By Simon Duddy
Middle Eastern construction firms have finally started to embrace IT. Eliot Beer looks at the reasons behind this shift in attitudes and sees a desperate need for solutions as projects pile up as a key driver.
|~|Khehar,-Aru_m.jpg|~|Khehar: Many contractors didn’t have an interest in bringing in IT systems.|~|There is a saying in Dubai: wherever you stand, there’s a crane in sight. While this may be a slight exaggeration, there can be no doubt that Dubai’s construction frenzy is still in full swing, from the Palms to the Burj Dubai, to the massive Dubailand project.
But this boom is not confined to Dubai any more. Across the Middle East new building projects are springing up, fuelled by high oil prices on top of already fast-growing economies. With this frantic level of construction comes an increasingly complex logistical operation: contractors must marshal more men, more machines and more materials than ever before, for ever more complex projects with ever tighter deadlines.
What was in the past a fairly low-tech industry is being forced to modernise its management procedures to be able to deliver, and IT is becoming an integral part of that process.
“I think construction companies are starting to embrace IT fairly comprehensively now; certainly the smart operators are moving in that direction,” says Safder Nazir, CIO of Dubai-based Nakheel. “Firms are starting to realise that there’s only so much you can do with pen, paper and an Excel spreadsheet. Nakheel uses IT very widely across all its operations, from construction to sales and support services as well.”
Nakheel, one of the biggest construction firms in the whole region, might reasonably be expected to make more use of IT than other, smaller companies, but here too the situation is starting to change. Organisations such as Tejari, the online tendering marketplace site, are seeing more and more companies make use of its services, according to Hani Obeid, director of sales and business development for Tejari.
“We’ve seen huge growth in the use of our services all across the Middle East, not just in the UAE,” says Obeid. “We’ve now got franchise operations in Jordan, Kuwait, Lebanon, Syria and Oman, as well as our UAE site, and we’ve hosted thousands of auctions across a whole range of commodities.
The value of e-procurement is very clear: from what we see, the typical savings for a company using e-procurement range from 5% to 30%.”
Tejari allows businesses from across the Middle East to buy and sell products and services online, and lets contractors put out tenders for specific projects, where companies can compete to give the most competitive bid. Obeid says the site gives companies a wider reach and access to firms across the region, instead of just in the local vicinity, so increasing the efficiency of the procurement process.
“Tejari also offers vendor and supplier pre-registration, a process where products and services are described and rated in more detail, in order to make it easier for contractors to make informed decisions about other users and their offerings,” says Obeid. “This is one clear advantage IT has over manual processes, as it can help to build relationships between suppliers and contractors much more effectively than in the past.”
Obeid says Tejari’s customers range from companies like Nakheel to many much smaller firms. He attributes this wide range of users to the low initial costs of using the service, which are little more than a PC and an internet connection. In contrast, many IT solutions vendors, such as Oracle, SAP or IBM, necessarily require relatively large upfront investments for implementations, as well as a long lead time before the system goes live. Nakheel’s Nazir suggests that in an industry where lead times for construction projects are routinely very short, this may be one factor in the slow adoption of IT solutions in the region.
Arun Khehar, senior director at Oracle for retail and manufacturing, says his company has worked hard to bring costs down and offer solutions that can be implemented more quickly as well. Oracle is running a series of roadshows in the region, with the aim of targeting a bigger proportion of construction firms with this updated product lineup.
“We can now offer a complete solution for around US$100-150,000 including implementation, training and handover,” says Khehar. “This is a fraction of the cost we could have offered a few years ago, and we’re now targeting 50 to 60% of the construction firms in the region, not just the biggest developers and contractors.”
Khehar says these solutions would typically take about six months to implement, but if companies needed something faster, there are products which could be implemented much more quickly with around 80% of the functionality of a full solution. And he says that Oracle’s solutions can benefit contractors with planning, workflow and contracting tools which can help delegate very specific tasks and requirements to contractors further down the line.
Carsten Dietz-Selent, director of engineering construction solutions for SAP, tells a similar story, and says, “A lot of firms in the construction industry are surprised now when they speak to us, because we address very specific processes within the construction industry, and we don’t just offer general solutions to their particular situations. And there’s now a trend among construction companies to not just take on IT to make construction more efficient, but to take it beyond that to maintenance of the finished building.”
Accounts from other major IT vendors suggest they have worked hard to dispel the idea that they don’t offer customised solutions to the construction industry. But some are still sceptical about the efficacy of many IT solutions proffered by some vendors. Richard Oliver, business development manager for Constructive Technologies, says his experience shows there are still a lot of issues between vendors and construction companies.
