Information Technologies and the Architecture-Engineering-Construction Industry
Mr. Kenneth Brown of Skidmore, Owings, and Merrill, LLP, identified issues the architecture community and individual firms face in using information technologies more effectively and ways in which information technologies may change the architecture industry. Mr. Norbert Young of the McGraw-Hill Construction Group reviewed issues for the construction industry and some initiatives that may help to resolve them. Dr. Robert Johnson of Texas A&M University presented the results of a survey of Fortune 500 companies about the impact of e-commerce on facilities management practices.
INFORMATION TECHNOLOGIES AND THE ARCHITECTURE COMMUNITY
Summary of a Presentation by Kenneth C.Brown President, Skidmore, Owings & Merrill, LLP
The architecture industry has structural problems that add to its business difficulties, but it has some potential advantages that could be quite useful in the new economy. On the minus side, the industry is:
Fragmented and small. There are 17,000 firms operating in the United States sharing $17 billion in fees. The total number of architects employed in the United States is probably about one-half the worldwide employment of General Electric.
Volatile. While we have had a good six-year run, the back-of-the-mind fear is the next big economic downturn and the reality of what a downturn can do to this industry. It has an effect on the ability to make decisions.
Local. Some firms like Skidmore, Owings & Merrill (SOM) and Hellmuth, Obata & Kassabaum, Inc. (HOK) have become more global, but looking at how global we are, compared to really global firms like Sony and Ford and General Electric and IBM, we are nowhere near what we should be.
Limited access to capital. The profit margins are not terrific, but over the last few years they have gotten much better; however, those margins do not translate into access to the capital market. Thus, those margins go to taking care of day-to-day, year-to-year problems. There is no long-term access to capital to really change the industry. So we are always looking to people outside the architecture community to provide new tools and sources of change.
On the plus side, architecture has many of the characteristics that Business Week says the world’s top-rung companies will share in the twenty-first century.
It will be based on information and talent. Top-rung companies will be focused on leveraging of intellectual capital and human knowledge. Architecture is like that.
It will be positioned to develop a brand.
It will not be capital intensive. This is an offsetting issue to the problem the industry has in generating and raising capital. Microsoft only uses about 5 cents in capital for every dollar of sales. Other software companies use about 20 cents per dollar and that is about where we are, at least at SOM. Manufacturing is typically a dollar of capital investment per dollar of sales.
Kenneth C.Brown was named to the newly created role of president of Skidmore, Owings & Merrill LLP (SOM) in June 1999. With offices in New York, Chicago, San Francisco, Washington, D.C., Los Angeles, London, Hong Kong, and Sao Paolo, SOM has undertaken more than 10,000 architecture, engineering, interior design, and planning projects in more than 50 countries during its 64-year history. Prior to joining SOM, Mr. Brown was a vice president of the General Electric Company (GE), where he was responsible for its operations in Southeast Asia, Australia, and Mexico, and served as manager of worldwide business development for GE Industrial Systems. His career spans corporate and operating jobs in mining and agricultural chemicals, engineering, and management consulting with Price Waterhouse, and energy research and development with Science Applications International and the Solar Energy Research Institute (now National Renewable Energy Laboratory).
Competition is driving change in the architecture community. Competition from within the fragmented industry is not the real threat. The threat is from outside firms like Andersen Consulting, technology firms, software firms, and dot.coms, that know how to leverage the system and are entering the field. Engineering firms that have grown by acquisition and by diversification at rates that make architectural growth absolutely anemic have a great deal of bargaining power.
The number-one issue for every large architecture firm is getting and keeping the best talent, keeping them motivated, and working in teams. This is not just architecture. It is every business today. But it is extraordinarily crucial for us, because we absolutely depend on human talent to do whatever it is we offer as added valued. We also need to operate more globally, not for diversification or leveling out economic cycles but because our customers are global. We must have a system to deal with global customers whether or not our firms are located in those areas.
The number-two issue is working harder on fixing the project and work processes within the firm. Picking the right work to do. Doing it more efficiently and, from a pure business point of view, managing the revenue capture cycle (i.e., collection) more effectively. It is killing architecture firms not to select the right projects or manage collections effectively.
Finally, architecture firms need the right resources and the right tools to work with. Ironically, a key problem for architecture firms is the physical space they are using. The space we have is not designed for the technology we use for design today. It is a mix between paper design and machine design processes and it is sub-optimal.
We are renting space on a short-term basis because we are afraid of the economic cycles, and we are not really thinking broadly about the kinds of spaces we need to operate optimally. We are not taking advantage of the virtual market because we are operating out of habit, not thinking forward.
The building Skidmore, Owings & Merrill is designing for Andersen Consulting looks like it will be an efficient work environment where they are going to leverage technology, but architectural firms are not doing this for themselves.
Much of the information technology work to be done in the near term involves expanding the use of technology beyond design processes to incorporate project management, human resources, finance, communications, and knowledge management. We also need to deal with nontechnical issues such as removing organizational inertia and barriers, or, in other words, people, training, and standards.
