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Talking about a revolution

All businesses will soon be using electronic communication in some, if not all, of their activities. Max Soudain looks at what this means for the construction industry.

E-commerce has enormous implications for the construction industry. 'Current savings are estimated at 5% or more for overall construction output in UK - several billion pounds, ' says Simon Middelboe, managing director of Emap's internet business Construction Plus.

'Other estimates put it between 15% and 25% - with obvious implications for staffing levels.'

Middelboe says the main benefits for the construction industry will be in the management of the construction process.

The large numbers of clients, consultants, contractors, subcontractors and material suppliers involved means communication is inefficient.

It is here that the e-business concept comes into its own.'The internet is a business tool. It threatens to cut out wasted time and energy by providing more cost-effective trade and communication, 'Middelboe says.

He explains that there are four main areas of e-business, each with their own distinct cost and efficiency savings (and possible revenue streams for those involved in web development): information provision, project collaboration, tender management and product specification and procurement.

The provision of information and knowledge - 'Not inventing information but making it available cheaply and quickly, all in one place' - is generally available through a web portal (or search engine), such as Construction Plus. This can include information on products, services, industry standards and legislation. Middelboe believes this is vital to the construction industry.

'If work is dependent on getting information, legislation for example, time and cost are involved. The internet will give that information to you. There are benefits in reducing waste or creating business opportunities by getting that information first.'

Such services have been offered for some time, in fact the internet owes its growth largely to its ability to provide information at the touch of a button. But the biggest growth area, as far as the construction industry is concerned, is in project collaboration tools (also called project management tools).

Although not exclusively constructionfocused, this development could be the catalyst for the most significant cultural change in the modern construction industry. Big news in the US, there are now a number of packages available and more to come. 'Between 15 and 20 systems are in development in the UK, ' Middelboe says.

Because any medium to large project tends to involve a large number of firms and teams spread across various offices and sites, the idea ofthese packages is to centralise communications and to aid job audits.

This should, in theory, increase efficiency by reducing paperwork and cut costs, including postage and printing.

The various packages (see box) have similar functions. A project website is set up, with access restricted to team members, who can communicate with each other, set up meetings and view documents.

The beauty of these packages is that because they are internet-based, output from almost any software package can be read, without users having it on their PCs.All of the project information is stored on a secure server, its security guaranteed by the service provider.

Middelboe believes the proliferation of such software is similar to the development of office software and its subsequent domination by Microsoft: 'In the future there will be no more than six packages used regularly worldwide.'

Costs vary. Some firms charge a percentage of the project value, others by the number of users and the time they are using the service for, or by the amount of server space.

Allied to this type of software is tender management - or bid management as it is known in the US - 'basically tools you go out to tender with'.

'For example, a main contractor seeking to win a contract that is divided into a number of subcontracts has to go to a preferred list of suppliers, 'Middelboe says.

The bureaucracy involved in producing and sending out tender documents is reduced if it is done electronically and as a result the cost of going out to tender falls.

'Equally, if people tendering have to go through the electronic process, returning and responding becomes cheaper and more efficient, margins increase and costs reduce.'

The other main area to be affected by the internet is that of specification and procurement. There are three main types of service: request for information (RFI), request for quote (RFQ) and the 'low-end', which means products.

The geotechnical industry and other specialised sectors in construction are unlikely to be particularly affected by online buying, Middelboe says, because the products on offer are likely to be tailored for individual projects, requiring discussions between manufacturers and end-users.

Even so, electronic communication (sending drawings and project details) can be more efficient, especially if standard forms are used.

Buying products over the internet is a straightforward process and the advantages are clear, with cost savings through reduced paperwork and the integration of purchasing into a firm's financial management structure.

There is also price transparency, with users able to compare products and services. This 'aggregation' - all the information in a standard form in one place - allows rapid personal choice, without marketeering, says Middelboe.

The threat to middlemen in the supply chain, builders merchants for example, is not as great as it may seem, as manufacturers do not like holding stock and the cost of delivering to individual customers is high. However, as manufacturers become more efficient the effect on the supply chain will become more pronounced, he says.

Middelboe advises that 'every business should have someone who is looking at what ebusiness means to them.'This person will need to know about the business and about internet technology.

'E-business is not just about websites. It is more about how the business is set up. At the moment not having a website is not too critical but in three years every firm will have one - not to will be like not having sales literature now.'

How much a firm spends depends on what it wants out of the site. 'Can you trade on it, order products, discuss business, or is it simply a place where people can leave a calling card?

You can design your own website at the moment but in the future, as it becomes a retail front end, it will become more expensive, ' says Middelboe.

'Companies have to look at the business and how it is set up. If they are in the vanguard, they might gain a competitive advantage over rivals. They have to plan to allow electronic trade.'

E-products and services

A number of different e-business services and products are available.

Most offer a variety of tools, including project collaboration, online information and procurement.For more detailed information, log on to the websites.

Construction Plus - The UK's largest supplier of construction industry information, including news and archives of Emap's construction magazines, including Ground Engineering.

Arrideo - due for launch later this year, part of the global exchange platform AECventure, backed by Amec, Bovis Land Lease, Hochtief and Skanska, offering a variety of products. Integration - Ove Arup's suite of project management tools. Cadweb - project collaboration tool, aimed at smaller businesses. Buzzsaw - US-developed project collaboration tool and procurement site spun off from construction software firm Autodesk. e-cement - Cement trading exchange set up by Blue Circle and Italcementi. Mercadium - internet trading hub for building materials. BuildOnline - project collaboration and procurement. eConstruct - backed by Taylor Woodrow, procurement service. Cephren - one of the original US project collaboration tool providers.Recently launched construction specific package ProjectNet in the UK. Bidcom - US tender management tools. Buildingwork- a range of services including bidding and project collaboration tools. SpecifyIt - product information. British Standards - can now be ordered online. Building Research Establishment - information on non-profit making organisations, websites and online purchasing of BRE publications. Caddnet - project collaboration tools including ShareIt and ReviewIt.

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