Many of today’s widely available software solutions for enterprise content management and collaboration have been designed as horizontal, one-size-fits-all platforms to maximise their vendors’ addressable market. Many of these products are therefore relatively generic in their functionality, e.g. Microsoft Sharepoint or DropBox. As today’s powerful cloud technologies allow for extending collaboration beyond the borders of an organisation, a new breed of vertically-focused collaboration solutions is rapidly gaining popularity, driven by the transparency, cost, compliance and efficiency requirements of different industries. One of the industry segments where this trend has been gaining particular momentum recently is the global architecture, engineering and construction (AEC) sector.
The global construction market is estimated to have amounted to over $8 trillion in 2015, making it one of the largest sectors worldwide. Its scope of activities is very wide and range from designing and building new structures to extensions and modifications thereof, as well as maintenance and related services. Construction projects tend to be complex and involve large numbers of parties that need to collaborate, yet the industry has historically been a laggard in terms of adopting new technologies to help manage these complexities, relying on “pen and paper” to a large extent.
According to Gartner Research, only 1% of construction sector revenues were spent on information technology historically, lagging behind virtually all other major industry sectors. As a consequence, the sector is notorious for its inefficient project management and has a devastating track record of meeting cost and time budgets; moreover, it carries substantial administrative overheads. Paper trails and project documentation are prone to errors, omissions and losses. And whilst the sector has returned to growth after the recent global financial crisis, it is facing substantial compliance, quality, cost and regulatory pressures.
The combination of these factors has created a tremendous opportunity in the global AEC software market for cloud collaboration software. Whilst it has been a mature market for software used to design and plan construction projects – dominated by technology leaders such as Autodesk, Dassault Systemes, PTC and Trimble, as well as vertically focused specialists such as Bentley, Nemetschek and RIB – little attention has been devoted to the construction execution and management phase until very recently. Basic online file-sharing solutions and collaboration platforms without construction-specific workflow templates are falling short of addressing the inherent complexities and requirements of a construction project. The above is exemplified by the industry’s most prevalent trend, “Building Information Modelling” (BIM), which attempts to merge design, process and cost data into one consistent model, amongst others.
Enter the next generation of AEC-specific cloud collaboration software players: leveraging the availability of nearly omnipresent internet connectivity and mobile technologies, a number of visionaries have built highly AEC-specific cloud-based software solutions over the past decade. As the market’s adoption of these solutions has accelerated rapidly in the last few years, its leaders have set out to consolidate the sector and create a new category of vertically-focused software players.
In the US, Viewpoint Construction Software is estimated to have more than tripled in size in the last five years through an aggressive acquisition strategy, fuelled by substantial private equity investments. Textura Corporation, which went public on the New York Stock Exchange in 2013, has made several acquisitions since. And in Q1 2016, Melbourne-based construction-focused cloud collaboration software player Aconex, which went public on the Australian Securities Exchange in 2014, acquired the European market leader Conject for €65 million, forming the global leader in cloud-based collaboration and cost management software for the construction industry. We expect that this consolidation will continue in the near- and mid-term, driven by private equity investor appetite and well capitalised software players that want to establish themselves at the forefront of the rapidly changing AEC industry. Both taking market share and filling product gaps will play a central role.
For more information on the sale of Conject to Aconex, where Mooreland acted as sellside advisor, please see: http://www.moorelandpartners.com/transactions/mooreland-partners-advises-conject-on-its-sale-to-aconex/.
Fabian joined Mooreland in 2008, and is a member of the Enterprise Software and Industrial Technologies and Electronics teams.