How could information technology change the architecture industry? First, it could enhance the internal collaboration processes of design from schematic to conceptual to final drawings. Efficiencies can be gained in the
transfer and use of information. Information technology can also allow us to focus on core competencies by encouraging strategic outsourcing of our indirect supplies and services. We can create meganetworks of specialties. The trick is to network people who want to work independently and people who want to work in organizations. But let’s get them all together in the same network so we can access all that great special knowledge in a seamless system.
Finally, information technologies can change the physical constraints of the way we work, from the way we work on machines to where we work, such as in our customers’ offices or in a different environment entirely.
INFORMATION TECHNOLOGIES AND THE CONSTRUCTION INDUSTRY
Summary of a Presentation by Norbert W.Young, Jr. President, McGraw-Hill Construction Information Group
Let us first examine the impact of the Web. Clearly, there are hundreds of applications and hundreds of dot.com companies out there. There is a promise of connectivity and of productivity enhancement; but neither promise is in place today, because the construction industry is fragmented and is not totally computer enabled. Equally important, unless there is the bandwidth for communication to be able to move information, we will not be able to leverage the information.
Nonetheless, we are seeing incredible investment coming into the construction industry in the form of venture capitalists. Over $600 million was invested in dot.com and technology-related ventures in the A-E-C industry in 1999. That sum was matched in the first three quarters of 2000. I look at that in many ways as being research and development (R&D) dollars.
But more than R&D will be required to bring the power of computers and communications to the A-E-C industry. Ninety percent of the 1.25 million companies in the industry have 10 people or fewer. Although 95 percent of the firms have e-mail, a typical firm probably has only one computer. Compounding difficulties, the average life of a subcontracting firm is 2.8 years, which means there are many companies leaving the industry on a continual basis. Until we make it incredibly intuitive and very easy for this base, which is the core of this industry, not much is going to happen.
Norbert W.Young, Jr., FAIA, is president of the McGraw-Hill Construction Information Group. The Construction Information Group is a source of project news, product information, industry analysis, and editorial coverage for design and construction professionals, and is comprised of such brands as F.W.Dodge, Sweet’s Group, Architectural Record, Engineering News-Record, and Design-Build and Construction. Prior to McGraw-Hill, Mr. Young spent eight years with the Bovis Construction Group and in 1994 was appointed president of the newly created Bovis Management Systems, which was established to serve the construction and project management needs for both private and public sector clients. He is a member of the Urban Land Institute, the American Institute of Architects, and the International Alliance for Interoperability, where he serves as chairman of the IAI North America Board of Directors.
On the other hand, the A-E-C industry is fundamentally a project-centric business. Secondly, it is an industry that is always organized virtually, so if there is any industry that is right for the Web and technology, it is construction. It is an industry that has an incredible number of intelligent applications. Sadly, it is an industry that operates with very little efficiency. Productivity has actually declined since 1965.
Two applications are emerging out of the pack and will make a difference: a collaboration and communications application and a trading platform application that allows connectivity among the participants.
To date there is no seamless, end-to-end collaboration in the three phases of a project (i.e., design, construction, and operation of a facility). The work in each phase occurs collaboratively. It always has. Unfortunately, the work done in each phase becomes static and devoid of intelligence when it is handed off to the next link in the chain, where people must recreate much of the work already done. Until we begin to really go back and look at the work processes, there is not much hope that Web technology is going to do much to change this.
There will not be one magic computer application that will solve everyone’s problems, but much could be gained if we could just share the information. When I begin to look at connecting the project, the participants, the
intelligent applications they use, and their information needs, then I see the promise of the Web as the glue that binds them together.
Wouldn’t life be great if architects could create CAD drawings on their platform of choice and move them dynamically to the platform the contractor uses for estimating, which would in turn pass the information on to the financial and project management people? But this will require data standards.
There are two major initiatives in data standards. One is called interoperability, and it is taking place on a global scale. It is all based on a fundamental shift to thinking of applications based on intelligent objects; instead of static lines on CAD, a door has intelligence embedded in it.
The second initiative is using Web-based aecXML, a framework for using the eXtensible Markup Language (XML) standard for electronic communications in the A-E-C industry. The concept is to use the Web as a giant database by tagging information so that it can be used for intelligent applications. It includes an XML schema to describe information specific to the information exchanges among participants involved in designing, constructing, and operating buildings, plants, infrastructure, and facilities. The various software applications used by these participants can transfer messages formatted according to the aecXML schema to coordinate and synchronize related project information. In addition, a standard aecXML specification will facilitate e-commerce among suppliers and purchasers of equipment, materials, supplies, parts, and services based on that same technical information.
The federal government is a huge owner of property and consumer of services. I think federal agencies need to demand that their service providers use certain standards. From my perspective, federal agencies are in the driver’s seat. Demand interoperability. Be willing to say that in order to work for our agencies, you must provide information in a way that can be shared.
