. Lack of Manufacturing – none of the ERP solutions dedicated to construction have functions designed for managing prefabrication or modular building. These are applications like Shop Floor Control and MRP, which are common to manufacturing ERP solutions. As contractors increase their exposure to prefabrication and develop greater needs in this area, the traditional ERP vendors will have to develop more functionality or integrate with some of the third-party solutions (e.g., FabSuite, Manufacton, MSuite). A Purchasing and Inventory module is not enough.
  2. Open Architecture – none of the ERP vendors today can build all of the applications that their customers ultimately need. They might do okay with timekeeping and PM but will fall short on HR, estimating, and some field functions like drawing management. This is not a problem as long as they provide open architecture (APIs) for allowing integrations with other solutions. For this reason, today’s ERP solutions must support APIs and web-services as well as a published data schema to aid others in tying other solutions safely into the database. Closed architecture is a dead-end anymore.
  3. Publishing – your ERP solution should have a robust publishing function that goes beyond simple report writing. It should include the ability to publish documents using a mail-merge function with Word or a similar document editing tool. It should allow for formatting documents produced by ERP like invoices and POs. Even to the point of binding documents like financial statements before distributing them. Asking the vendor for these options on a one-off basis and having to pay for the “customization” is not a good sign of the type of solution you are going to need.
  4. Project Management – almost all ERP vendors in construction have acknowledged the need for an integrated PM solution so change orders can be processed in the same system as contracts, job cost, and subcontract management. The idea is to keep PMs in a single solution rather than having them operate in two or even sometimes three solutions every day. The challenge has been, not all of the traditional ERP vendors have appreciated the magnitude of effort involved. And certainly, companies like Procore, e-sub, Kahua, and Autodesk have raised the bar. This is probably the most vexing challenge for most contractors when they set out to select a new ERP.

Working with and monitoring all the most prominent ERP vendors in the industry, BCG has an opportunity to see at close hand the strengths and weaknesses of each of the vendor platforms. We regularly get involved in discussions regarding the roadmap for their products and as one might expect, get a chance to see the more progressive among them. The observations in this article are based on our ongoing research of the vendor community.