“The IT industry has given itself the image of a snake oil salesman; there’ve been a lot of promises and a lot of capital spent, and these promises haven’t been realised,” says Oliver. “I’ve sat on both sides of the fence: I worked in the construction industry in South Africa, and I remember dealing with salespeople who would do anything to sell their products and promise the world. One of my favourite words in IT is ‘theoretically’ — anything is theoretically possible, but the practicalities are often very different.”
Oliver says Constructive’s approach is to focus on the requirements of the client rather than the technology, acting as more of a consultant than a vendor. The company is involved in projects ranging from the Palm, to Dubai Airport, to the Between the Bridges project in Abu Dhabi, offering solutions for the steel reinforcement sector.
Oliver says, “A lot of contractors don’t have the level of understanding to discriminate between the theoretical and the practical when it comes to IT, and end up buying something which they can’t implement properly and which can’t give them a return on their investment. It’s critical for vendors to identify the needs of the client and deliver those, rather than focus on the ‘nice to have’ aspects. I think the time is limited for vendors that don’t do this, because there’s more understanding out there now, and there is a change coming.”
Nakheel’s Nazir is also sceptical of just throwing technology at a problem in an attempt to solve it. He says the best approach is to deal with all aspects of a problem, rather just focus on the IT tools, and suggests that without this approach, any attempt to implement a new IT solution is most likely doomed to fail.
“There are three key aspects to any situation: technology, people and processes,” he says. “To make a solution work, you need to tackle all three of them — without people who are trained, without the correct processes, even the best technology in the world won’t do any good. But I think as the technology aspect has become more and more essential, as projects increase in size, companies are being forced to think harder about their processes and their personnel, and so workable solutions are appearing.”
Nakheel’s operations use IT at every level, from the tendering and procurement process, to planning and designing, to marketing and selling the finished projects, according to Nazir. But it also deals with dozens of contractors on its projects, and has to exchange plans and documents with them electronically, thus necessitating a very clear policy on IT requirements for contractors, right down to the level of file sharing and back office requirements.
Nazir says, “We exchange a lot of material with our contractors, something we wouldn’t be able to do without IT. We use Primavera, a project management application, AutoCAD for design, and Esri, a GIS (geographical information system) which ties everything together. These are now all fairly standard applications throughout the construction industry, and we also use Oracle products very heavily, but not in the construction side at the moment, so much as the back office, sales and marketing, and management side.”
The prevalence of applications such as Oracle’s in the back office but not in the construction process itself, seems to be indicative of the situation up until recently in the region. Oracle’s Khehar says the company recognised there was a hole in its offerings and worked to fill it, but also says many developers in the Middle East were not focusing on the construction aspect as much as the sales and marketing of a project.
“A lot of developers would look at a project purely as an exercise in selling, then leave the construction to third parties,” he says. “What this meant was there was not as much use of IT as there could have been within the process of construction, because many of the contractors didn’t have interest in bringing in IT systems to their businesses.”
Even within the past year, though, this situation seems to have changed, at least as far as attitudes towards IT are concerned. There are several reasons put forward as to why this has happened, but the consensus seems to be that the shift has come about because of necessity; the construction sector in the Middle East is growing by billions of dollars a month, and the size of projects mean many firms have to move beyond manual methods.
Constructive’s Oliver says, “I think many contractors will turn to IT as a necessity, simply because there’s a degree of crisis mode with the level of construction at the moment, so firms need to have some sort of solution. But the solutions that last will be the ones that actually deliver, and I think companies that try to take advantage of this boom to sell ineffective products will find it hard to do repeat business in the future.”
Another emerging use of IT is in the field of building management and maintenance after completion. Companies such as HP and SAP are promoting solutions which allow intelligent monitoring of many aspects of building infrastructure (see box). Such advanced services, though, necessitate a greater involvement of IT in the construction phase, as the necessary infrastructure elements have to be included in plans, ordered, and installed and configured, alongside every other aspect of the building process.
But even without such emerging uses of IT, the firm consensus is that the widespread adoption of technology in the Middle East construction industry is only a matter of time. Nazir, with many years’ experience of technology and IT implementations, says the potential for IT is huge.
“There are more and more products coming onto the market for construction, and as it becomes a more competitive market the offerings will improve, which is what I see when I visit Gitex, for example,” says the Nakheel CIO. “The power of technology, if it’s deployed correctly, allows you to cut time and collaborate better. And it’s great to see the Dubai Government, for example, being so proactive with bringing in electronic certification, and I think we’re going to see more and more of this across other governments, and across the industry as a whole.”||**||