“If you don’t feel confused and scared, you don’t know what’s happening.” With that quote from GE Chairman Jack Welch, one speaker got the rapt attention of a couple hundred contractors and e-commerce exhibitors who attended the first e-contracting conference, sponsored by Electrical Contractor magazine last month.
The history of dot.com companies has been littered with corporate corpses. In a short year, it has included hype, hope, and helplessness. So EC convened the conference, which focused on “extranets” in the form of application services providers (ASPs). These ASPs offer new solutions to old communications problems electrical contractors have while using the Internet. The formal presentations and informal comments that follow represent what is soon to be a regular part of your business plan, (i.e., Internet information management).
Call it e-commerce, e-construction, information technology, or “e-nough” as one mind-boggled observer did; the projections for Internet intrusion into electrical contracting ranged from immediate to, at most, three years. The e-commerce trend is well established among leading-edge electrical contractors. A show of hands indicated that more than half the attendees regularly used a handheld device or personal digital assistant (PDA) for wireless communications over the Internet. So it seems likely that among the building trades, electrical contractors are leading the charge to use rapidly developing Internet applications for improving their operating efficiency.
The conference featured solo speaker-experts and panel discussions presented by several groups of dot.com providers. They could be divided roughly into three groups of applications related to the overall construction process, including collaborative project management, bidding and procurement, and information portals.
One group of dot.coms attempts to improve project management by facilitating collaboration between owners, architects, and contractors on a job-by-job basis. Although smaller contractors may not use this application yet, larger firms already are feeling pressure to learn how to access a common database on the Internet provided by an ASP. Some owner/developers require all their project team members to participate in such collaborations to qualify as bidders. The Internet collaboration firms enable all contractors on the building team to communicate at the speed of light. Some uses include progress reports, meeting minutes, requests for information (RFIs), and even transfer of project photos of site work. Average listeners could barely decipher the speakers’ jargon, but when they were told that the time to clear RFIs dropped from days to minutes, the learning curve seemed worthwhile.
Collaborative project management. This application varies among owners and constructors on the panels. Some speakers said they were still in a “wait and see” mode, while others said all their projects were now being managed through a project collaboration ASP. The enthusiastic users seem convinced that there are many cost and efficiency benefits to Internet project management. At least one project manager for a large international builder said all of the company’s 350 projects are being managed through a collaborative ASP. But, the non-users seem to wonder whether the new technology is not a solution looking for a problem. They are hoping current methods will continue being used. Time will tell as owners and developers evaluate bottom line results provided by Internet collaborative project management.
Bidding and procurement. This application is meant to improve the bidding and procurement processes between general contractors and specialty firms. Several different approaches are offered. For example, one Internet firm demonstrated an open auction bidding process, in which the suppliers all could see each other’s bids as they were submitted. The time-compressed reverse-auction proceeded until bidding finally stopped at the lowest bid, where the threshold for further pain was highest.
While this demonstration caused many contractors—who are used to competitive closed bidding—to fidget, the owner/buyer obviously benefited by reducing the price he had to pay to bare bones. The provider tried to assure the attendees that precautions were built into the system to ensure that the award would be made to the lowest bidder among sources who were pre-qualified. But a number of attendees obviously were uncomfortable with this kind of open bidding. Nevertheless, the speaker said owners, general contractors, and constructors would decide if this new approach will be effective enough to use in bidding electrical projects. For an industry that feels bid shopping and bid peddling are unethical business practices, this new e-commerce trend may take some getting used to.
Of course, electrical contractors can use the same reverse-auction approach when buying electrical products, office supplies, or even capital equipment. In this purchasing application, some distributors reported they already offer electronic buying services. One way is for independent distributors to set up a proprietary Web site for business transactions 24x7x365. An independent electrical distributor reported that 6 percent of his $30 million volume is now conducted online.
Another way is for an ASP to aggregate many distributors into a group electrical contractors can access for purchasing. One exhibitor introduced a handheld device that enables authorized supervisors to buy materials directly from the job site. A procurement specialty application enables contractors to buy lighting equipment and exchange surplus equipment worldwide. The value added by these dot.coms included validation of lighting specs for the intended use, and price negotiations with multiple contacts. But, speakers and contractors agreed that for materials procurement via extranets to work, established contractor/supplier relationships would have to be preserved. The question of how good will, mutual trust, and personal contacts would be sustained over the Internet was not fully resolved.
Information portals. In this application, a provider aggregates information from all kinds of suppliers and makes it all available for a fee on a common Web site. The user merely clicks on information he or she is interested in, then is routed to the site of the source at the speed of light, be it a system spec, a product catalog, or a training program. This application is useful for setting up supplier product catalogs for ease of searching and downloading product cut sheets needed for project submittals.
One speaker presented the negative side of communication at the speed of light, saying that, the Internet enables “the wrong information to be sent to the wrong people, only much quicker.” So a major consideration discussed was the matter of control of information transfer and the security of private information.
Internet information portals enable engineers, estimators, and designers to conveniently retrieve and visualize products in three dimensions. One architect-speaker said soon virtual buildings will be transmitted over the Internet in three-dimensional forms, possibly even including holograms that show several different aspects. Advantages to electrical contractors could be more accurate dimensioning and layouts that minimize the design errors and omissions that often accompany project plans and specs. One specialized information portal service is that of personnel recruitment and job prospecting. In this application, employers can post job openings, and people looking for work can get together far more quickly and cost-effectively than conventional methods using print media.
While an Internet provider may choose to offer a specialized service in one or more of these applications, it became clear at the conference that electrical contractors will be impacted by all three applications. As an added risk, some providers specialize in e-commerce applications, while others combine them into differing options. Selecting the winners from among survivors is a gamble, which causes fear and confusion.
Several dot.com providers have come and gone in the past year. Others are rapidly merging and joining with partnering allies for an anticipated marketing advantage. With several hundred dot.coms attempting to get started, it is downright impossible to forecast which ones will survive.
So, one strategy for electrical contractors to use with project management aggregators is to wait until an owner or general contractor chooses an application service provider and forces its use on its specialty contractors. A problem will occur when your favorite general contractors choose several different ASPs, because then you will either have to forego work or learn to use several different applications on different jobs.
Procurement applications pose a similar challenge. You may have to choose between distributors or office suppliers, based on which of their several Internet systems you want to invest in learning how to use, since you may not be able to use them all. So, a new combination of business partners could form, based on their willingness or ability to use the rapidly emerging e-commerce technology. Unfortunately, you may be dropped by some customers and qualified bidders’ lists if you cannot comply with their Internet communications policies.
The bottom line is this: You had better invest enough time to prepare for e-commerce. One speaker presented a formula for change that equaled pain plus fear divided by commitment: change = pain of the learning curve + fear of risk/management commitment.
It is obvious that the higher management’s commitment is the lower the impact of fear and pain. For example: If on a scale of 1 to 10, pain is a 9, fear is a 7, and commitment is a 1, then change impact is 16; but if commitment is 10, then change impact is only 1.6. So, it might be wise to appoint or hire an information technology (IT) manager.
Here are some suggestions for success:
* Get all your project managers, purchasing agents, and estimators familiar with working on the Internet.
* Give them personal laptop computers and enable them to get connected to the World Wide Web.
* Look for more help from Electrical Contractor magazine through e-commerce news and education.
Next time EC sponsors an e-contracting conference, try really hard to be there.
TAGLIAFERRE is proprietor of C-E-C Group and contributing editor to Electrical Contractor magazine. He can be reached at (703) 321-9268 or by e-mail firstname.lastname@example.org.