Connect and Construct WP1 (Market Analysis)

Connect and Construct WP1 (Market Analysis) by Prof. Konstantinos G. Zografos 1 st Advisory Group Meeting (June 21, 2013)

Table of Contents Objectives & of Work Overall vs. (2020) Market Structure Data/Information Exchange Requirements vs. ICT Problems Way Forward 2

Objectives / Market Structure / ICT Data/Info Exchange Requirements & Solutions 3

of Work Entire construction project lifecycle 4

of Work Focus on building construction sub-sector (e.g. residential, commercial, institutional, industrial) 5

of Work Focus on SMEs and B2B transactions among large companies and SMEs 6

of Work Address the exchange of both technical and business/administrative data/information 7

of Work Time horizon: 2020 (future outlook and ICT uptake) 8

of Work Geographic coverage: EU-27 http://europa.eu/about-eu/countries/ 9

Objectives Chapter 1 & Chapter 2 Chapter 3 Chapter 4 ICT Chapter Needs 5 Chapter 6 Chapter 7 Chapter 8 Online survey: assessment of the current use and level of adoption of ICT systems and standards used in the construction supply chain Overall 1 st Expert Group Meeting (April 18, 2013): validation and feedback on the developed business scenario PESTEL analysis: assessment of trends and drivers affecting the evolution of the future business landscape Multi-Criteria Assessment: use of Analytic Hierarchy Process (AHP) for the assessment of future (as compared to current) ICT uptake based on expert judgments provided in the 1 st Expert Group Meeting 10

Importance & Impacts Overall sector contribution in GDP in 2011: 9.6% (1.2 billion ) of total EU27 GDP (FIEC, 2012b) Severely hit by the economic crisis (FIEC, 2010; 2012b; Eurostat, 2012) Building sub-sector: 52% of the total construction sector output in 2011 (FIEC, 2012a) 7% (14.6 million jobs) of total EU27 employment in 2011 (FIEC, 2012a) Buildings: the largest end user of energy in EU27 (41% in 2010) (European Commission, 2010; BPIE, 2011) 36% of the total GHG emissions in EU27 (European Commission, 2013b) 11

Market Structure Characteristics Market Characteristics Business Presence of SMEs Strong presence of SMEs SMEs acting as subcontractors and selected on the basis of cost/price SMEs operate typically on local or regional level Degree of Regulation High levels of regulation for energy and environment, labour requirements, and service/product quality standards Competition Fierce competition for SMEs Price-based Only leading designers and consultants and large construction companies compete on international level Types of Relationships Short-term relationships Opportunistic relationships Lack of trust and commitment Business Models System integrator (main contractor) coordinating multiple satellite actors (subcontractors) Alternative types of business models Use of Subcontracting Extensive Price-based 12

Main Driving Forces of Year 2020 PESTEL analysis and review of relevant foresight studies: assessment of trends and main driving forces affecting the evolution of the future business landscape Market forces: demographic changes, market requirements, and industry response Role of public sector: regulator and client Public Sector Year 2020 1 st Expert Group Meeting: validation and feedback on the future business scenario Environmental concerns: environmental awareness and industry response Market Forces Development of Business Scenario: - Presence of SMEs - Use of subcontracting - Degree of regulation - Competition - Types of relationships - Business models Environmental Concerns 13

vs. (Year 2020) Market Structure Characteristics Market Business Characteristics Presence of SMEs Strong presence of SMEs Use of Subcontracting SMEs acting as subcontractors and selected on the basis of cost/price SMEs operate typically on local or regional level Extensive Price-based (2020) Strong presence of SMEs Emerging types of specialised SMEs (e.g. sustainable construction, energy efficiency, smart materials, waste management) competing mainly on the basis of specialised services / offering Broader geographical presence and larger size of certain specialised SMEs More extensive More specialised, price-based Degree of Regulation High levels of regulation for energy and environment, labour requirements, and service/product quality standards Competition Fierce competition for SMEs Price-based Only leading designers and consultants and large construction companies compete on international level Types of Relationships Business Models Short-term relationships Opportunistic relationships Lack of trust and commitment System integrator (main contractor) coordinating multiple satellite actors (subcontractors) Alternative types of business models Increased regulation levels in terms of energy, environment, workforce welfare, and quality of services Securing a level playing field in terms of competition Fierce competition for SMEs Value-based (with price considerations) Delivery of environmentally sustainable construction solutions offering value over their lifecycle Balance between economic efficiency and environmental sustainability Increased internationalisation of business environment and competition for specialised SMEs and suppliers of (smart) construction materials Longer-term relationships Less opportunistic relationships Increase in trust and commitment Increase of PPPs and voluntary, collaborative relationships Increasing use of integrated contracts 14

