Oracle has spent nearly $2bn building up its project management and payment platforms to target the construction industry. So what is the tech heavyweight planning?
The year was 1977.
The Queen was celebrating her Silver Jubilee, movie critics were hailing the first Star Wars film, and the world was mourning the death of Elvis Presley at the age of 42.
Over in California’s Silicon Valley, three software engineers – Larry Ellison, Bob Milner and Ed Coats – were setting up a small consulting company called Software Development Laboratories. The trio won a contract with the CIA later that year to build a database program using an experimental ‘relational’ method – the program was given the codename ‘Oracle’.
Fast-forward 41 years: SDL has been renamed Oracle and the company has grown to become one of the biggest names in the international technology industry.
For decades Oracle’s software competed with that of Microsoft and Apple as they battled to introduce computers to the masses and revolutionise business in the process. Far from suffering from this intense competition, Oracle benefited from the market’s relentless progress as these emerging tech giants transformed homes and workplaces.
Yet the construction industry was, for the most part, left behind amid this technological arms race.
But as budding start-ups have increasingly sought to rectify the lack of industry digitisation in recent years, Oracle’s huge global operation has taken note of the expansion opportunities construction presents.
Oracle has made two notable acquisitions since 2016 and established a new department – the Oracle construction and engineering global business unit – to house them.
Mike Sicilia senior vice-president and general manager Oracle construction and engineering
“Construction companies were uptaking tech at a more aggressive rate than they had been in previous years”
Mike Sicilia, Oracle
Textura, a provider of construction contracts and payment management software, was acquired in April 2016 for $663m. A second acquisition followed in December 2017 when construction project management provider Aconex joined Oracle in a deal worth approximately $1.2bn.
“When we look back to those pre-Aconex and Textura days, there was an ecosystem of things evolving, particularly around the cloud,” says Mike Sicilia, senior vice-president and general manager of Oracle’s construction and engineering global business unit. “Construction companies were uptaking tech at a more aggressive rate than they had been in previous years.”
Oracle noticed this trend around three years ago, Mr Sicilia recalls, prompting the company to purchase two of the leading global providers of construction project and payment platforms.
Mr Sicilia adds that another trend he’s noticed is construction companies implementing innovative technologies at a faster rate than some of the other sectors Oracle serves. This acceleration might be down to the industry skipping entire generations of technology, he suggests. Nevertheless, it means “there are a lot of greenfield opportunities” that have the potential to propel construction ahead of other sectors in the long term.
Mr Sicilia points to the fast and widespread uptake of drones across the industry as evidence of this trend, adding that the integration of “back-end project management BIM-based solutions [is happening] at a rate that’s pretty impressive”.
Answers in the clouds?
The industry’s increasing appetite for technology is just one of the reasons why Oracle has spent nearly $2bn developing its construction business.
Use of cloud computing – the ability to use applications or access data that is stored on the internet rather than your device – has become far more commonplace – and increasingly varied.
“The cloud has created a huge inflection point and created an opportunity for construction to solve a big problem, and that is embracing the supply chain,” Mr Sicilia says. “Whether that’s the financial side or the document and collaboration side […] you start to get real-time collaboration from suppliers, which was happening very infrequently, if at all in large projects.”
Where companies would previously have had to set up their own physical IT infrastructure and manually install software onto their computers, they can now access all of their files and software online through the cloud. This means the client, architect, main contractor and the whole supply chain can access all the latest programme information from one central portal.
Cloud computing prevents each of a project’s stakeholders “holding different versions of the truth on their own systems”, argues Robert Phillpot, Oracle’s vice-president for product strategy, construction and engineering – and also a co-founder of Aconex. In other words, everyone is on the same page at all times.
“We’re getting a groundswell of people globally who understand the financial health of their supply chain”
Mike Sicilia, Oracle
Mr Phillpot started out in construction himself, but having grown frustrated with inefficient working practices and the time and cost pressures they create, he left his previous job in 2000 to set up Aconex with co-founder Leigh Jasper. The pair wanted to find a way to bring all the stakeholders in a project together and remove duplication of effort in terms of documents and project programme.
Oracle’s acquisition of Aconex represents an “interesting and exciting time”, Mr Phillpot says, as Aconex is only one piece of the software puzzle the industry needs to achieve real-time collaboration across a project.
Oracle Aconex software 1
Oracle identified payments as another part of the construction project puzzle that could be significantly improved, which was a major factor behind its acquisition of Textura. Like Aconex, Textura is also a cloud-based platform and handles construction contracts and payments throughout the supply chain.
Who’s taking notice?
On the face of it, combining cloud-based project management and payment management software under one roof is an intriguing prospect for construction companies.
But has the industry noticed?
“At the time we acquired Textura, we were processing $4.5bn a month in subcontractor payments. Now we’re processing well north of $6bn a month,” Mr Sicilia says. “The uptake has been phenomenal. We’re getting a groundswell of people globally who understand the financial health of their supply chain. In other words, [they know] making sure they get paid on time, or even early, really de-risks a lot of problems the subcontractors have.”
When Oracle started its push into the industry in 2016, around 90 per cent of the cash flowing through its systems was coming from the US. This is now at 80 per cent, with the UK and Australia responsible for the wider global take-up.
Robert Phillpot vice president for product strategy construction and engineering Oracle
“That’s where we think the industry is going to go: great data, insights from [that data] and a continuous learning loop”
Robert Phillpot, Oracle
Oracle boasts the likes of Balfour Beatty, Kier and Lendlease among its British customers, with Mr Sicilia claiming that Balfour has “saved approximately £1.3m over 20 months by reducing errors and reworks”. Meanwhile, US-based construction firm Burns & McDonnell has reported being able to remove 3,000 forms from its processes.
Unlocking productivity gains
Although Aconex, Textura and the construction business unit are all relatively new additions to the group, Oracle Primavera has long since offered project, cost, time and risk management solutions for various industries.
The biggest challenge for the tech giant now, according to Mr Sicilia, is knitting all three platforms together in a way that they complement each other and are accessible for users.
Mr Phillpot is excited by the amount of data Oracle will now be able to work with, which he believes will produce better insights on the industry’s future in terms of costs and scheduling. “That’s where we think the industry is going to go: great data, insights from [that data] and a continuous learning loop,” Mr Phillpot says. “That’s where we need to get to […] to get this 40, 50, or 60 per cent productivity gain.”
Trying to achieve these productivity gains in an industry often derided for spending too little on technology could be challenging, but Mr Sicilia believes people are often misled by focusing on the wrong set of numbers.
“It’s probably true in a mathematical sense, but philosophically, I don’t think it’s true,” he argues. The key measurement that many people miss, Mr Sicilia believes, is the type of technology in which the industry is investing, with too much attention paid to the overall investment figure.
“In other industries, 80 per cent of IT cost is maintenance and operation [of existing IT infrastructure],” Mr Sicilia says. “I think it’s very different in construction because, in many cases, there aren’t any technical solutions to replace.”
With a relatively reduced exposure to the costs of maintaining dated IT hardware, industry firms are able to invest in technology that is generations ahead of what is currently used.
Construction has caught Silicon Valley’s eye as a result, which could mark a turning point in how the industry operates.