System architectures in Construction and Real Estate Industry

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Digitalization is one of the most important developments of recent years. Construction and real estate industries have been lagging behind other industries for years. One of the biggest hurdles on the way to digitizing a company is the interfaces between different tools. The application landscape of many construction companies and enterprise developers resembles a patchwork carpet. Often, many isolated solutions have been bought together, which at some point someone in the company liked. Today, they cause a lot of effort due to multiple entries and prevent automated processes. I claim this does not have to be the case and go even further out on a limb with the following provocative thesis: "No construction or real estate company, regardless of its size, needs more than three product families to be integrated."

In order not to run the risk of losing a possible bet, I would like to add a small disclaimer: specialized product add-ons from third-party companies count as part of the same product family as the base product (since the provider takes care of the necessary updates here) and pure (web) solutions without connectivity requirements do not count as applications.

How do I come to such a bold statement?

The following diagram gives an overview of the processes of real estate developers and their need for application support:

Every real estate developer needs a calculation and controlling tool (which may well be self-made); depending on the size and degree of outsourcing, there may be additional application requirements. A special position is occupied by accounting, which may be outsourced, especially in the case of smaller developers. Nevertheless, data for project costing and controlling is definitely needed on a regular basis, so this should be considered when designing the application landscape.

To back up my claim, I'll now briefly change my perspective and define Microsoft as set. Life without Excel, PP and Word is simply unthinkable nowadays.

Conversely, by using the Microsoft product family, calculation and controlling (Excel), IT processes (e.g. Intune for device management) and also workflows (Automate) can be mapped, as well as storage using Sharepoint and Onedrive.

For smaller developers, tender and project management can also be well mapped by using Microsoft products (Word, Outlook and especially MS Project), at best with the addition of a web solution for defect management that need not be integrated.

I do not see a good representation of the needs of real estate developers through the Microsoft product range with regard to payroll accounting, accounting and marketing/CRM. The extent to which a CRM is needed must be critically questioned on a case-by-case basis, but it cannot be ruled out even for "smaller" developers who, for example, are developing a project with 100 residential units.

If a smaller developer does not need a CRM and payroll and accounting are run by the tax consultant, then a pure Microsoft approach is quite target-oriented. In this case, however, it is important to clearly define and implement the process and tool-side interface to the tax consultant's tool (usually BMD).

If payroll accounting and bookkeeping are not outsourced and a CRM is actually required, the applications purchased for this purpose represent numbers 2 and 3.

A possible such combination would be e.g. Microsoft, BMD and Salesforce.

For larger developers, accounting/payroll/payment, CRM, and any other HR needs (recruiting, scheduling, etc.) can be mapped to SAP, so theoretically everything is already covered with SAP and Microsoft. To be fair to large developers, the question arises whether a professional integrated project costing and planning solution (instead of Excel) would not be appropriate. The selection of such a large-scale project costing and planning solution is a science in itself. Nevertheless, more than 3 product families will not do.

Let us now turn to the construction business. The following graphics again provide an overview of processes and their need for application support:

Due to the low margins and the high time pressure, I consider tool support across almost all phases of the core performance process and also for ongoing controlling to be absolutely essential for construction companies of all sizes. Depending on the size of the construction company, there is also a need in the fields of construction project management, HR, financing (guarantees) and IT.

For the analysis we change the perspective again. Microsoft is also a must for a construction company, which means that at least IT processes, workflows, filing and project schedule management are covered. Whether bid calculation and submission, tendering, awarding and invoicing can also be done in the Microsoft world depends heavily on the size of the construction company. In contrast to real estate developers, where a professional calculation tool is only necessary for very large players, smaller construction companies certainly already reach their limits here.

For small construction companies that have their accounting run by their tax advisor and do not need any guarantee management, a pure Microsoft approach is therefore also conceivable here.

If the accounting system is run by the company itself, the areas of accounting, payroll, payment and guarantees are covered by the ERP application. The previously mentioned AVA tool for the areas of bid calculation and submission, tendering, awarding and invoicing would be the third in the group.

Unlike a smaller real estate developer, the CRM issue is not virulent in a smaller construction company. 10-20 customers and quite possibly a multiple of potential prospects can be managed in MS Outlook. When choosing an ERP system for a larger company, it is important to ensure that it also covers the CRM topic in addition to accounting and controlling.

Two possible tool combinations that cover the entire needs of a construction company are e.g. Auer/BMD/Microsoft or iTwo/SAP/Microsoft.

At this point, I don't want to give the impression that digitizing the construction and real estate industry is easy. Defining the processes across multiple tools (e.g., master data maintenance) is not easy, nor is programming the interfaces. The latter especially in light of the fact that some application vendors are not particularly open-minded in this regard.

I also do not want the above product combinations to be understood as unconditional recommendations. Which tools are the right ones for a company can only be said after an appropriate analysis. What can definitely be said, however, is that the digitization of a company is doomed to failure if there is a corresponding proliferation of systems. And that construction companies and developers of all sizes can be provided with 3 product families in terms of processes.