Intensity of Data/Information Exchange Prevailing presence of the main contractor and the design/building team Highest frequency of exchange between main contractor and subcontractors Clients mainly interact with the main contractor Subcontractors mainly interact with the main contractor and suppliers The flow of data/information depends on the business model and the type of contract Intensity of interactions varies throughout the lifecycle and in terms of direction 15

Objectives Chapter 1 & Chapter 2 Chapter 3 Chapter 4 ICT Chapter Needs 5 Chapter 6 Chapter 7 Chapter 8 Importance and Frequency of Data/Information Exchange 16

RFID EDI SCM MRP PMIS e-collaboration e-procurement CPC e-invoicing GIS CAD/CAE 3D/4D BIM Analysis Systems CAFM BEMS/BAS PMS Objectives & Data/Information Exchanged by ICT Systems Used in Construction Client requirements Technical specifications Drawings / models Building product information Building standards Calculations (e.g. design, quantity, cost) Planning and delivery information As-built / As-maintained information Energy measurements / certificates Order / Payment information (including invoices) Tender / contract information Installation certificates / Maintenance instructions Permits/ licenses Certain types of information (e.g. drawings/models, building product information, calculations, as-built/as- maintained information) are handled by a diverse number of ICT systems creating interoperability problems that should be addressed by the Framework in WP2. 17

ICT in Construction Assessment of the current use and level of adoption of ICT systems and standards Online survey conducted between mid-march and mid-may 2013 Target: supply chain actors of all sizes (i.e. micro, small, medium, large) and various types of business activity (Design and Engineering, Suppliers, Construction companies, Consulting/Management, Regulatory/Governmental bodies) More than 3,500 professionals were contacted personally (via email and LinkedIn) International branch organisations supported/promoted further the survey Companies/professionals not having internet access were, by default, excluded (due to the internet-based nature of the survey) Self-selection bias 217 completed (and analysable) questionnaires from 20 countries in EU27 Sample (Analysed Data) A representative subset of 138 respondents from 11 countries in EU27 was analysed (only countries with 10 or more responses). In the case of Greece -initially representing 35.5% of the Complete Set of responses - random sampling was applied. 18

Adoption of Different Means for Data/Info Exchange E-mail: the predominant means of exchange with adoption rates for almost all types of data/information (except GIS data) exceeding 75% Non electronic means: varying rates of adoption (10-60%); high levels of adoption for the exchange of invoices, tenders, and permits/licenses Non internet-based means: adoption rates ranging from 20% (invoices) to 45% (requirements, technical specs) Cloud services and corporate web portals: adoption rates in a range 20-30% more focused on the exchange of drawings/ models, building standards (cloud services); technical specifications and building product information (web portals) EDI/Web EDI and XML web services: very low adoption (<10%) 19

Use of ICT Systems Large companies exhibit, in general, higher adoption rates than SMEs ICT Infrastructure: very high adoption rates of Intranet/Extranet (89% for large companies, 68% for SMEs) Internal and External e-collaboration: great variation for EDI and ERP (SMEs at about 20% and large companies around 40%); low adoption rates for MRP (12% for both SMEs and large companies); relatively high adoption of accounting, project management and planning, and e-collaboration tools (40-50% for SMEs and 55-60% for large companies) e-sourcing and e-procurement: lower adoption rates of e-procurement/e-tendering for SMEs (23%) as compared to large companies (38%) Online Marketing and Sales: low current use of online selling (8% for SMEs and 22% for large companies) and e-invoicing (20% for SMEs and 27% for large companies) Construction and Design Support: relatively high levels (especially CAD above 60%) both by SMEs and large companies; lower adoption rates for specialised analysis and collaborative design systems (20-30% by SMEs, 40-50% by large companies) 20

Importance of Perceived Benefits from ICT Adoption Special emphasis on: increase in speed and reliability of data/information exchange and increase in productivity SMEs vs. Large Companies More important for SMEs: benefits related to the increase of market potential and innovation capacity 21

