By John Somers, AEM Director of Product Management, Construction, Mining & Utility
One of the most impactful technological trends of the last decade has been the rise of cloud computing as a business tool.
Designed to provide shared and on-demand computer processing resources and information to computers and other devices, cloud computing is commonly utilized by business professionals in the form of Software as a Service (SaaS) – often without them even knowing it.
Do you use Gmail for a personal email account? How about Salesforce.com or Concur at the office? These are just three prominent examples of SaaS many of us employ on a daily basis. Users do not own the software and, typically, pay as they go based on usage. In addition, they do not have to perform updates to the software or maintain its compatibility, and they are guaranteed service uptime of somewhere around 99%.
A corporation used to have to worry about installing and updating software on every employee’s computer, making sure it was licensed correctly, and – in many cases – maintaining a fairly large server room to allow for the access of locally stored information. This is no longer the case, as cloud computing eliminates the need to purchase expensive hardware upfront, instead allowing the company to spread out the expense over time. Cloud computing also alleviates the uptime burden off of a company’s IT department and allows them to allocate their resources elsewhere.
Now let’s apply a similar thought process to the construction industry. In the not-so-distant past, many contractors purchased all or the majority of their equipment. There was a significant upfront cost, all of the maintenance cost fell on the shoulders of the contractor, and machine downtime pulled money from the bottom line. And let’s not forget to mention the cases where machines sat idle or at a different jobsite than where they were needed.
Over the last decade or so, we have seen more and more equipment being shifted into the rental market. This helps contractors only pay for equipment they need at a given time. The routine and preventative maintenance is handled by the rental company, and the renter doesn’t need to worry about an investment in the machine depreciating in value over time.
Another similarity would be how if you need more file storage space in the cloud, you just pay to add more. If you need more equipment, say for a bid you just won, you rent more. In theory, that equipment would be ready on-demand, just like more storage space, and also delivered to wherever it’s needed.
This is happening today with all rental companies, who are working diligently to ensure their customers get the equipment they need, when they need it.
However, there’s still one aspect of SaaS to mention: paying for the equipment based on usage or, in this case, production. When you order from a ride sharing service such as Uber or Lyft, the total cost is communicated upfront. A calculation is made, and it takes into consideration the miles to your destination, the expected amount of time it will take to get there and current traffic patterns. Doing so eliminates a route mistake by your driver which, in a taxi, could cost you more money. Recently, my driver missed the entrance to the driveway. While it took an extra-half mile of distance to proceed back to the route, all it cost me was my time.
What if construction projects were handled in a similar way? Telematics data could be used to accurately determine the average cost it takes to move a specific amount of dirt. Factors would include the amount of time needed and fuel used, as well as the wear and tear on the machine. If historical data existed, an exact cost to move the dirt could be determined.
A common assumption in the construction industry today is the cost of renting a piece of equipment may be based on the original cost of the machine, in the same way that it costs me more to rent a Corvette than a Corolla because of the ’Vette’s price tag. However, this isn’t necessarily the case. Or, at least it shouldn’t be.
It’s far less expensive to rent a 3-ton excavator than a 20-ton excavator. I don’t believe it’s because the cost to rent the 20-ton piece of equipment is greater, but rather because of the level of production provided by the larger machine. While the Corvette is capable of transporting you from one place to another as efficiently as the Corolla is, it takes much more time to move a certain amount of dirt with a small excavator than it does with a larger one. So, really, what you are paying for is production.
Imagine a future where contractors bid on jobs based on actual data and accurate knowledge of upfront costs. If the information was public, those who fund projects would be able to determine an approximate price tag for the work, adding a whole new layer of transparency to the jobsite. Everything would be based on production.
Of course, completing a construction project on time is another matter altogether, and the human factor will never truly be removed until machines are autonomous.
Is that the next step?