When I directed the design and construction of the facilities for the Summer Olympic Games in Atlanta in 1996 while working for Bovis Construction Group, I told contractors they were going to deliver CAD documents in an AutoCAD format and that all schedule information would be in Microsoft Project. We, as the owner, said we want to take advantage of all the information we are using and then be able to aggregate it to look at our portfolio. I think federal agencies are in a perfect position to be able to do the same. And I say, what is the risk?
THE IMPACT OF E-COMMERCE ON FACILITY MANAGEMENT PRACTICES
Summary of a Presentation by Robert Johnson Director of the CRS Center, Texas A&M University
The CRS Center conducted a questionnaire survey about the impact of e-commerce on facilities management practices for the IFMA Foundation, a not-for-profit group affiliated with the International Facilities Management Association. The goals of this survey were to develop a rigorous and factual description of how business-to-business e-commerce and Web-based technologies were being used by large building owners and assess how those uses were projected to change over the next two years.
For the purposes of the survey, e-commerce was defined as conducting business communications and transactions among companies over the Internet. Fortune 500 companies were the focus of the survey and all the respondents were IFMA members. About 1,700 questionnaires were mailed out and 578 were returned, for a response rate of 33.7 percent. Almost one-half of the respondents managed more than 1 million gross square feet of space.
Robert E.Johnson, AIA, is a professor of architecture and director of the CRS Center for Leadership and Management in the Design and Construction Industry at Texas A&M University. The mission of the CRS Center is to create useful knowledge in leadership and management that applies to both individual projects and firms and organizations in the design, construction, and facility management industry (http://crscenter.tamu.edu/). Dr. Johnson also serves as chair of the College of Architecture’s Facility Management Certificate Program. His current research has focused on the impact of information and communication technologies on the design and construction industry, with particular focus on facility management organizations.
Of the total respondents, 5 percent said they used e-commerce a lot to help manage their facilities, 31 percent said they used it some, and only 4 percent said they were not using it at all.
Top uses of e-commerce listed by respondents were:
Purchasing supplies and materials from a specific vendor;
Accessing facilities manuals (e.g., maintenance or training);
Publishing static project information;
Taking interactive training courses; and
Purchasing supplies and materials through an Internet service that connects buyers and sellers.
Within the next two years, more than 8 out of every 10 respondents said they would be purchasing supplies and materials on the Web from a specific vendor; 9 percent said they anticipated purchasing a lot of facility services over the Internet; 7 percent said they planned to purchase a lot of energy on the Internet; and 3 percent said they would be leasing a lot of space by using the Internet.
What we are seeing is a pattern of increasing use of the Internet to do more traditional activities. The activity with the greatest payoff for facility managers appears to be using the Internet for purchasing.
In the services sector, telecommunications and information companies are the leading users of e-commerce for managing facilities, followed by utilities, banking, and health and hotel companies. E-commerce was less frequently used by facility managers in the trade and insurance sectors. In the manufacturing sector, electronics companies used e-commerce most often, followed by vehicles, energy, chemicals, and consumer companies.
Almost one-quarter of the respondents thought e-commerce would have a big impact on their departments over the next two years, and 52 percent said it would have some impact.
Is e-commerce effective for managing facilities? About 47 percent said it had decreased the total annual cost of facilities and 80 percent agreed or strongly agreed it would decrease costs within two years. About 67 percent said it was decreasing the cost of buying supplies and materials, and 50 percent said it had decreased the time required to complete projects. About half said e-commerce was decreasing the cost of facility maintenance and operations and almost one-third agreed that it decreased the overall cost of space management. About 30 percent said it has decreased the cost of new construction projects.
More than one out of every 10 respondents said implementing e-commerce was a big problem and one-half said it was somewhat of a problem. Almost 60 percent of respondents mentioned that their biggest barrier to the use of e-commerce was the difficulty of integrating legacy systems. Other top-rated barriers cited were:
Funds required to invest in e-commerce were not available;
Software upgrades were too costly;
Too hard to customize software to meet needs; and
Too costly to keep building data current in facilities management systems.
One of the objectives of this research was to learn if it was possible to identify the type of organization that is more likely to use e-commerce. The survey found that those organizations using systematic work processes were more apt to adopt business-to-business e-commerce. Work processes that were associated with e-commerce use were ISO 9000 certification, the use of continuous improvement processes, the use of continual retraining of employees, and the use of modeling work processes using charts.
Overall, this survey found that business-to-business e-commerce appeared to be emerging as a major change agent in facility management. Facility managers reported that e-commerce will significantly affect facility management practices. Although business-to-business e-commerce had not yet resulted in significant improvements in facility practices, facility managers expected this to change in the next two years, resulting in practices that lowered costs and reduced the time required to complete projects. E-procurement was the most frequently used application. It also was the most effective in reducing costs.