Most important problems/barriers: Financial affordability / cost of ICT solutions Importance of Lack Perceived of customisation Problems/Barriers to ICT Adoption Lack of construction-specific solutions Technological interoperability and compatibility issues Limited ICT awareness SMEs vs. Large Companies Lack of financial resources is considered a greater barrier for SMEs, whereas large companies are more concerned with interoperability with existing company systems 22

Planned Use of ICT Systems (next 2 years) Based on input from the online survey (2020) Based on expert judgments provided in the 1 st Expert Group Meeting Potential Impacts Assessment of potential impacts resulting from the future uptake of ICT on the efficiency and competitiveness of construction supply chain enterprises based on input from the 1 st Expert Group Meeting 23

Planned Use of ICT Systems (next 2 years) ICT Infrastructure and External e-collaboration: adoption rates of MRP and SCM are expected to increase substantially (almost double) in the next 2 years e-sourcing and e-procurement: rapid increase in the use of e-procurement/ e-tendering in the next 2 years both by SMEs (+56%) and large companies (+43%) Online Marketing and Sales: online selling and e-invoicing are expected to more than double within the next 2 years for SMEs (+50% for large companies) Construction and Design Support: with the exception of CAD systems (already used at high levels) the use of all other systems is considered to increase substantially (by 30-40%) in the next 2 years particularly for SMEs (slightly lower for large companies) 24

Objectives Chapter 1 & Chapter 2 Chapter 3 Chapter 4 ICT Chapter Needs 5 Chapter 6 Chapter 7 Chapter 8 Assessment of (2020) vs. ICT Goal ASSESSMENT OF FUTURE VS. CURRENT ICT UPTAKE Dimensions TECHNOLOGICAL READINESS TECHNOLOGICAL EFFECTIVENESS Factors PROPENSITY TO INVEST IN ICT TECHNOLOGICAL CAPACITY IN-HOUSE ICT EXPERTISE ICT SECURITY AND TRUST AWARENESS OF ICT IMPACTS COST OF TECHNOLOGY EASE OF USE ICT SUPPORT CUSTOMISATI ON OF ICT SOLUTIONS TECHNOLOGICAL COMPATIBILITY Alternatives CURRENT 2020 25

Importance of Dimensions Determining ICT 26

Importance of Factors Determining ICT 27

vs. ICT (2020) vs. per Category of ICT Systems The future ICT uptake of all categories of ICT systems in 2020 is expected to be significantly higher (more than double) than the current ICT uptake. The Technological Readiness of a company in adopting ICT is significantly more important than the Technological Effectiveness of ICT systems. Findings are in alignment with the planned use of the corresponding systems within the next 2 years (online survey). 28

Perceived ICT Impacts on Efficiency and Competitiveness Significant improvement of productivity in terms of external/internal business processes, innovation capacity, and efficiency of data/info exchange Moderate improvement in terms of costs and sales Significant improvement of market potential (e.g. ability to promote to targeted markets, geographical presence); Moderate improvement of temporal market presence 29

Types and Industry Standards Machine-to-machine (e.g. communication protocols) and syntactical (e.g. data format and structure) interoperability Technical Most of the identified standards deal with technical interoperability Increasing importance of semantic standardisation need for more investment and support to further develop in the future among different business processes of parties involved in data/information exchange Semantic Process Uniform and consistent interpretation of exchanged data/information Scarce due to abstract nature ( soft aspects) and complexity of processes 30

Standardisation Efforts / Initiatives Standardisation Efforts/Initiatives De facto (industrial) standards led by consortia rather than organisations developing standards Most of the standardisation efforts are operated under open models Prominent standards in terms of maturity, vendor support, and user adoption are those developed by buildingsmart consortium for BIM covering all three layers of interoperability: IFC, IFD and IDM Other prominent standards - due to the flexibility and wide adoption of XML - are XML-based (e.g. ifcxml, LandXML, gbxml), as well as RDF and OWL, which are also XML-based Some efforts (e.g. CIS/2) seem to be converging towards buildingsmart Some overlapping between existing standardisation efforts (e.g. buildingsmart and OGC consortia) might also occur in the future 31

Problems / Challenges Lack of standard data format: technical drawings and 3D models, as well as design specifications and requirements require a standard data exchange format that should be adhered to by software vendors. Lack of common language: the semantic aspect of interoperability has a serious impact on the interpretation of data/information exchanged and particularly on specifications and requirements. Lack of computer-readable data: data/information is often exchanged in textual form rather than a software-interpretable format. This mostly affects requirements and specifications. Incompatible formats: formats for geometric information do not support requirements and vice versa. As a result, automatic validation and verification of requirements is impossible. Loss of information: the lack of a common format and viewer software on the client side often leads to loss of information. Large file size: files are often too large to be exchanged via e-mail which constitutes the dominant medium for data/information exchange. problems that cannot be tackled by existing ICT solutions constitute Gaps that are prime candidates to be addressed by the Framework (WP2) 32

Way Forward Prioritisation of interoperability gaps and detailed assessment (including feasibility) of alternative solutions Final selection and detailed definition of the business scenarios involving: various combinations of construction supply chain actors of different company sizes and with different levels of ICT familiarity / digital maturity multiple phases and processes of the construction project lifecycle various types of data/information (e.g. technical, business/administrative) exchanged various types of business models and the resulting allocation of roles and responsibilities among supply chain actors 33

In a Nutshell High fragmentation, strong presence of SMEs, short-term relationships, intensive exchange of information (in terms of multiple actors, multiple phases, frequency of exchange, heavy files) Low ICT uptake, very low integration of heterogeneous systems among business partners, lack of interoperability, standardization efforts are under way but de jure standards are not yet there Information exchange needs will be intensified, future ICT uptake will increase The technological readiness of a company has a major influence on ICT uptake Efforts aiming to increase ICT uptake should primarily focus on the company s readiness in terms of technological capacity, in-house ICT expertise, ICT security and trust, as well as awareness of ICT benefits The public sector can play an instrumental role in: i) increasing the technological readiness of companies (especially SMEs) and ii) raising (SMEs) awareness about ICT benefits 34

In a Nutshell The Framework (WP2) should capitalize on de facto standards buildingsmart) and should cater to the needs of SMEs (e.g.!!! Source: http://xkcd.com/927/ 35

List of References (1/2) 1. Buildings Performance Institute Europe (BPIE), Europe s buildings under the microscope: A country-by-country review of the energy performance of buildings, Brussels, Belgium, 2011. 2. ECORYS SCS Group (ECORYS), Sustainable Competitiveness of the Construction Sector and its Enterprises, Final Report prepared for European Commission DG Enterprise and Industry, 2010. 3. Enerdata, Energy Efficiency Trends in Buildings in the EU: Lessons from ODYSEE MURE Project, September 2012. 4. Environmental Technologies Action Plan (ETAP), European Forum on Eco-Innovation: Markets for Sustainable Construction, Brussels, 2007. 5. Europe INNOVA Sectoral Innovation Watch (Europe INNOVA), Sectoral Innovation Foresight: Construction Sector, Final Report, December 2010. 6. Europe INNOVA Sectoral Innovation Watch (Europe INNOVA), Sectoral Innovation Watch: Construction Sector, Final Report, December 2011. 7. European Builders Confederation (EBC), Annual Report 11>12, Luxemburg, 2012. 8. European Commission, The Competitiveness of the Construction Industry, COM(97) 539, Brussels, Belgium, 4/11/1997. 9. European Commission, Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the Energy Performance of Buildings, Official Journal of the European Union, I153/3, 18/06/2010. 10. European Commission, EU R&D Scoreboard: The 2012 EU Industrial R&D Investment Scoreboard, Luxembourg, 2013a. 36

List of References (2/2) 11. European Commission, Commission Staff Working Document Accompanying the Document: Financial Support for Energy Efficiency in Buildings, SWD(2013) 143 final, Brussels, 18/04/2013b. 12. European Construction Industry Federation (FIEC), Construction: Activity in Europe, Brussels, Belgium, 2010. 13. European Construction Industry Federation (FIEC), Construction in Europe: Activity 2011, Brussels, Belgium, 2012a. 14. European Construction Industry Federation (FIEC), Construction: Activity in Europe, Brussels, Belgium, 2012b. 15. Eurostat, News Release Euro Indicators, 58/2012 of 18 April 2012, http://epp.eurostat.ec.europa.eu/cache/ity_public/4-18042012-ap/en/4-18042012-ap-en.pdf 16. Fischer, C., M. Werge, EU as a Recycling Society: Present Recycling Levels of Municipal Ware and Construction & Demolition Waste in the EU, European Environmental Agency, European Topic Centre on Sustainable Consumption and Production (ETP/SCP), 2009. 17. Manchester Business School, Study on Voluntary Arrangements for Collaborative Working in the Field of Construction Services, Final Report, Part 1: Main Report, Manchester, United Kingdom, 2009. 37

Thank you for your attention! 38